As congressional committees begin drafting legislation this week for the $3.5 trillion federal spending plan, American Farm Bureau Federation, along with state Farm Bureaus and other organizations, urged legislators to maintain tax policies fundamental to the financial health of production agriculture.
AFBF, along with 46 state Farm Bureaus including Illinois Farm Bureau, and 280 organizations representing family-owned agribusinesses, sent a letter to congressional leaders Wednesday addressing four key tax provisions that make it possible for farmers and ranchers to survive and pass their businesses on to the next generation: estate taxes, stepped-up basis, 199A small business deduction and like-kind exchanges.
“The policies Congress enacts now will determine agricultural producers’ ability to secure affordable land to start or expand their operations,” the letter states. “Regardless of whether a business has already been passed down through multiple generations or is just starting out, the key to their longevity is a continued ability to transition when a family member or business partner dies. For this reason, we firmly believe the current federal estate tax code provisions must be maintained.”
These tools are as crucial as ever as the number of farmers and ranchers 65 and older outnumber those 35 and under by a four-to-one margin, the letter states. More than 370 million acres are expected to change hands in the next two decades.
Regardless of whether a business has already been passed down through multiple generations or is just starting out, the key to its longevity is a continued ability to transition when a family member or business partner dies. For this reason, the current federal estate tax code provisions must be maintained, the letter states.
As for the stepped-up basis, assets in agriculture are typically held by one owner for several decades, resetting the basis on the value of the land, buildings, and livestock on the date of the owner’s death under a step-up in basis is important for surviving family members and business partners to ensure the future financial stability of the operation.
"Imposing a new capital gains tax at death would effectively establish a transfer tax with the potential to devastate our nation’s family-owned agribusinesses," according to the letter.
The letter also lays out how issues already faced by farms are compounded by a heavy tax burden.
"Key to maintaining a reasonable level of taxation for pass-through businesses like farms and ranches is continuation of the Sec. 199A business income deduction. Eliminating or reducing this key business provision will result in a huge tax increase for farmers and ranchers at a time when they can ill afford it."
House Speaker Nancy Pelosi and Senate Majority Leader Charles Schumer set a Sept. 15 deadline for the various committees in each chamber to draft their pieces of the budget bill.