The American Farm Bureau Federation says individual tax code reform is essential for farmers and ranchers.
According to a statement submitted by Farm Bureau to the House Small Business Committee Tuesday, tax reform must be simple, transparent, revenue-neutral and fair to farmers and ranchers.
Farm Bureau notes more than 96-percent of farms and 75-percent of farm sales are taxed under IRS provisions for individual taxpayers. Farm Bureau cautions that while broadening the tax base and lowering the rate are important parts of tax reform, lowering rates will impact farms and ranches differently than other businesses because income for farmers and ranchers can swing wildly as a result of unpredictable weather and uncontrollable markets. In fact - farm and ranch income varies greatly from year to year - with loss years often outnumbering those that are profitable.
Farm Bureau also supports the continuation of unrestricted cash accounting for farmers and ranchers who pay taxes as individuals - and warns against reducing the number of farms classified as corporate that are eligible to use cash accounting. According to the statement - capital gains taxes continue to be a problem for farmers and ranchers. In addition to capital gains taxes imposed when land and buildings are sold, proceeds from the sale of cattle used for breeding, dairy, draft and some other livestock are treated as capital gains income.
Farm Bureau says estate taxes are another worrisome issue facing farmers and ranchers.
The group says farmers are left with few options for generating cash to pay the estate tax because about 85-percent of farm and ranch assets are tied up in land, buildings or breeding animals. With ag cropland values increasing 15-percent on average from 2011 to 2012, Farm Bureau says more farms are in danger of topping the current five-million dollar exemption. Farm Bureau adds that estate tax planning continues to be complex and expensive for those close to or over the threshold. Farm Bureau supports permanent repeal of the estate tax.