What does the Tax Reform Bill mean to Small Agriculture-Related Businesses?

tax reform small ag businesses

The tax reform bill has dominated many headlines in recent weeks. Just in case you haven’t had a chance to dig in and find out what these new rules mean for you, or for your customers, we’ve highlighted some of the more noteworthy points below and collected links to several articles. We hope you find this information helpful.

According to a recent article in Growing Produce, benefits of the new tax bill to farmers include:

  • Increased (doubled) federal estate tax exemption: $11.2 million for individuals and $22.4 million for a couple (2018 figures), with proper estate planning.
  • 20% deduction on co-op payments to farmer members.
  • Lower tax rates for pass-through business income (new Section 199A deduction); “pass-through” businesses include partnerships, LLCs, S corps, and sole proprietorships.
  • New farm equipment depreciation schedule: five years instead of seven.

According to an article on ReutersU.S. grain companies fear harm from new tax law. Article highlights include:

  • The new U.S. tax law is poised to drive more control over the nation’s grain supply to farmer-owned cooperatives, provoking concern among ethanol producers and privately run grain handlers that they could be squeezed out of the competition to buy crops.
  • A provision added in the final stages of the law’s passage gives farmers such a big tax deduction for selling their produce to agricultural cooperatives that private firms fear their grain supplies will dry up.
  • The new tax law allows farmers and ranchers to claim a 20% deduction on all payments received on sales to cooperatives.
  • Analysts think these new deductions could come as a massive boon to cash-strapped U.S. grain farmers, who have struggled for at least four years amid a global grain glut and sluggish commodity prices.

According to a recent article in American Agriculturist:

  • Beginning with the 2018 tax year, farmers will be allowed to immediately write off capital purchases such as breeding livestock, farm equipment and single-purpose structures (such as milking parlors) up to $1 million. The phase-out of this expensing provision doesn’t kick in until a farm reaches $2.5 million in purchases.
  • Farmers will be able to write off 100% of qualified property purchased after September 27, 2017, through 2022 (at which point a phase-down occurs). The new law expands bonus depreciation to include new and used property purchased or constructed, and to plants bearing fruits and nuts.
  • Machinery and equipment (other than any grain bin, fence or other land improvement structure) will be able to be depreciated over five years, as long as the original use of the asset begins with the taxpayer.

If you’re still looking for additional information to help you understand how the new tax bill affects U.S. agriculture, related businesses and suppliers, check out the links below:

And finally, if you’re just looking for which group thinks the tax bill is positive and which group thinks it’s negative, there’s this:

“Bloomberg is reporting this week that two prominent farm organizations disagree over how the tax-bill compromise would affect the agriculture industry.

“The American Farm Bureau Federation, which Bloomberg says ‘focuses on making the farming business more profitable,’ supports the bill’s potential for lower farmer income taxes. But the National Farmers Union focuses on the possibility that ‘the tax cuts could threaten programs like crop insurance in the 2018 farm bill, as lawmakers struggle to offset the $1.5 trillion that the overhaul would add to the national debt over 10 years.'”