Ag gets ongoing gifts in tax reform bill

Ag gets ongoing gifts in tax reform bill

Credits such as Section 179, charitable deduction for real property, and the deduction of food inventory are now permanent

Alongside the massive omnibus bill, Congress passed a tax extenders package. For agriculture it was seen as an important step forward, but lacked a longer horizon, especially within the renewable fuels sector.

Credits such as Section 179, charitable deduction for real property, and the deduction of food inventory are now permanent. Unfortunately, credits such as the biofuel producer credit, the production tax credit, and other renewable fuel incentives were only extended for 2015 and 2016. Fortunately, other renewable energy provisions like wind and solar received longer-term, favorable treatment.

Introduced by Senate Finance Committee Chairman Orrin Hatch, R-Utah, House Ways and Means Committee Chairman Kevin Brady, R-Texas, and Senate Finance Committee ranking member Ron Wyden, D-Ore., the bipartisan, bicameral deal provides permanent tax relief and lays the groundwork for what they hope will be broader tax reform going forward. Republicans had wanted to make certain provisions permanent and agriculture saw some wins under that scenario.

Brady said, “Businesses will also be able to invest with confidence in new equipment, research and jobs to grow the local economy. This bill is an important piece of our plan to replace our broken tax code with a simpler, fairer system that actually works for the American people.”

Earlier this year, the Senate Finance Committee reported out a bipartisan tax extenders package that extended provisions to assist families, individuals and small businesses for two years. The House Ways and Means Committee advanced several tax bills that would make permanent a number of policies, like incentives for innovative research and development, among others.

The PATH Act includes a number of bipartisan legislative policies that were advanced by the two tax writing committees through open process and debate.

Section 179 and bonus depreciation

As for the Section 179 business deductions, the bill allows for deduction for capital expenses, including equipment like tractors, to be permanently capped at $500,000, instead of $25,000; and the 50% bonus depreciation provision would be extended for five years. The bonus depreciation percentage is 50% for property placed in service during 2015, 2016 and 2017 and phases down, with 40% in 2018, and 30% in 2019. 

Renewable fuels

The tax bill extends through 2016 the existing $1.00 per gallon tax credit for biodiesel and biodiesel mixtures, and the small agri-biodiesel producer credit of 10 cents per gallon. The provision also extends through 2016 the $1.00 per gallon production tax credit for diesel fuel created from biomass. The provision extends through 2016 the fuel excise tax credit for biodiesel mixtures.

The $1.00 per gallon blenders’ credit has expired four times in six years, making it difficult for businesses to develop longer-term production and blending plans. In the face of more than 100 years of uninterrupted preferential tax treatment for petroleum, the two-year extension is welcome news for biodiesel.

Biodiesel producers welcomed the extension, but had been lobbying for a change that would only apply to domestic producers. By narrowing the scope of the credit to domestic production, the producer’s incentive would save some $90 million as currently companies in Argentina, Asia and Europe are able to also receive the blenders credits, according to the Joint Committee on Taxation.

Being generous

The tax extenders deal includes the America Gives More Act, which will make permanent an oft-renewed temporary incentive for land conservation. Securing permanency for this incentive is something the Land Trust Alliance has sought for a decade and said it will have a major impact on future conservation.

First enacted as a temporary provision in 2006, the incentive is directly responsible for conserving more than 2 million acres of America’s natural outdoor heritage. The incentive grants certain tax benefits to landowners who sign a conservation easement. Such private, voluntary agreements with local land trusts permanently limit uses of the land in order to protect its conservation value. Lands placed into conservation easements can continue to be farmed, hunted or used for other specified purposes. The lands also remain on county tax rolls, strengthening local economies.

First enacted as a temporary provision in 2006, the incentive is directly responsible for conserving more than 2 million acres of America’s natural outdoor heritage. The incentive grants certain tax benefits to landowners who sign a conservation easement. Such private, voluntary agreements with local land trusts permanently limit uses of the land in order to protect its conservation value. Lands placed into conservation easements can continue to be farmed, hunted or used for other specified purposes. The lands also remain on county tax rolls, strengthening local economies.

The charitable deduction for food inventory contributions was also made permanent by passing this bill.

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