Corn Growers are reacting to the proposed American Families Plan. The $1.8 trillion plan proposes paying for new investments and tax cuts through reforms to the tax code, including ending stepped-up basis for capital gains on more than $1 million ($2 million per couple). Earlier this year, the White House held an ag stakeholders listening session with Secretary Vilsack. He outlined the proposed exemption for family businesses and farms, which would only apply to assets that continue to be owned and operated by heirs. We have raised concerns that this is not enough protection. Many family farm operations may have different structures than this very simple portrayal of the family farm. And, it is not clear how or if this protection would extend to cash rent or leased land.
We know this issue is big. We’re working on scenarios to demonstrate the consequences of this proposed policy. Grassroots is essential and we’re working to get you the information you need to share how this could impact you. A webinar was provided on May 26.
Agriculture is standing together on this issue. Recently 40 ag groups sent a letter to Congressional leaders outlining key tax priorities including protecting current estate tax exemptions and preserving stepped-up basis for capital gains. You can view the letter here.
A second letter was sent September 8, 2021 signed by 327 national, regional, and state trade associations regarding the need to preserve critical tax policies like stepped-up basis, like-kind exchanges, the Sec. 199A small business deduction, and current estate tax code provisions. This effort sends an important message, especially given the House Ways & Means Committee is expected to begin marking up revenue raising legislative proposals next week, as required under reconciliation and the FY22 budget resolution.
NEW TOOL – Calculate Your Estate Tax Exposure
National Corn Growers Association Efforts
The direction of National Corn’s efforts on this issue fall within the Risk Management and Transportation Action Team (RMTAT). This team includes Mark Roberts from Pleasureville, KY. In RMTAT’s May meeting, members discussed the Biden Administration’s legislative proposals on infrastructure and tax, outlook for Congressional Action, and NCGA’s priorities and positioning. Team members, including Mark Roberts from Kentucky Corn, asked for more detailed information on the tax proposals impacting agriculture in order to inform the team and NCGA policy. The team approved a motion to direct NCGA to solicit a proposal examining 1) the proposed family farm exemption for changes to the stepped up basis provisions for capital gains and 2) protections for agriculture in current law.
BIDEN FY 2022 BUDGET HIGHLIGHTS & NCGA PRIORITIES – View the document
CORN GROWERS WELCOME STEPPED-UP BASIS DEFENSE – U.S. House Agriculture Committee Chairman David Scott (D-GA) sent a letter June 2 to President Biden expressing his concerns to proposed changes in tax policy that would eliminate the stepped-up basis provisions used by farmers. The letter resulted from a conversation Chairman Scott had with the Corn Board last month on taxes and other priorities.
“We appreciate Chairman Scott’s leadership on preserving the stepped-up basis protections in the tax code for America’s corn farmers and stand ready to help him defend our farms and families from harmful taxation,” said NCGA President John Linder.
Congressional Hearings Relating to Taxes
The Senate Finance Committee held a hearing on May 18 on “Funding and Financing Options to Bolster American Infrastructure.”
Chairman Ron Wyden (D-OR) focused his opening comments on asking “mega corporations to pay their fair share” and opposition to user fees and their impact on middle class works. Ranking Member Mike Crapo (R-ID) focused his opening statement on the role of user fees to pay for infrastructure, the possibility of re-directing unspent COVID relief funds, and GOP opposition to proposals to raise corporate taxes. Members discussed proposals on vehicle per miles fees including electronic vehicles, gas taxes, funding for broadband, the highway trust fund, and bonds.
On May 19, the House Ways and Means Full Committee will hold a hearing on “Leveraging the Tax Code for Infrastructure Investment.” Last week, the Ways and Means Subcommittee on Select Revenue Measures held a hearing “On Funding Our Nation’s Priorities: Reforming the Tax Code’s Advantageous Treatment of the Wealthy” with witnesses who are academics and tax professionals.
Tax Resources and Materials
1) NCGA is working with K COE ISOM, a team of leading agriculture accounting experts, to host an informative webinar for farmers on May 26th, 9am EDT. The webinar will begin with a explanation of the political aspects of this issue, then presenters will go into proposed changes in the tax code and provide true-to-life scenarios for impacts on farm families. REGISTER HERE
2) NBC News recently provided a good overview of the uncertainty surrounding infrastructure and tax proposals in Congress, titled “Biden’s tax hikes are in flux as Democrats grapple with competing pressures.” Here is the story from May 15th.
3) Kristine Tidgren, the director for the Center for Agricultural Law and Taxation at Iowa State University has posted a blog titled “A Look at the American Families Plan,” which provides and agricultural perspective of President’s Biden’s tax proposals and the landscape of potential changes to the estate tax and stepped up basis.
4) The Tax Foundation, an independent tax policy nonprofit, has a deep dive into the Administration’s proposals with a paper on “Taxing Unrealized Capital Gains at Death at Death Is Unlikely to Raise Revenue Advertised.” While the post does not discuss the proposed family farm exemption, it does walk through issues with raising taxes on capital gains.
5) The Ernst and Young study on “Repealing step-up of basis on inherited assets: Macroeconomic impacts and effects on illustrative family businesses” was released in April for the Family Business Estate Tax Coalition. The executive study is four pages and is a good resource on stepped up basis. It was released before the American Families Plan and does not mention an ag exemption.
6) The Congressional Research Service (CRS) has a short report and overview on “Tax Treatment of Capital Gains at Death”
7) Roger McEowen, Professor of Agricultural Law and Taxation at the Washburn University School of Law, has a post on the STEP Act titled, “The “Mis” STEP Act – What it Means To Your Estate and Income Tax Plan.”
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“’If the farm has been handed down for several generations – saying land bought at $500 or $1,000/acre and worth significantly more – it would be very likely that farm land would have to be sold just to pay the taxes. Small communities with smaller businesses will also be hurt. Supposedly under the plan, if the one inheriting the farm will continue operating it, the stepped-up basis will not go into effect. If the land cannot be operated by the ones inheriting it, for health reasons or other occupation, the stepped-up basis will be in place. Probably not what the farmer would have wanted for his children after he worked so hard to pay for the farm and make a living.”