House bill recognizes importance of cash-basis accounting in ag industry
Last week, House Ways and Means Committee Chairman Dave Camp released his long-awaited tax reform legislation including a requirement that businesses with gross receipts of more than $10 million use the accrual method of accounting. The Ways and Means Committee noted that the bill specifically excludes agriculture: “The provision would not apply to farming businesses, which would continue to be subject to current-law accounting rules.” This is a major change from earlier drafts that included agriculture in the required shift from cash-to-accrual accounting.
“We applaud the efforts of the Ways and Means Committee to find common-sense approaches to tax reform. We are pleased to see that they responded to the concerns of U.S. agriculture and have not required farmers to shift to accrual accounting,” states Brian Kuehl, Director of Federal Affairs for Kennedy and Coe, LLC. “We hope the Senate Finance Committee will follow suit in their tax reform efforts.”
The bill released by Chairman Camp allows farmers and ranchers to continue to use cash accounting, permitting producers to manage their taxable income in volatile commodity markets.
The provision announced today spares agricultural producers from what would have been a $4.8 billion increased tax expenditure over the next four years. This was a large concern given the industry only has $1.2 billion in cash on hand to cover these taxes, according to a study released by Kennedy and Coe and Farmers for Tax Fairness last week, which can be found online at bit.ly/informa-study. The study was prepared by the independent research firm Informa Economics.
The Farmers for Tax Fairness Coalition (FairFarmTax.com) is actively leading a campaign to create awareness among legislators about the significant hardship the proposed changes would impose on agricultural producers. The Coalition will continue its campaign to encourage the Senate to keep current cash-accounting rules for agriculture.
Kennedy and Coe and Farmers for Tax Fairness will release additional details in the near future. Read more information online at www.FairFarmTax.com.