Tax Reform- Senate Bill

DTN Ag Policy Editor Chris Clayton reported today that, “The U.S. Senate’s tax-reform bill released late Thursday would keep more tax brackets and maintain the estate tax, but also would still keep several tax provisions important to farmers regarding equipment expensing and pass-through income.

“With the House advancing its tax-reform package on Thursday to floor debate next week, the Senate Finance Committee released details of its plan as well. The Senate Finance Committee is set to start markup and debate on its bill starting Monday, Nov. 13.

“Like the House, the Senate lowers the corporate tax rate from 35% to 20%, but the Senate delays that lower 20% corporate rate until 2019. That provision has already been panned by business and conservative groups — and was cited as a reason stocks fell on Thursday. But the delay was included as a way to keep the 10-year cost of the tax bill under $1.5 trillion. The Republican-led Senate can avoid facing a 60-vote threshold for its bill if the tax changes do not add more than $1.5 trillion in tax costs over 10 years.”

Mr. Clayton noted that, “Like the House bill, the Senate bill would allow 100% expensing for equipment put into service before Jan. 1, 2023.”

The Senate bill does not appear to have language that would subject rental income to 15.3% self-employment taxes. That issue had become a major sticking point in the House bill because landlords, including farm landlords, would have been subject to self-employment taxes. The House Ways and Means Committee removed that language Thursday before the committee vote to advance its bill to the House floor,” the DTN article said.

Today’s article also indicated that, “In a blow to farmer cooperatives, the Senate also follows the House and repeals the Section 199 Domestic Production Activities Deduction. The National Council of Farmer Cooperatives has warned this 9% deduction is worth about $2 billion in deductions to cooperatives that are directly passed on to co-op members. But both chambers now have agreed to eliminate the deduction.”

Mr. Clayton added that, “While several major farm groups have pushed for full elimination of the estate tax, the Senate bill does not repeal it. The Senate plan increases the estate-tax exemption from $5.49 million to $11 million for an individual or $22 million for a couple, which is also indexed for inflation. The Senate would keep a special valuation clause for real estate on smaller farms.

“The House bill doubles the estate-tax exemption to $11 million then phases out the estate tax by 2023.”

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