House votes to make key ag tax provisions permanent in “Tax Reform 2.0” | Michigan Farm News

House votes to make key ag tax provisions permanent in “Tax Reform 2.0”

Category: Politics

by Farm News Media

Unlimited bonus depreciation and direct expensing would be a permanent fixture for farmers, under legislation approved by the U.S. House known as Tax Reform 2.0. The three-bill package now heads to the U.S. Senate for approval. It’s unclear at this time if, and when, the Senate will take up a vote, but it could be voted on during lame duck following the midterm elections.

The U.S. House of Representatives has passed Farm Bureau-supported legislation that makes several important tax reform provisions, originally scheduled to expire after 2025, permanent. The Protecting Family and Small Business Tax Cuts Act of 2018 (H.R. 6760), one of a three-bill package know as “Tax Reform 2.0,” addresses bonus depreciation and the estate tax, among other tax provisions.

According to Michigan Farm Bureau National Legislative Counsel, John Kran, the newly passed legislation grants farmers certainty by making the tax reform measures permanent, which could positively benefit Michigan farmers when it comes to making long-term business decisions such as estate planning and capital purchases.

“While the tax reform passed nearly a year ago was beneficial for Michigan farmers, one of our biggest concerns at the time was that not all of the provisions were made permanent – meaning we’d need to ask Congress to reinstate them in a few years,” Kran said. “We appreciate Michigan Congressman Mike Bishop’s role as a member of the House Ways and Means Committee that wrote the bill in addressing that concern.”

Following passage, Rep. Bishop (MI-08), said Tax Reform 2.0 will lock in middle-class and small business tax cuts, promote family savings, and advance the next generation of entrepreneurs. He credits the original tax reform signed into law in 2017, with creating 1.7 million new jobs and boosting wages at the fastest rate in almost a decade.

Rep. Bishop

“We finally have a tax code that delivers for hardworking families – allowing them to keep more of their hard earned paychecks, and after decades of stagnant growth, our economy is growing at a record pace,” Bishop said. “Today’s passage of Tax Reform 2.0 builds on our progress and will make our country even more competitive by locking in tax cuts for our middle-income families and making it easier for hardworking Americans to save for their futures.”

The Tax Cuts and Jobs Act, passed in 2017, reduced taxes for all businesses, but only the tax cuts for incorporated businesses operated as C corporations were permanent. The vast majority of farms, however, file their taxes as sole-proprietors, partnerships or S corporations.

“Failure to [make these provisions permanent] will result in a huge tax increase. In addition, the uncertainty caused by temporary tax provisions makes the already tough business of running a farm or ranch even harder,” American Farm Bureau Federation President Zippy Duvall wrote in a letter urging House members to support the bill.

The legislation makes the following provisions that are particularly important to agriculture permanent:

  • Reduced pass-through tax rates and expanded brackets
  • The Section 199A new 20 percent business income deduction
  • Unlimited bonus depreciation (expensing)
  • The doubled estate tax exemption ($11 million person/$22 million couple)
  • The increased alternative minimum tax threshold for individuals

The Protecting Family and Small Business Tax Cuts Act of 2018 was passed as part of a three-bill package dubbed “Tax Reform 2.0” by the House Ways and Means Committee. The other two bills, also approved by the House last week, are the Family Savings Act of 2018 (H.R. 6757) and the American Innovation Act of 2018 (H.R. 6756).