The U.S House of Representatives passed its tax bill, H.R.1, known as the Tax Cuts and Jobs Act last Thursday by a 227-205 vote. No Democrats voted in favor of the measure and 13 Republicans broke party ranks to vote against it.
The bill includes changes to tax brackets, moving from the existing seven to four, which reportedly will benefit individual taxpayers.
A provision that has been closely watched by America’s farmers and ranchers is the estate tax exemption, which would immediately increase from $5.49 million per individual to $11 million. The “death tax” would phase out entirely after 2023.
National Cattlemen’s Beef Association (NCBA) President Craig Uden issued a statement immediately after the vote, saying, “House approval of this comprehensive tax-reform legislation is a step in the right direction, but we will continue to work hard to make sure that final legislation doesn’t include provisions that would create undue and unfair burdens for certain segments of our industry.”
Also included are measures to:
• Fully preserve the step-up in basis;
• Allow businesses to immediately and fully expense the cost of new investments;
• Increases Section 179 small-business expensing limits; and
• Expands cash accounting.
Uden said these are all victories for cattle producers.
On the down side, Uden commented, “Unfortunately, the House-passed bill would also significantly limit the ability of some businesses from deducting their interest expenses. This could be a big problem for some members of the cattle-production business. We’ve worked closely with members of Congress to address this issue, and we’ll continue to work tirelessly to fix this problematic provision as this legislation moves forward in the Senate and toward a House-Senate conference committee.”
As tax consideration moves to the Senate, a provision in the House instructions calls for reconciliation, meaning that the Senate bill could be approved by a simple majority vote.
Full text of the House bill is available online at www.congress.gov; enter H.R. 1 in the search box.
Senate markup
While the House was putting the final touches on its bill, the Senate started the markup process of its tax reform package on Nov. 13. Many aspects are expected to mirror the House version, but differences remain.
Senate Finance Committee Chairman Orrin Hatch (R-UT) delivered an opening message to the committee outlining some highlights of his markup as prepared by the Joint Committee on Taxation.
Like the House bill, the Senate version has aspects that are viewed as good for agriculture, and some that are not so good. NCBA Director of Government Affairs Danielle Beck told WLJ, “We are grateful to the chairman of the Senate Finance Committee for including the modification on interest deduction in his release last night [Nov. 14]. Tax reform is a process and we continue to work with Congress to ensure that any final legislation benefits U.S. cattle and beef producers. Restrictions on interest deductions could jeopardize the operations of U.S. beef producers, and NCBA is advocating tirelessly on Capitol Hill to make that message clear.” She added, “NCBA is reserving final judgment on the tax legislation as we continue to work with Congress. We are watching legislative developments in the House and Senate closely.”
Responding to Hatch’s release of his “chairman’s modifications” to the tax bill, NCBA called it a “starting point” for addressing the interest deduction issue for U.S. beef producers. The chairman’s modification, on page 6 of the 103-page report says:
B. Business Tax Reform
1. Modification to the interest limitation for certain farms—The chairman’s modification revises the limitation on the deduction of business interest to allow a farming business (as defined in section 263A(e)(4)) to elect not to be subject to the limitation. The chairman’s modification requires a farming business electing not to be subject to the limitation to use the alternative depreciation system to depreciate any property used in the farming business with a recovery period of 10 years or more.
The complete report can be found on the Senate Finance website, https://www.finance.senate.gov/, click Newsroom then Chairman’s news.
Changes to the estate tax is also being considered in the Senate with a proposal to double the exemption. Unlike the House proposal, the Senate is not calling for a full repeal, at this time.
What now?
As noted, the House passed its version of tax reform last Thursday and the Senate is hashing out details of its own tax bill. At the point when both versions have passed they will go to a conference where a joint committee of House and Senate members will come to agreement on the content of the bills. Once that is accomplished both chambers will vote on the conference version.
Max Moncaster, associate director of policy communications for NCBA, said statements from Republican leadership have indicated they want the tax reform issue settled soon after Thanksgiving and on the president’s desk before Christmas. — Rae Price, WLJ editor
