Overview of Nutrition and Tax Provisions in the New Farm Bill

1. Other Issues in the New Farm BillBrief Overview of Nutrition and Tax Provisions in H.R. 6124 Craig Infanger University of Kentucky Agricultural Economics

2. Agricultural Economics

3. Food Stamps are Important to a Farm Bill Agricultural Economics

4. CBO Budget Baseline Projections March 2007 Agricultural Economics

5. Agricultural Economics

6. Agricultural Economics

7. Agricultural Economics

8. Nutrition Provisions in H.R. 6124 • SNAP – the new name for the Food Stamp Program: “Supplemental Nutrition Assistance Program” • Raises the Minimum Standard Deduction and indexes it for inflation  affects 10m recipients; benefit increase = $4 - $5/mo • Increases minimum $10 benefit to 8% of max benefit  affects 780,000; now $14/mo Agricultural Economics

9. Nutrition Provisions in H.R. 6124 • Eliminates the cap on child care expense deduction ($175)  100,000 households with working parents; increase benefit = $40/mo • Excludes combat pay from income calculations for food stamp eligibility for military families • Expands spending for TEFAP to assist food banks Agricultural Economics

10. Nutrition Provisions in H.R. 6124 • Expands authority for Senior Farmers Market Nutrition Program  vouchers for fresh food • Expands availability of fruits and veg for low-income kids in school nutrition programs Agricultural Economics

11. Nutrition Provisions in H.R. 6124 Educational programming? Agricultural Economics

12. Tax Provisions in H.R. 6124 • Changes affecting self-employment taxes Agricultural Economics

13. CRP payments -- Individuals who are considered retired or disabled under Social Security, and who are otherwise not actively involved in farming activities, may exclude CRP payments from self-employment income after Dec. 31, 2007. Agricultural Economics

14. Social Security -- With the increase in the dollar amount necessary to earn a “quarter of coverage” under Social Security = problems for some farmers with maintaining currency for disability and retirement purposes. Farm Bill permits a modified, optional method of reporting income which makes it easier to get four quarters of coverage. Agricultural Economics

15. Tax Provisions in H.R. 6124 • Changes affecting self-employment taxes • Changes affecting income taxes Agricultural Economics

16. 1099-G reporting of CCC transactions – marketing loan gains realized will now be reported to the taxpayer on a 1099-G. Consequently, they must be reported as “Agricultural Program Payments” Agricultural Economics

17. New limitations on farming losses – The amount of farming “losses” than a taxpayer may use to reduce non-farm business income will now be limited to the greater of $300K or the net farm income the taxpayer generated over the past five years, applicable to taxpayers who receive commodity program payments or CCC loans. Agricultural Economics

18. Implications for >23 states, 45 local and regional programs, 1300 local and regional land trusts Agricultural Economics

19. Enhanced charitable contributions of conservation easements to December 31, 2009. For persons with >50% of gross income from farming, charitable deduction can be as much as 100% of AGI. If <50% of gross income from farming, then deduction limited to 50% of AGI. Also extends the carryover of unused donations from 5 to 15 years. A ‘win-win’ for estate planning and environmental preservation? Agricultural Economics

20. A 30% business tax credit for retailers of ag chemicals & manufacturers/formulators/distributors for “protection” activities, e.g. employee security training, background checks, installation of security equipment, and computer safeguards. Agricultural Economics

21. Endangered species recovery – Expenditures after 12/31/08 for site-specific management actions recommended in ESA recovery plans will be deductible as current expenses for taxpayers materially participating in farming Agricultural Economics

22. Race horse depreciation – Any race horse placed in service after the end of 2008 but before 2014 is assigned a three-year recovery period, regardless of age Agricultural Economics

23. Tax Provisions in H.R. 6124 • Changes affecting self-employment taxes • Changes affecting income taxes • Alternative fuel provisions Agricultural Economics

24. Bioenergy tax credits – A special provision for a cellulosic biofuels production tax credit for up to $1.01/gal through the end of 2012, plus Congress ordered an analysis of biofuels by NAS. Agricultural Economics

25. Reduction in ethanol subsidy – The $.51/gal incentive for ethanol is reduced to $.45/gal for 2009 and thereafter unless not at least 7.5 billion gallons of ethanol is produced or imported in 2008. • Tariff on imported ethanol extended through 2010. Agricultural Economics

26. Reduction in ethanol subsidy – The $.51/gal incentive for ethanol is reduced to $.45/gal for 2009 and thereafter unless not at least 7.5 billion gallons of ethanol is produced or imported in 2008. • Tariff on imported ethanol extended through 2010. Agricultural Economics

27. Tax Provisions in H.R. 6124 • Changes affecting self-employment taxes • Changes affecting income taxes • Alternative fuel provisions • Aggie bonds Agricultural Economics

28. Aggie Bonds for Beginning Farmer Loans • Agricultural bond improvements – loan limit raised from $250K to $450K with inflation index; eliminates the $125K limitation on the amount of farmland a person can own and still qualify. Agricultural Economics

29. Educational Programming • Modest changes = new publications but not special tax educational efforts. Agricultural Economics

30. Educational Programming • Modest changes = new publications but not special tax educational efforts. http://www.ces.uga.edu/Agriculture/agecon/agecon.html Agricultural Economics

31. Educational Programming • Modest changes = new publications but not special tax educational efforts. • IRS, Publication 225 Agricultural Economics

32. Educational Programming • Modest changes = new publications but not special tax educational efforts. • IRS, Publication 225 Agricultural Economics

33. Educational Programming • Modest changes = new publications but not special tax educational efforts. • IRS, Publication 225 • University-based tax seminars Agricultural Economics

34. Educational Programming • Modest changes = new publications but not special tax educational efforts. • University-based tax seminars Land Grant University Tax Education Foundation, Inc. Agricultural Economics

35. Tentative Ag Tax Topics for 2008: • Conservation easements • Income tax treatment of repaying property taxes and on land taken out of agriculture • Sale of carbon credits • Prepaid expenses • Land improvements purchased with CREP payments • Tax issues for farmland owners who rent their land • Fertilizer containment structures • Soil and water conservation districts • Eligibility of Section 179 assets used in farming • Tax treatment of tobacco buyout installment payment contracts as gifts Agricultural Economics

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37. Educational Programming • Modest changes = new publications but not special tax educational efforts. • IRS, Publication 225 • University-based tax seminars • Farm Tax Schools – most use Phil Harris’ book, Agricultural Tax Issues and Form Preparation(www.taxinsight.com) Agricultural Economics