Tax News

CCH (cch.taxgroup.com) reports:

  House and Senate negotiators for a massive farm policy reform bill said on April 24 that they are nearing agreement on tax cuts and revenue offsets for additional spending that has kept resolution of the measure at an impasse for several weeks. With the current extension of the 2002 farm legislation set to expire on April 25, both the Senate and House quickly approved another one-week extension with the hope that conferees could finish their work and get a bill to President Bush within that time frame.

  Negotiators inched closer to accord as House leaders opened the door to accepting some tax cuts that Senate conferees said are vital to ensure passage of the measure in that chamber. In exchange, Senate negotiators compromised on additional spending for nutrition programs that have been advanced by House Democrats. While details remain fluid, negotiators said that Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Charles E. Grassley, R-Iowa, have agreed to scale back their tax package from $2.5 billion to approximately $1.4 billion.

  A final decision on agriculture tax cuts is now reportedly in the hands of House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., but it is likely that the final product will include customs user fees and other small changes such as how farmers claim losses to help offset an additional $10 billion in spending beyond the base line budget approved for the measure. The Bush administration has reportedly rejected improved stock basis reporting as a means of raising additional revenue. Still in play is a tax break for racehorse breeders strongly advocated by Senate Minority Leader Mitch McConnell, R-Ky., which would lower the capital gains tax rate for the industry and increase the depreciation amount allowed for breeders. In addition, conferees maintain that the final version will include a provision allowing farmers on Social Security who participate in land conservation reserve program to count payout received as investment income, thereby avoiding diminished Social Security/disability benefits.

  Negotiators were initially confident that they could wrap up their work by April 25, but that date has been pushed back as Baucus and others said they plan to work through the weekend if necessary to hammer out the final details.

  President Bush is expected to sign the one-week extension (Sen 2903), confirmed a White House spokesman. White House Deputy Press Secretary Scott Stanzel said the administration remains disappointed that Congress has not been able to reach agreement on a "reform-minded bill" but that reverting back to the 1949 law, which would occur if the current law expires, "would be too disruptive to farmers."

  Meanwhile, House Majority Leader Steny Hoyer, D-Md., said he hopes the farm bill conference report will be ready for a vote on the House floor during the week of April 28.

  By Jeff Carlson and Paula Cruickshank, CCH News Staff