Tax News

CCH (cch.taxgroup.com) reports:

  House and Senate negotiators announced on May 8 that they have reached a final conference agreement on the Food, Conservation, and Energy Act of 2008 (HR 2419). The comprehensive farm policy bill includes a host of agricultural tax provisions that were negotiated by House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., and Senate Finance Committee (SFC) Chairman Max Baucus, D-Mont. Despite what looks to be substantial bipartisan and bicameral support, the bill has generated a veto threat from the President Bush. House Majority Leader Steny Hoyer, D-Md., said the farm bill conference report is likely to come to the House floor on May 14.

  According to information released by the SFC, the farm bill would update the agricultural tax-exempt bonds program for loans to first-time farmers and ranchers. It would also exempt from self-employment taxes any Conservation Reserve Program payments made to retired or disabled individuals. The farm bill also would provide a tax credit to help defray the cost of criminal activity associated with agricultural chemicals or pesticides, create a uniform depreciation period for race horses, and allow tax free exchanges of stock that represent a holding of water rights, just as allowed for real property under Code Sec. 1031. The bill also provides temporary tax relief to victims of tornados and storms in Greensburg, Kansas.

  Negotiators also included a provision intended to provide a boost to the development of cellulosic biofuels, paid for by reducing the tax credit for ethanol. The bill includes a five-year production tax credit for up to $1.01 per gallon at a cost of $403 million over ten years. The bill would reduce the 51-cents-per-gallon credit for ethanol by 6 cents, which would generate $1.203 billion over the next 10 years. The farm bill also includes an extension of the tariff on imported ethanol through 2010, an exclusion of denaturant from the alcohol fuels credit, and a duty drawback on certain imported ethanol, according to the finance committee release.

Veto Threat

  President Bush will veto the farm bill because it does not provide meaningful program reform and expands the size and scope of the federal government, according to Agriculture Secretary Ed Schafer. "At a time of record farm income, Congress decided to further increase farm subsidy rates, qualify more people for taxpayer support, and move programs toward more government support," Schafer said in a written statement on May 8.

  By Stephen K. Cooper and Paula Cruickshank, CCH News Staff

SFC Release: 2008 Farm Bill Tax Package --Homegrown Energy Independence

SFC Release: 2008 Farm Bill Tax Package --Farm Tax Reforms