After the House passed their Farm Bill today, it appears that their version on the Senate version are not too far apart.  The key points for both are:

• An elimination of all direct farm payments
• A reduction in CRP acreage to either 24 or 25 million acres
• Consolidation of many farm programs
• A Price Support program that guarantees a farmer a minimum price for their crop, or
• A Revenue Program that a farmer can elect (they have to elect one or the other).

The Price Support program is either based on a price set by Congress (the House version) or based on the average Olympic average of the prior 5 years of prices (the Senate version).  If a farmer elects the Price program, they cannot participate in the Revenue program and vice versus.

A couple of key differences is a payment limitation in the Senate of $50,000 per person for the Senate and $125,000 for the House.

The Senate also eliminates these payments if your adjusted gross income is over $750,000 while the house boosts this to $950,000.  This will most likely make the accounting simpler than it is now since you will most likely only need to look at the bottom line income shown on the bottom of your Form 1040 page 1.

We would guess that a final farm bill will be ready for a vote in the  next week or so, but with Memorial Day only a week from Monday, who knows long Congress will take off for that Holiday.

We will keep you informed.

Paul Neiffer, CPA

I was doing a google search on the House Farm Bill today and the 10th item that showed up in my search was this article.  With a title of “House Ready to Make Draconian Cuts to Food Stamps in House Bill” I was interested in what these “draconian” cuts were.  As you read the article, you will note that the author point out that the House Farm Bill is proposing cutting “Food Stamps” by about $2.5 billion per year or $25 billion over the 10 years.  This compares to the Senate Bill which calls for lower cuts of about $4.1 billion in total over 10 years.

On the face of it, $2.5 billion might be a lot of money, however, the total “Food Stamp” portion of the Farm Bill is close to $60 billion per year.  The proposed $2.5 billion cut equates to a 4% reduction.  I would normally not consider that to be “Draconian”.  The House is most likely battling this issue as I write this post and it will be interesting to see what final number they pass onto the floor for a vote.

It also appears that the Dairy margin management program is still part of the Bill, but this may get eliminated or changed in the committee between the House and Senate.  We will keep you posted on any material changes in both versions.  So far, the Senate Bill appears to mostly follow the bill passed last summer.

Paul Neiffer, CPA

Four Senators (two Democrats and two Republicans) this week introduced a bill “The Farm Program Integrity Act of 2013″ to place a cap on farm payments that an individual farmer can receive and try to close “certain perceived” loopholes in the farm payment program.  This bill closely follows language that was included in the original 2012 Senate farm bill proposal.

The bill would establish a per farm cap of $50,000 on all commodity program benefits plus $75,000 on any loan deficiency payments and marketing loan gains.  This would result in an overall $125,000 per farm cap which is doubled for a husband and wife.  The $50,000 cap would apply to any new farm programs that are developed as part of the final 2013 farm bill (assuming one gets done).

The bill tries to close the perceived loophole that currently allows “non-farmers” to qualify for federal farm payments.  This provision will prevent non-farmers from being able to use the management “loophole” that is in the current law.  The bill would clearly define the scope of people who qualify as actively engaged in farming by only providing management for the farming operation.  However, like most law, it is our opinion that “clearly define the scope” will not be quite as black and white as the Senators would like.

Both the National Farmers Union and the National Sustainable Agriculture Coalition support the bill.

On another related note, as part of the Sequester talks, there is a chance that 2013 Ag payments may be reduced.  The discussion right now is an 8% haircut, but we know anything is possible in this process.

We will keep you posted.

Paul Neiffer, CPA

Part of the ongoing Alternative Minimum Tax (AMT) mess over the last several years involved the allowance of certain nonrefundable individual tax credits such as the adoption credit, the child and dependent care credit, the lifetime learning credit and other similar credits to be allowed to reduce AMT.  In some years it was allowed whereas in other years it was not allowed or was only allowed on a retroactive basis.

In some years if a taxpayer had regular tax before these credits of $10,000 and AMT of $7,000, they could offset $10,000 of tax and potentially have zero tax liability.  In other years, they could only offset $3,000 of regular tax and still be subject to the AMT of $7,000.

The new tax law passed at the beginning of the year now makes the more beneficial treatment permanent (at least as permanent as Congress will allow).  This rules has been made effective as of January 1, 2012.

Therefore, along with the increase in the AMT exemption to reflect inflation, taxpayers can now offset AMT with nonrefundable personal credits that might not have been allowed under the old law.

On another subject that appears to be raising its head is that possible limitation of 2013 direct payments.  Although Congress passed a one-year extension of the 2008 farm bill; with the upcoming fight over the debt ceiling and sequester issues, there is a distinct possibility that these direct payments will be reduced or eliminated.  The possible savings in the current and future years may be too tempting for Congress to pass up.  We will keep you posted.

Paul Neiffer, CPA

The Economist Magazine based in England writes several good articles a year on items related to farming.  They just recently posted an article dealing with the farm bill making its way through Congress.

Most farmers know that the Farm Bill has technically expired as of September 30, 2012, but many probably do not know that we are now under the 1949 Farm Bill.  Each four-five year extension of the Farm Bill is actually an extension of the 1949 Act.  When the 2008 Farm Bill expired, we technically go back to the provisions of the 1949 Act.

This Act has various support prices and some of these prices are extremely high.  For example, milk support price is somewhere in the $30 plus range.  Wheat is around $15.  These prices are one of the primary reasons that Congress will either extend the Farm Bill or pass a new one.  The Milk support price would take effect on January 1, 2013.  The others would take effect when the crop is harvested.

I do not think we will have the Agriculture Abyss mentioned in the article, but all of thought that the 2010 no-estate provision would have been fixed long before December, 2010 also.

Paul Neiffer, CPA