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TAXATION

ISSUE:

Changes to tax laws. Passing the family operations to the next generations

without tax hardship is imperative to the continuation of the farm and ranch operations

in the United States. The survival of the farm and ranches must be considered in tax

laws, for family operations to survive, operate and provide nutritious, affordable food

and products to the United States and the world.


AMERICAN AGRI-WOMEN REQUEST:

American Agri-Women Urge Congress and the Administration to apply the following

tenets in tax law.


BACKGROUND:

Estate & Gift Tax:

  • H.R.338 Consider a bill being sponsored by Rep. Latta (R-OH-5). To amend the

Internal Revenue Code of 1986 to repeal the estate tax and retain stepped-up

basis.

  • The American Agri-Women are afraid for the farmers and ranchers if the estate

tax exemption set up by the Tax Cuts and Jobs Act of 2017 is allowed to expire as

of January 1, 2026. Currently the estate tax exemption for 2023 stands at

$12.92 million and has increased for inflation each year. This has allowed many

farms and ranches to transition to the next generation upon the death of the

owner, operator, father, mother, grandparents, or loved ones. If the estate tax

exemption is allowed to expire, the exemption could drop to as low as $3.5

million under the Build Back Better Plan causing farms and ranches to be sold

and the end of the farms and ranches as we know them. Inflation has caused

the value of agricultural and ranch land and equipment to increase. With that,

the estate exemption must also increase with inflation.

  • For agricultural estates to pass to the next generation, the estate tax exemption

along with the stepped-up basis on all assets must be maintained. A stepped-up

basis is mandatory, as it is the value of the asset at the time of death. Inflation

has raised the value much higher than the cost basis of the asset. If the steppedup basis were not allowed, a beneficiary would need to pay tax on the inherited

property that would include the difference of the inflated market value at death

less the original purchased basis. Without cash to pay taxes, the assets that

were just inherited would need to be sold at the market rate and taxes paid out again. For agriculture and ranching, this would be the end of the family farm and

ranch.

  • To save the family farms and ranches, the current estate tax rates need to

decrease or be repealed. We ask that Congress support ways to allow the

transition and succession of farms, ranches, and small businesses to survive and

grow following the loss of loved ones. Without farms and ranches, our country

will not survive.


Capital Gains Tax:

  • AAW does not support raising the Capital Gains tax rate but to decrease.

  • A capital gains tax rate is currently on the sale of all agricultural farmland,

equipment, animals, and purchased property. If the capital gains tax rate were

to increase, the funds needed to continue providing food and products for the

nation and world would be lost on taxes. Agriculture and Ranches, bankrupt.

Tax increases:

  • To allow agricultural operations, ranches, and small businesses to survive, taxes

cannot be raised as in a “Small Business Surtax.” Expanding a surtax on S

Corporations, LLC’s, sole proprietorships, and partnerships and lowering income

thresholds on family trusts will cripple small businesses. Small businesses,

agricultural and ranches are not cash rich. Money that is made goes back into

the operation. We ask that you support the survival of small businesses, the

family farm, and ranches by reducing taxes not raising. To say that a tax

increase would affect only the high-income individuals is false. It would affect all

small businesses, farmers, ranchers, and tax paying individuals.

Additional Tax Positions:

  • Consider the bill sponsored by Sen. Cruz (R-TX) S.314. AAW supports

permanently allowing a tax deduction at the time an investment of qualified

property and assets are made.

  • AAW supports the continuation of the Sec. 199A deduction for pass-through

businesses. Currently set to run through 2025.

  • AAW supports the depreciation recapture rules when farm and business

depreciable assets are sold on retirement or cessation of business.

  • AAW does not support increasing tax rates, with a

flat inflated rate for corporate farm operations

and businesses or increasing individual rates and

decreasing the income threshold to $400,000.00.

  • AAW supports tax-deferral options by using installment sales and Sec. 1031 likekind exchange.

  • AAW does not support the repeal of “step-up basis”. The “step-up basis” is not a

loophole to avoid taxes. It is a necessary event to pass the ability to provide

food and products for the nation to the next generation.

  • AAW does not support an increase in investment tax on all small businesses,

including farmers and ranchers with an income over $400,000.00. This income is

needed to continue the business.

  • AAW supports special exemptions for purchases of machinery, equipment, land

improvements, livestock, and buildings. Supports the accelerated depreciation

to

  • Allow a shortened recovery period of 15 years versus 39 years for “qualified

improvement property”.

  • AAW supports the continuation of electing to expense certain property under

Section 179 expensing election.

  • AAW supports measures that provide tax simplification for farmers, ranchers,

and small business and opposes any effort to make tax laws more burdensome.

  • AAW supports the cash accounting method for family farmers and ranchers,

regardless of income.

  • AAW supports the deductibility of all inputs and business expenses, regardless of

origin.

  • AAW supports interest paid on business loans as fully deductible as the cost of

doing business.

  • AAW supports FICA and Medicare taxes (Self-Employment tax) to be assessed

only on wages, not on pass through dividends to shareholders from corporatestructured farms.

  • AAW supports the 100% deduction for health insurance for the self-employed

and family-owned corporations regardless of business structure. Prevent a

government-run family and medical leave program regardless the number of

employees.

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