Tax reform has been on the minds of Americans for months. On Wednesday, the House and Senate came to an agreement on a tax reform package that will go both chambers for a full vote on Dec. 18. According to Pro Farmer’s Washington policy analyst, Jim Wiesemeyer, farmers should be aware of several aspects of the bill. If passed:
- The proposed corporate tax rate would be 21%, down from the current 35%. It will go into effect in 2018.
- The top individual tax rate would be 37% and will kick in for income levels below the $1 million cutoff outlined in both the House and Senate bills.
- The deduction for "pass-through" business income will be set at 20%. “Negotiators agreed to keep the Senate’s approach to provide a tax deduction for pass-through companies, whose owners pay taxes on profits through the individual code,” Wiesemeyer says. “The conference bill will include a House provision that would allow some pass-through owners with few employees — but large amounts of investment in their businesses — to bypass a limit on how much income qualifies for the preferential deduction.”
- Will allow individuals to deduct up to $10,000 in state and local taxes.
- Businesses would get to immediately write off investments for the next five years.
- Will maintain the estate tax but raises threshold to qualify to about $11 million.
- Mortgage interest deduction cap would be lowered to $750,000 from the current $1 million.
- Opens up the Arctic National Wildlife Refuge to oil and gas drilling.
- Ends the mandate that all Americans have health insurance or face a fine.
According to Paul Neiffer, CPA and principal at CliftonLarsonAllen, the Section 199 replacement, Section 199A is calculated differently that Section 199 was. “Coops may not be able to pass out the Section 199 deduction like they have in the past,” he says. The Wall Street Journal reports the Senate version of the bill would allow a 23% deduction on profits that are distributed to members, but details on Section 199 in the conference bill are unclear. Officials at Minnesota Milk Producers Association say the loss of Section 199 could cost dairy farmers as much as $100 per cow.
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