The Biden Administration has signaled an intent to offset costs for the infrastructure plan in part through increased tax liabilities on America’s farming operations. While it is perhaps now more important than ever to maintain estate tax exemptions for farmers to keep family farms in business to keep feeding this nation, we cannot reduce the protections provided through the step-up in basis.
This has not yet been embodied in legislative text, so we have yet to see the details but to require family farm heirs to come up with the liquid resources to pay for this drastic increase in capital gains would leave many with no choice but to sell the farm. This would be devastating to individual farmers and the American agriculture community at large. While we applaud the goal of modernizing our nation’s infrastructure, particularly as it relates to Western water security, it cannot come at the cost of American agriculture.
Western Growers is working with allies to apply pressure to prevent the repeal of the step-up in basis. In a letter to top congressional leaders, WG and a coalition of 41 industry organizations expressed concern over elements of President Biden’s tax proposal that would jeopardize the viability of family-owned agricultural businesses. The letter calls out several principals to ensure that financial harm is not caused to multi-generational farms and ranches across the U.S.:
- Preserve tax provisions that support multi-generational operations, including maintaining the current estate tax exclusion limits and the step in basis.
- Safeguard the viability of family-owned agricultural business entities, including the continuation of the Sec. 199A business income deduction and retaining like kind exchanges.
The letter concludes: “As Congress works to enact a comprehensive infrastructure package, we appreciate your consideration of these important issues. We look forward to working with you on legislation that ultimately preserves the long-term sustainability and vibrancy of family-owned farms, ranches, and agribusinesses.” See the text of the Tax Agriculture Coalition letter here.
Our Congressional champions have been working on this issue as well and have sent a letter to leadership with the same goal in mind, led by Rep. Jim Costa (CA). See the Congressional letter here.
Additional Resources:
- News articles providing background and the state of play:
- Roll Call’s Frontline, farm-state Democrats push back against Biden tax plan: https://www.rollcall.com/2021/05/06/frontline-farm-state-democrats-push-back-against-biden-tax-plan/
- Wall Street Journal’s Biden Plan Would Limit Longstanding Tax Break Used by Farmers: https://www.wsj.com/articles/biden-plan-would-limit-longstanding-tax-break-used-by-farmers-11620298800
- Tax Agricultural Coalition Letter: https://www.wga.com/sites/default/files/Tax%20Aggie%20Coalition%20Letter%205.10.21%20.pdf
- Congressional Letter: https://costa.house.gov/sites/costa.house.gov/files/05.6.21%20Stepped%20Up%20Basis%20Final.pdf
For questions, contact Dennis Nuxoll or Jonathan Sarager at (202) 296-0191.
