A Quick Look at the Next Farm Bill
So, the federal midterm elections have come and gone. Republicans have taken the majority in the House of Representatives and picked up six seats in the Senate. What does this spell for agricultural interests and the ag lawyer dealing with federal legislative issues?
It spells a murky farm bill discussion. This next Congress will be charged with the task of passing the next farm bill, including the dairy title. While it is still too early to know many of the details about the membership of the respective agriculture committees or to determine the content and procedure for completing the farm bill, the little that we do know does provide some guidance.
We know that Senator Debbie Stabenow of Michigan will chair the Senate Committee on Agriculture, Forestry, and Nutrition. In the House, Oklahoma Congressman Frank Lucas will be the chair. Other positions will be announced as the new term approaches.
As for the content of the farm bill, we are, in many respects, starting from a clean slate. What, if anything, will be utilized from the hearings held by the current House Agriculture Committee is unclear. Almost certainly, the new committees will hold their own hearings before debate begins on the bill in earnest. If that sounds like it could take some time, it does. I have personally heard some musing about punting the discussion into 2012 and 2013, which would be similar to the path taken by 2008 farm bill.
The scope of existing programs, as well as any new programs, will be determined in large part by the federal budget. Total spending under the new farm bill will likely be at or below the levels of previous years. That’s good news for budget hawks, and poses potentially sticky decisions for supporters of farm programs.
Turning to dairy-specific aspects of the farm bill, the principal legislative initiatives are National Milk Producers Federation’s Foundation for the Future (FFTF) and the Costa-Sanders Bill on supply management. Other comprehensive and targeted provisions will be introduced and discussed. As FFTF has been developed and promoted, its total costs have been reported to be less than the current programs that it seeks to replace. We will now watch to see how these little pieces of information fit into the big picture as we get ready to turn over the calendar once again.
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Return of Federal Estate Taxes Means Farmers Should Plan
As 2010 came to a close, estate planning attorneys carefully watched what would happen to federal estate taxes. In late December, Congress passed the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” (“TRUIRJCA”). For persons dying in 2010, there was no federal estate tax. But that provision was set to expire at the end of 2010 with estates over $1 million becoming subject to federal death taxes.
What would an estate tax exemption of $1 million mean for farmers? For many, the effects could have been catastrophic. In an excellent overview article appearing today in the Jamestown (NY) Post Journal, the effects on farm families are explained so clearly, I was tempted simply to re-post the article. Instead, I am simply going to hit the key point–farmers need a good estate plan. And the current bill is not enough to protect many farms from estate taxes. You can read the full article here.
Many farmers are quite wealthy. But instead of controlling large retirement accounts or cash, farmers’ wealth is tied up in their farm operations. As the president of the Chautauqua County Farm Bureau was quoted in the Jamestown Post Journal article, “Farmers are basically cash-poor but asset-rich, and it doesn’t take much to have a $1 million estate – or even a $5 million estate – on a farm, to tell you the truth. By the time you start adding up the land, cattle and machinery, you’re pretty close.”
In my experience, that assessment rings true. With land values in some Ohio farming communities approaching or exceeding $7,500 per acre, a grain farming operation with 1,000 acres would exceed even the expanded estate tax limits. Equipment, livestock, and other assets can make even a modest family farm a multi-million dollar operation.
The new estate tax exemptions, while an improvement over the $1 million level that was scheduled to take effect, are only a temporary fix. The new tax exemptions and ax rates are scheduled to expire at the end of 2012. Uncertainty remains as to what Congress will decide when the current changes expire.
Even for those farmers whose assets do not reach the $5 million exemption, a good estate plan can help preserve control over property, pass property to desired heirs, and provide peace of mind. For farmers who want to preserve their assets and plan for their future and the futures of their family members, a consultation with an experienced agricultural and estate planning attorney is the best way to see that their farm and legacy are protected