Mixed bag for ag in tax extenders, spending bills

“They’ve gotten intermingled,” says Pat Wolff of the two large bills.

Wolff, a tax policy specialist with the American Farm Bureau Federation in Washington, D.C., says the horse-trading that often goes with spending bills ended up spreading to both of these bills.

But the good news is the spending bill doesn’t hit agriculture too hard, and the tax bill includes several important provisions that effect farmers.

The tax extenders bill covers dozens of tax credits or tax-related items ranging from wind and solar to a tax credit for biodiesel and ones covering the use of depreciation.

This year’s bill is a two-year extension, but one of those years is retro-active for 2015 and 2016.

The omnibus spending bill is a different matter. Congress is supposed to pass a series of 12 spending bills before the fiscal year begins Oct. 1, but it failed to meet that deadline. All the spending bills have been rolled into one large bill, funding the federal government for the fiscal year that ends next Sept. 30.

Renewable energy credits

On the tax extender side, farm and energy organizations were happy with several credits related to renewable energy. Tax credits for power projects, fueled by wind turbines and solar panels, were included in the package voted on by Congress last week.

Also in the bill is a renewal of the biodiesel tax credit, which is good news, according to Grant Kimberley, executive director of the Iowa Biodiesel Board. But he says producers were pushing for a switch from a blender’s credit to a producer’s credit, which would have meant it would only have gone to domestically produced biodiesel. As it stands now, the biodiesel credit can also be used for imported biodiesel.

Making that change would have saved the government money and would have benefitted U.S. biodiesel producers, Kimberley explains.

The end result is generally good news, says Monte Shaw, head of the Iowa Renewable Fuels Association. But he hopes lawmakers consider making the change to a producer’s credit in the future.

“This was really kind of a missed opportunity,” he says, adding large oil companies appear to have convinced smaller blenders they would be hurt by the change.

Both Shaw and Kimberley say the extension of the biodiesel credit was important for the industry. Producers of biodiesel were forced to plug at least part of that credit into their pricing structure this past year if they hoped to remain competitive in the fuel market. If it had not been retro-active, they would have suffered a financial hit.

Both men say it is still difficult to make long-term plans when the credit is only renewed for a year or two at a time.

Section 179

The tax bill as passed by the House also includes language regarding bonus depreciation and what is referred to as section 179 expensing allowance, an item used by many farmers.

That section 179 provision allows farmers and other businesses to cap small business expenses at $500,000 instead of $25,000. It appears the extenders bill would also make that language permanent, meaning the section 179 language would not expire at the end of 2016, as is the case with many of the other tax provisions in the bill.

Illinois Corn Growers Association President Jeff Jarboe said in a news release, “All farmers can understand the importance of this extension even though it doesn’t seem directly related to agriculture.”

Making that extension permanent was a goal of the Farm Bureau, says Wolff, as was the language that extends the 50 percent bonus depreciation provision for five years.

Spending bill

Meanwhile, the omnibus spending bill also includes some good news and some bad news for farmers.

Ag groups have battled over enforcement regarding Country of Origin Labeling, but an announcement by the World Trade Organization that it would allow trade sanctions by Canada and Mexico against the United States, led to language in the omnibus spending bill that would repeal COOL.

Many agricultural organizations praised that move, saying it would head off potentially devastating sanctions. But leaders of the National Farmers Union and some other groups expressed disappointment in the move.

Other provisions included lifting a federal ban on exporting oil and about $21.75 billion for agriculture spending, an increase of about $1.15 billion over last year.