‘Green Book’ Proposals Could Mean Substantial Tax Increases

Paul Neiffer, The Farm CPA, details some of the Biden administration's 2025 budget plans and how they could affect farmers if approved. Of the provisions, only one would potentially help farmers, he says.

Every year the President sends a budget proposal to Congress for consideration. The section dealing with how to pay for the budget is called the Green Book.

Neiffer told AgriTalk Host Chip Flory recently that the Biden administration is proposing substantial tax increases that, if passed, would impact many U.S. farmers. Six of the key points Neiffer highlights in the AgriTalk discussion and also covers online at farmcpareport.com are proposals that would include the following:

1. Imposing a capital gains tax on transfers, either during life or at death. Neiffer explains there would be a $5 million exemption ($10 million for couples with portability). Also, farmers could elect to defer the tax until it is no longer farmed in the family, but interest would be due and payable over 15 years.
2. The Excess Business Loss (EBL) would become permanent, and the carryover would no longer be part of the net operating loss (NOL) but would be subject to the EBL rules. Essentially the maximum NOL deduction in any year would be $500,000 (indexed).
3. Section 1031 gain deferral would be limited to $500,000 ($1 million for married couples) in any year.
4. Capital gains on amounts over $1 million would be taxed at 37%/39.6%.
5. The maximum Net Investment Income Tax (NIIT) rate would bump to 5%.

One Silver Lining

Neiffer told Flory there is one major provision that might help farmers:

6. Section 2032A would be bumped up to $14 million and indexed to inflation. This would allow farmers to value their land at its rental value instead of current fair market value. Current law allows for about a maximum $1.3 million deduction. This would increase it to $14 million.

EDITOR’S TAKE:

Although I am not a CPA or accountant, it is clear from this article that the President’s proposals would overall, constitute a tax increase on farmers/ranchers. This would certainly cut further into margins that are already tight in 2024. Only time will tell if any or all of these proposals have legs and make it through the congressional budget process. In the meantime, you are encouraged to remind the farmers/ranchers in your area how AgPack® can help them save up to $35,000 in operating costs. Emphasize that they can take advantage of all or only a few of the fantastic discounts and rebates offered by our amazing AgPack® partners!