Biden Plan to Exempt Farms from Elimination of Capital Gains Tax Breaks

by Colter Brown

In a joint address to Congress on Wednesday night, President Biden lobbied for some big spending proposals for infrastructure, education, social services and healthcare. To pay for his wish list, the President’s American Families Plan calls for more taxes on corporations and wealthier Americans.

Biden’s infrastructure and social spending plans combine for more than $4 trillion in spending over a decade while the president also is proposing at least $1.5 trillion in tax increases to help pay for these programs.

In addition to new taxes, Biden plans to end several provisions of the tax code that are important to the ag industry. The American Families Plan would repeal the deferral of gain for real estate like-kind exchanges for gains greater than $500,000 and eliminate stepped-up basis for gains in excess of $1 million ($2.5 million per couple “when combined with existing real estate exemptions”) and tax said gains on any property not donated to charity.

It has long been a concern of agricultural organizations that the President would eliminate stepped-up basis. Danielle Beck, the National Cattlemen’s Beef Association’s Senior Executive Director of Government Affairs, commented, “Family-owned cattle operations, no matter the size, are the backbone and economic drivers of rural economies across the U.S. Preserving long-standing tax provisions such as stepped-up basis and like-kind exchanges is critical when considering the financial viability of farms and ranches, as well as the ability for the next generation of producers to carry on the family business and conserve the land that has been in their family for generations.”

Addressing the question of taxes on farm estates and a plan to eliminate the “stepped-up basis,” the U.S. Department of Agriculture issued a statement before Biden’s speech. USDA stated Biden’s tax plan would have special protections for farms.

“No capital gains taxes at death for family farms,” USDA stated. “This plan includes a special protection for family-owned farms and businesses. It defers any tax liability on family farms as long as the farm remains family-owned and operated. No tax is due if the farm stays in the family. No one should have to sell a family farm they inherit to pay taxes and the president’s tax reform guarantees that.”

USDA pointed out the proposal closes a “loophole for wealthy estates so that enormous fortunes do not completely escape taxation.” The plan would tax unrealized capital gains at death above a $2 million exemption per couple.

Under Biden’s plan, about 2% of farm estates would owe taxes “on their non-farm assets” and 98% of farms would not owe any taxes “provided the farm stays in the family.”

However, NCBA expressed concern that the tax policy changes will still threaten the long-term viability of family-owned farms and ranches.

“When considering how to offset the cost of a comprehensive infrastructure package, it is essential that Congress preserve sound tax policies for family-owned agricultural operations. We are committed to holding Members of Congress accountable for legislation that will not adversely impact the viability of farm and ranch businesses, or the next generation’s ability to continue to sustainably produce an abundant food supply,” Beck said.

“To be clear, we firmly believe that it would be irresponsible to pay for an infrastructure bill on the backs of farmers and ranchers and with that, counterintuitive with this Administration’s conservation agenda. These provisions in the tax code are a determining factor in whether farmers and ranchers access to land is maintained for generations to come, or if that land is fragmented and further threatened by conversion and development, or paved over outright for strip malls and shopping centers,” Beck continued.

NCBA says that they stand ready to work on both sides of the aisle to ensure that Members of Congress understand the needs of cattle producers in regard to tax policy.

 

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USDA/NCBA/DTN


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