By Chris Skorupa, Rural & Agricultural Council of America
Producers understand how unique the agriculture business climate is – there are high upfront costs in equipment, land, and labor, unpredictable weather changes, volatile market conditions, and more that can impact our bottom lines. At top of mind this time of year is the one thing that should remain stable and predictable, the U.S. tax code.
The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), passed the House of Representatives in January 2024 on an overwhelmingly bipartisan vote. The bill currently sits with the Senate and there are several key extensions to provisions that could have positive impacts for agriculture and rural America.
Among them, the bill allows for the full expensing of new equipment rather than spreading over multiple years. Already phasing out, this will drop to an 80 percent deduction in 2023, 60 percent in 2024, 40 percent in 2025, and effectively phase out completely by 2026. The benefit to front-loading the tax deduction is that it aligns with when the investment was made. This lowers the businesses’ financing costs and can result in a higher investment.
The bill will also allow for full expensing of Research and Development (R&D) investments. Currently, these costs are spread over a five-year period, creating a gap between when the expense occurs and when it is recognized for tax purposes, which discourages and penalizes investments in better, faster, or more efficient technologies. As an industry that is being met with ever-increasing and ever-moving targets on energy efficiency and climate mandates, any opportunity to encourage the development of new technologies on these fronts is critical.
Ultimately, the bill fixes mismatches in the current tax code and allows for more commonsense policies. It provides the stability and predictability that is necessary in an industry that is always weighing margins with return on investment.
The Tax Relief for American Families and Workers Act provides key tax reforms that boost business and support growth opportunities for rural America. It’s time for the Senate to act on this tax bill and bring it to the floor before the approaching deadlines.
Mr. Skorupa is President of Beartooth Fertilizer Company in Fox, MT, Chris provides fertilizer, custom application, seeding, soil testing, and crop consulting for farmers and ranchers in southern Montana. Beartooth is a family owned and operated business. Chris has led the RACA Farm Bill Committee and is a past director for the U.S. Cattlemen’s Association.
