Tax Week in Congress

Senate Committee Starts Deliberations as House Prepares for Floor Debate

The Senate Finance Committee starts debate on its version of a tax overhaul. The full House could vote on a bill later this week. (DTN photo by Nick Scalise)

WASHINGTON (DTN) -- The Senate Finance Committee is scheduled to begin marking up the tax overhaul bill Monday afternoon while the House is expected to hold a floor vote later this week on its version of the bill.

Leading into the Senate Finance Committee debate, more than 350 amendments have been filed by senators from both parties. Sen. Charles Grassley, R-Iowa, has multiple amendments to extend or modify certain tax credits for biofuels production. Sen. Pat Roberts, R-Kansas, has multiple provisions seeking to clarify taxation of farmers through cash accounting changes, for instance. Democrats have filed a broad array of amendments to curb tax cuts for wealthier taxpayers or reinstate tax credits or deductions taken out of the original bill.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, also has to contend with a report by the Joint Committee on Taxation released Sunday, which shows that roughly 9% of Americans would see a tax increase under the Senate tax bill in 2019, while another 31% of taxpayers would see less than a $100 change in taxes in 2019. Roughly 19% of tax filers would see their taxes decline between $100 and $500, while just over 40% of taxpayers would see their taxes decline by more than $500, the committee stated.

The House Rules Committee has scheduled a meeting to consider the bill on Wednesday. Floor action on the bill is expected Thursday. House Majority Leader Steve Scalise, R-La., said Sunday on Fox News that he will begin the process of counting the votes for the tax bill and encouraging members to vote for it.

Each bill contains provisions that would be positive for agriculture, but the bills do differ, and each eliminates the tax break known as Section 199 or the Domestic Production Activities Deduction, Jeff Wald, CEO of K-Coe Isom, an accounting firm, said in an analysis released late Friday.

National Council of Farm Co-operatives President and CEO Charles Conner has campaigned vigorously to keep the Section 199 deduction, which co-ops pass on to farmers.

Conner has warned that the deduction is valued at more than $1 billion annually and said its elimination could raise an individual farmer's tax burden by 5% to 17%. Conner has said that farmers' taxes should not be raised in a period of low commodity prices.

The House bill doubles the exemption for the estate tax to $22 million and eliminates the estate tax permanently in 2024, but the Senate bill only doubles it.

Each bill eliminates the Alternative Minimum Tax and allows for immediate expensing of capital purchases for the next five to six years, Wald said.

Wald noted that the House dropped a provision that would have required the payment of self-employment taxes (Social Security and Medicare) on land rental income, and the Senate has not included a provision to require payment of self-employment taxes on land rental income in its version.

On business interest deductions, Wald said he worries the Senate bill could constrain certain Ag businesses that are heavily reliant on credit financing.

"The House bill would limit interest deductions for businesses with more than $25 million in gross receipts, which could impact larger agricultural businesses," said Wald.

"The Senate bill would use a $15 million gross receipts test," he said. "It would sweep in many medium-sized operations and limit their ability to deduct interest expenses. We are optimistic that we can work with House and Senate Ag leadership to maintain vital flexibility on this point."

Wald also noted that both bills would eliminate like-kind exchanges for personal property such as agriculture equipment.

Finally, Wald noted that unlike the House bill, the Senate bill would eliminate the interest charge domestic international sales corporation provision known as IC-DISC that provides a tax incentive for the export of agricultural products.

"We encourage the House and the Senate to work together to ensure that any final tax reform legislation does not negatively impact agriculture. Given the tight margins in agriculture and high volatility of ag markets, Congress needs to continue to focus on preserving financial flexibility for ag businesses," added Wald.

Jerry Hagstrom can be reached at jhagstrom@njdc.com

Follow Jerry Hagstrom on Twitter @hagstromreport

Chris Clayton can be reached at Chris.Clayhton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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