K·Coe Isom Applauds Congressional and White House Progress on Tax Reform Framework

Leading Ag Consulting & CPA Firm Calls on Congress to Shape Tax Reform to Boost U.S. Agriculture

(Sept. 27, 2017) – K·Coe Isom, the nation’s leading agricultural accounting and consulting firm, today applauded the U.S. House and Senate leadership and the White House for moving forward with tax reform targeted at growth and tax simplification. This morning, House and Senate leadership and the White House released the “Unified Framework for Fixing Our Broken Tax Code.”

The Framework would modify many provisions in the tax code including reducing the top corporate rate to 20%, reducing individual rates into three or possibly four brackets, creating a new tax rate for pass-through entities, raising the standard deduction, and eliminating the estate tax. While more detailed than some of the past tax reform documents that have been released, the Framework stops well short of legislative language leaving substantial questions about what deductions will be eliminated and how Congress will pay for the proposed rate reductions.

“Tax reform would be a great shot in the arm for the U.S. economy,” said K·Coe Isom CEO Jeff Wald.  “Simplifying the tax code and lowering individual and business rates can improve the competitiveness of American businesses and put additional dollars into the pockets of American families. Creating a new rate for pass-through entities in particular could be helpful for many farms and ranches.”

Wald called on Congress to make sure that tax reform legislation doesn’t hurt America’s farms and ranches:

“As the House and Senate move from the general Framework and begin crafting tax reform legislation, they need to make sure they don’t raise taxes on American farmers and ranchers, or take away the flexibility that agricultural producers rely upon to manage their businesses.”

Three specific provisions that K·Coe Isom is calling on Congress to preserve for agriculture include:

  • Preserve and enhance the ability of U.S. agriculture to use the cash method of accounting. Cash accounting is a critical tool that farmers and ranchers use to balance their cash flow through commodity and input price swings. Studies commissioned by K·Coe Isom demonstrate that removing cash accounting would cost agriculture $4.8 billion and reduce the borrowing capacity of agriculture by an additional $7 billion. The Framework is silent on whether cash accounting will be maintained or limited for agriculture.
  • Maintain the ability of U.S. agriculture to deduct interest expense. Farms and ranches often finance equipment, land, and input costs with debt financing. Unlike other sectors of the economy, agriculture rarely turns to equity financing, relying much more heavily on debt financing to operate. Because of this, it is vitally important that farms and ranches are allowed to continue deducting interest expense as a real cost of conducting business. The Framework states that “[t]he deduction for net interest expense incurred by C corporations will be partially limited. The committees will consider the appropriate treatment of interest paid by non-corporate taxpayers.”
  • Allow farmers and ranchers to “step up” their basis in assets upon death. The tax code currently allows families to step up the tax basis in inherited land and other assets. The Framework calls for the elimination of the estate tax but is silent on whether Congress will modify the rules governing the step up in tax basis. As Congress moves to repeal the estate tax, it needs to make sure that families won’t have to pay massive capital gains taxes triggered by the death of a loved one.

“K·Coe Isom represents many of America’s most successful farm and ranch businesses. We’re also helping some of America’s leading agricultural organizations to assess how tax reform will affect producers of critical commodities,” added Wald. “As Congress releases tax reform legislation in the coming month, we’ll be looking closely to make sure that it doesn’t inadvertently raise taxes on agriculture or reduce the flexibility that farms and ranches need to function. Until the details are released and we can analyze the effect on actual farms and ranches, it is too early to tell whether tax reform legislation will be a net gain for agriculture.”

K·Coe Isom is a national agriculture accounting and consulting firm that represents farmers and ranchers throughout the U.S. In 2013, K·Coe Isom helped launch Farmers for Tax Fairness, a national coalition of farmers who work together to educate Congress on the importance of cash accounting to U.S. farmers.

“Agriculture is the backbone of America, creating millions of jobs, supporting local economies, and providing food security for the world,” said Wald. “As Congress considers comprehensive tax reform, it must make sure that its rewrite of the tax code will continue to promote U.S. agriculture.”

About K·Coe Isom

K·Coe Isom leads, nationally, as consultants and CPAs in the food and agriculture industry—services constituting more than two-thirds of the firm’s business. The firm is embedded throughout the US food-supply chain—from policy to plate—working with producers, input suppliers, processors, packagers, distributors, biofuel manufacturers, equipment dealerships, landowners, lenders, and many agencies and policy organizations that support the industry. The firm also has regional strengths in community banking, construction and real estate development, education, and manufacturing. K·Coe Isom serves domestic and international clientele from 21 coast-to-coast offices. Visit kcoe.com.


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