Majority of U.S. House of Representatives Says “No” to Requiring Agriculture to Shift to Accrual Accounting

A Victory for the Farmers for Tax Fairness Campaign

Farmers for Tax Fairness today praised members of the House of Representatives for their overwhelming support of common sense accounting for America’s farmers and ranchers. Last week, more than half of the legislative body signed a letter to House Leadership expressing support for tax rules that allow certain small businesses, including most farming and ranching operations, to continue to use of the cash basis of accounting. The overwhelming show of support for cash accounting indicates that proposals to restrict the use of cash accounting are unlikely during the remainder of the 113th Congress.

Last week’s letter, which was signed by more than 50 percent of House members, marks a significant victory for the Farmers for Tax Fairness Coalition, a national coalition of agricultural producers brought together by the nation’s most proactive agriculture-industry accounting and consulting firm, K·Coe Isom, LLC.

K·Coe Isom CEO Jeff Wald said the news marked a victory for U.S. agriculture.

“We knew right away that the proposals coming out of Congress would be devastating for our clients and the industry as a whole. The broad base of support for the campaign demonstrated to Congress that the shift to accrual accounting just wasn’t something that made sense for U.S. agriculture. And to Washington’s credit, members of Congress really listened to the groundswell of opposition and told congressional leadership that these proposals just won’t fly.”

In 2013, K·Coe Isom grew concerned about two provisions contained within House and Senate tax reform proposals that would have disallowed the use of cash accounting for any business with more than $10 million in gross revenues. This proposed change threatened common practice in the industry, as most farmers and ranchers have used the flexibility of cash accounting to deal with dramatic shifts in commodity prices, high energy and other input costs, and long pre-productive periods for decades.

The tide began to turn after House Ways and Means Committee Chairman Dave Camp released a new draft tax reform bill in February, 2014. While the new bill maintained the requirement that most businesses with more than $10 million in revenue use cash accounting, the Farmers for Tax Fairness Coalition successfully worked with leaders in the House of Representatives to have farming and ranching businesses exempted from the proposed shift.

Throughout the spring and summer of 2014, Farmers for Tax Fairness continued to educate members of Congress and their staff about the impact of the proposed changes on the U.S. agriculture industry. Farmers for Tax Fairness coordinated its outreach efforts with complementary advocacy from groups such as American Institute of CPAs, the American Bar Association, the American Farm Bureau Federation, and the American Dental Association.

The spring and summer advocacy culminated in letters from 44 U.S. Senators and 233 U.S. Representatives expressing support for the continued use of cash accounting in the agriculture sector.

While comprehensive tax reform legislation is not currently expected to be considered in the remaining months of the 113th Congress, House and Senate leaders have indicated that tax legislation will be a priority when the 114th Congress adjourns in January 2015.

“We believe this sends a strong signal to members of Congress when they begin drafting tax reform next year,” says Wald. “Tax reform is critically important, but it has to be done correctly. Eliminating the use of cash accounting would dramatically increase costs and complexity for U.S. agriculture. Farmers for Tax Fairness, American Farm Bureau, AICPA, and others who helped spearhead this effort really deserve all of our thanks.”


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