September 19, 2019 – (Washington, DC) In a letter to Congress today, 28 of America’s leading agricultural businesses and associations called for the repeal of an IRS opinion that threatens the livelihoods of thousands of farm and ranch operations nationwide.
The letter, coordinated by Farmers for Tax Fairness, was signed by state and national agriculture associations and businesses representing hundreds of thousands of farmers nationwide raising all types of crops and livestock. (A list of the signing organizations and businesses is included at the end of this release).
As noted in the letter (read full letter here):
In February of 2017, the IRS issued an Action on Decision letter (“AOD”) in response to the IRS’ loss in the 5th Circuit Court of Appeals in Burnett Ranches, Ltd. v. U.S. (5th Cir. 2014). AOD 2017-17 places a cloud over thousands of legitimate agricultural businesses and threatens the livelihoods of American farm and ranch families. It does so by calling into question the accounting methods traditionally used by agriculture and exposing farmers and ranchers to needless litigation with the IRS.
“This issue could impact farm and ranch families across the United States,” said Brian Kuehl, Director of Farmers for Tax Fairness. “Whether you raise corn or soy or hogs or almonds or any other ag product, you shouldn’t live in fear of an IRS audit declaring you to be a tax shelter because of the way you have structured your operation. Active farmers are not tax shelters.”
Farmers for Tax Fairness formed in 2013 when Congress proposed limiting the ability of farmers to use the cash method of accounting.
Farmers for Tax Fairness helped demonstrate to Congress why the cash method of accounting is critical to farm and ranch operations and ultimately Congress elected not to limit this important financial tool. Farmers for Tax Fairness is concerned that the IRS ruling on farming syndicates will impact active farm and ranch operations – many of whom may not even be aware that they are at risk.
The letter from the 29 agriculture organizations and businesses calls for the repeal of AOD 2017-17 and asks Congress to consider changing this section of the tax code to protect the ability of active farmers to use the cash method of accounting.
“What U.S. pork producers and other farmers don’t need right now is more uncertainty,” said David Herring, president of the National Pork Producers Council and a pork producer from Lillington, North Carolina. “At a time when many farmers are facing export market and other headwinds, more uncertainty is exactly what we will face without access to the cash method of accounting used by so many farmers.”
Leading ag CPA firms also joined on the letter explaining how American farmers could be impacted by this ruling.
“A farmer should not be penalized if they hold their farm through an S corporation, complex trust, or similar entity. Farmers hold their operations using these types of structures for a variety of reasons including inheritance and succession planning and liability protection,” said Bryce Gibbs, a CPA with K·Coe Isom, a leading national agriculture accounting and consulting firm. “Congress and the Trump Administration should work together to make sure America’s farmers aren’t hurt by this IRS ruling.”
Chris Hesse, a Principal with the accounting firm CliftonLarsonAllen who works closely with U.S. ag producers added: “The farm syndicate rules have taken on a heightened importance as a result of the Tax Cuts and Jobs Act. It would be helpful if Congress would at least provide an exception for small farm entities that otherwise meet the gross receipts test. Abusive situations are already covered under other provisions.”
Bryan Powell, National Practice Leader for Moss Adams’ Agribusiness Service, concluded: “Having Congress’ continued support for American farm and ranch families is critical to their sustained success. Clarifying this substance-over-form issue will remove uncertainty that jeopardizes our family farm and ranch operations.”
Organizations and Businesses Signing the Letter to Congress:
American Farm Bureau Federation
American Soybean Association
California Farm Bureau Federation
Farm Credit Council
Farmers for Tax Fairness
Illinois Farm Bureau
Indiana Corn Growers Association
Indiana Soybean Alliance
Iowa Corn Growers Association
Iowa Farm Bureau Federation
Kansas Farm Bureau
Kansas Livestock Association
K·Coe Isom, LLP
Minnesota Farm Bureau
Missouri Farm Bureau
Moss Adams, LLP
National Cattlemen’s Beef Association
National Corn Growers Association
National Council of Farmer Cooperatives
National Federation of Independent Businesses
National Milk Producers Federation
National Pork Producers Council
Ohio Farm Bureau Federation
United Fresh Produce Association
Wisconsin Farm Bureau Federation
Wyoming Stock Growers Association