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Some Tax Code Changes Would Hamper Farmers and Ranchers

K-Coe Isom, an agricultural accounting and consulting firm,  said there were provisions in the tax bill that would hamper growth for farmers and ranchers and could increase their taxes. These include caps on the interest-expense deduction, scaling back carry-back of losses, the elimination of the Domestic Production Activities Deduction and limits on like-kind exchanges.The tax plan would cap business-interest deductions at 30% of adjusted taxable income. Like cash accounting, businesses with average revenue of $25 million or less would be exempt from that cap.Wald called on Congress to consider four changes to the bill:-- Exempt farm businesses from limits on interest deductions. 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. While it is good that small businesses are exempt from interest expense limitations in this bill, Wald said it would be better if all farm businesses were exempt from this limitation.-- Allow farmers and ranchers to use like-kind exchanges for farm equipment. The current tax code allows farmers to avoid paying taxes on the trades of equipment provided that the farmer acquires similar equipment.-- Congress should preserve the ability of farmers to use such like-kind exchanges. This creates an incentive to replace aging farm equipment with new purchases, which is good for agricultural competitiveness and good for ag manufacturers and equipment dealers.-- Exempt agriculture from the elimination of the Domestic Production Activities Deduction (Sec. 199). The Domestic Production Activities Deduction (DPAD) is a deduction that applies to proceeds from agricultural products that are manufactured, produced or grown by farmers.

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DTN