The Top Producer Seminar kicked off Wednesday in Chicago. During a live broadcast of the “Farmer Forum” on AgriTalk radio, with host Chip Flory, producers shared how tax reform will impact their businesses. Spoiler alert: not everybody wins.
“Right off the bat it looks good because the C corporation rate went to 21 percent,” Iowa farmer Ted Hamer explains. “I lost the 15 [percent] bracket, so now I've got to have at least a taxable income of $85,000 to breakeven on this whole deal. So, it didn't really help the small c-corp.”
Beyond the tax brackets, Hamer says because of his business structure, he won’t be able to qualify for the controversial Section 199A deduction.
“I cannot benefit from selling that grain to the co-op,” he says. “So why don't I just sell it to somebody who's got an S-corp? They can pay me a little more because now they're going to benefit from the tax side selling it to the co-op.”
Hamer says if Congress doesn’t pass legislation to make Section 199A provide a more level playing field, he is probably going to change his business structure to a s-corporation.
Wisconsin potato grower Jeremie Pavelski says he’s not sure how the tax bill will impact his farm.
“I think there's still a lot up in the air,” he explains. “We're an s-corporation, so you know it's a little bit different there.”
While his business structure would qualify for the 199A he doesn’t sell his potatoes to a cooperative. So, as the law is currently written it won’t provide him much benefit.
“What I understand is from an s-corp standpoint, [the benefits] expire in 2025, whereas c-corp [benefits] are permanent,” Pavelski says. “But you know the dynamics for all of this are just quite honestly kind of crazy and in flux right now. I think the real winners, at least in the short term, are going to be all of the tax advisors.”
Section 199A is “just another pick and roll program,” says Bob Birdsell from Missouri.
“There's going to be guys out there doing rolling and rolling, and it’s hard telling where everything's going to end up,” he says.
Frank Howey says, for him, the biggest benefit he sees as part of a general partnership is the higher estate tax exemption level.
“Raising the deduction on the death tax and estate tax is really important to the larger family farms,” he says.
Flory reminds listeners that it’s critical to keep an eye on tax reform as Congress works to level the playing field.