Tax policy geared toward farmers and others that transfer land and other assets to heirs will get a renewed focus at the Ways and Means Committee this year, a marker of the panel’s more rural tilt while still promoting measures that favor business.
Chairman Jason Smith (R-Mo.) has cast himself as a champion for working families, small businesses, and farmers, “not the people on K Street.”
With the retirement of former Rep. Kevin Brady (R-Texas), whose district included Houston suburbs, and the exit of former Rep. Tom Rice (R-S.C.), whose district included Myrtle Beach, and the addition of members like Reps. Randy Feenstra (R-Iowa) and Claudia Tenney (R-N.Y.), the panel now has greater rural representation.
Stepped-Up Basis Breakdown
The step-up in basis tax rule reduces the capital gains tax on inherited property. The Joint Committee on Taxation has noted that the failure to collect these taxes costs $40 billion per year, citing a 2021 Congressional Research Service report.
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In Democratic proposals to eliminate the provision, lawmakers have included exemptions of up to $1 million and for farmers.
Rep. Bill Pascrell (D-N.J.), who has introduced legislation on the issue, told Bloomberg Tax that “people are getting away with murder” on the issue. There’s room for compromise, though, Pascrell said.
“We’ve made some considerations for farmers, small farmers, but there’s no question in my mind that inheritance has never been taxed many times,” Pascrell said. “Anybody who believes that your inheritance should not be taxed, I’ll listen to, but that, to me, is probably in the top five of what needs to be reformed.”
Favor in the House
With Republicans now in control of the House, Feenstra said he wants to introduce legislation shielding the stepped-up basis and like-kind exchanges.
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The upcoming farm bill will be the first opportunity to add in those types of policies, as well as extending or renewing tax measures from the 2017 tax law that expired at the end of 2022, Feenstra said.
“There’s great opportunity for that Ways and Means can work with the Agriculture Committee,” Feenstra said, “and make sure whether it be in conservation, an energy title, or even a research and development title.”
Tenney said she hopes to make other tax measures benefiting farmers permanent, pointing to the 2017 tax law’s 20% pass-through deduction for certain businesses, which she said benefits farms in her district.
Feenstra also wants to see full bonus depreciation, which allowed companies to immediately expense capital expenditures, and which starts to phase out this year, make a return.
A research and development tax deduction that expired last year could also be included in the farm bill, Feenstra said.
