Washington D.C. Report 1/12/18

January 12, 2018

Interagency Task Force on Agriculture and Rural Prosperity – Report

On January 8, the Task Force on Agriculture and Rural Prosperity presented a report to the President identifying legislative, regulatory, and policy changes that focus on improving the economic development and prosperity of rural America.

The report outlines five major Calls to Action:

Achieving e-Connectivity for Rural America: Connecting rural America is essential to economic development, access to global markets, farm productivity, and technological innovation. The report suggests establishing executive leadership, revising federal regulations, and incentivizing private capital investment.

Improving Quality of Life: Modernizing the infrastructure of rural communities is an important part of quality of life. Transportation, road safety, safe drinking water, affordable housing, and modernization of rural utilities leads to improving rural prosperity. The report suggests advancing educational opportunities, modernizing healthcare access, creating housing options, and improving community resiliency planning.

Supporting a Rural Workforce: Industries such as agriculture, forestry, mining, and manufacturing support rural economies. To grow these industries, employers need educated and skilled workers. The report suggests connecting rural skillsets to jobs, connecting veterans to underutilized training programs, promoting and expanding apprenticeship programs, improving access to education and training, and ensuring access to a lawful, agricultural workforce.

Harnessing Technological Innovation: Innovative technologies and practices improve crop quality, nutritional value, and food safety. The report suggests coordinating federal farm production and food safety research and development, increasing public acceptance of biotech products, developing a streamlined, science-based regulatory policy for biotechnology, and enabling rural uses of unmanned technologies.

Developing the Rural Economy: The report suggests improving rural access to capital through equity financing, debt financing, bundling/repackaging products and deals, and regional and state collaborations. Additionally, leveraging existing market opportunities, creating an investment matchmaking tool for project promoters, improving the tax code, increasing agriculture and forestry production, promoting development and access to natural resources, increasing energy production, and improving access to global markets.

The underlying theme of providing rural America with access to broadband to promote the prosperity of rural America will support the economic development of the entire nation.

New Tax Reform Law

On Friday, December 22, President Trump signed his $1.5 trillion tax reform legislation into law. The legislation remained a partisan effort from beginning to end.  Some of the most notable changes of the tax bill include lower individual tax rates, lower corporate tax rates, repeal of the individual mandate for health insurance, but preservation of many of the deductions and credits businesses use.

The tax overhaul legislation includes several provisions that will benefit farmers and growers. The bill will lower corporate tax rate to 21% and the individual tax rate to 37%, while nearly doubling the standard deduction. Legislation also significantly increases the Section 179 expensing allowance and allows farms to continue to deduct interest costs and use the cash accounting method.  It also allows for 100% expensing for five years of all real property that was previously eligible for bonus depreciation.  A new 20% deduction on pass-through business income from a partnership, S corporation, or sole proprietorship was also added. The deduction was presented to mimic and replace the benefits of Section 199 that the bill repealed. Section 199 is the provision in Ag Cooperative law that governs patronage from cooperatives.

These provisions should mean significant tax breaks for farmers and growers.  However, there is concern over including expiration dates, which prevent the bill from increasing the deficit after 10 years.  An increase in the deficit could lead to mandatory spending cuts that would likely come from farm programs and other spending. While increasing the deficit and triggering mandatory spending cuts would be catastrophic to agriculture programs, the sunsetting provisions may make it difficult for long-term planning.

The passage of this tax overhaul marks the first major legislative victory for Republicans under President Trump. However, the accelerated process in which Republicans passed tax reform will likely result in a few hiccups as the bill gets implemented. House Ways and Means Committee Chairman Kevin Brady (R-TX) has already acknowledged that Congress will need to draft legislation to make "technical corrections" to the tax bill.