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Missouri Cattlemen seek income tax break for disaster payments

 

By MATTHEW D. ERNST

Missouri Correspondent

 

JEFFERSON CITY, Mo. — A law passed last month in Arkansas will exempt cattle producers there from paying state income tax on disaster payments, and similar legislation is being sought in Missouri.

The bills represent an apparently novel legislative push. "I am not aware of past or present legislation in Corn Belt states that seek to exempt disaster payments from state income tax," said Roger McEowen, Director of the Center for Agricultural Law and Taxation at Iowa State University. In Iowa, as in other Corn Belt states, agricultural disaster payments are subject to state income tax.

The Arkansas bill, S.B. 341, exempts cattle producers starting with the 2015 tax year from paying income tax on payments received from nine disaster programs, including the Livestock Forage Disaster Program, Livestock Indemnity Program and Emergency Assistance for Livestock, Honeybees and Farm-Raised Fish. Those four programs were made permanent in the 2014 Farm Bill, with benefits retroactive to 2011 for producers in qualifying counties.

Many cattle producers in southern Missouri and northern Arkansas sold off cattle after a severe drought in 2012. Signup for retroactive drought disaster payments in qualifying counties began in April 2014.

Supporters of the Missouri bill, which is still in committee, are pitching the bill as a fair shake for farmers. "This is loss replacement, not income," said Dan Kleinsorge, chief of staff for Dave Schatz, the senator sponsoring the bill in the Missouri Senate. Kleinsorge said that "loss replacement" should not be subject to state income tax. "These disaster payments rarely occur. We don’t expect this to have much impact on state revenues," he added.

The Missouri Cattlemen’s Assoc. banded with the Arkansas cattlemen to support bills in both states. "We are optimistic that MCA can take this legislation in Missouri to completion this year," said MCA President Janet Akers.

According to an online report from the Farm Service Agency, Livestock Forage Disaster Program payments of $4.3 million were made to Missouri producers from Jan. 7 to Feb. 2 of this year. Payments from the LFDP in Arkansas totaled $7 million during the same period. Most of the payments to Missouri and Arkansas producers this year are for grazing losses in 2012, according to FSA disaster payment reports.

4/8/2015