By KEVIN WALKER
WASHINGTON, D.C. — The U.S. House of Representatives voted late last month to extend the individual tax cuts in President Trump's 2017 tax law; however, it appears unlikely anything more will be done on it before the midterm elections on Nov. 6.
The legislation passed by a vote of 220-191 on Sept. 28, with three Democrats voting for and 10 Republicans voting against it. The 2017 tax cuts are temporary and set to expire after 2025. The Protecting Family and Small Business Tax Cuts of 2018 (H.R. 6760), one of a three-bill package known as Tax Reform 2.0, addresses bonus depreciation and the estate tax, among other tax provisions – and would be permanent.
The Tax Cuts and Jobs Act passed in 2017 reduced taxes for all businesses, but only the tax cuts for incorporated businesses operating as C corporations were permanent, according to the Michigan Farm Bureau (MFB). The vast majority of farms, however, file their taxes as sole proprietorships, partnerships or S corporations.
MFB's John Kran said the newly passed legislation would grant farmers certainty by making the tax reform measures permanent, which could benefit Michigan producers when it comes to making long-term business decisions such as estate planning and capital purchases.
“With the election coming up, we aren't expecting the Senate to do anything on it until after the midterm elections,” he said. “A lot of the positions we advocated for were only in place for a few years. We're happy to see that some people are looking at extending these now.”
Kran added what's most important in the tax provisions depends on “where you're at in life.” The legislation makes the following provisions that are particularly important to agriculture permanent: reduced pass-through tax rates and expanded brackets, the Section 199A new 20 percent business income deduction, unlimited bonus depreciation (expensing), the doubled estate tax exemption ($11 million per person or $22 million per couple) and the increased alternative minimum tax threshold for individuals.
The other two bills that passed the House as part of the three-bill package are the Family Savings Act of 2018 (H.R. 6757) and the American Innovation Act of 2018 (H.R. 6756).
Kran predicted that ultimately, Republicans will have to compromise with Democrats on what actually makes it into law. Democrats have characterized the tax cuts as favoring the wealthy and increasing a budget deficit that Republicans would seek to fill with farm program and entitlement spending cuts.
“This legislation is a priority for us and we're going to keep pushing for these things no matter who's running things,” Kran explained. “Everything's up in the air right now and we don't know what's going to happen with the midterm elections.
“Realistically, it's probably going to take more than one or two Democrats to get this thing passed. We might have to make some changes to the legislation.”