Issue
Farm Bureau opposes a new 3 percent withholding tax on government payments for goods and services that is
scheduled to begin in 2012. The withholding tax, which will apply to many Agriculture Department payments that
farmers and ranchers receive, will be a credit against the recipient’s individual or corporate tax liability. The
withholding tax is refundable at the end of the year if taxes withheld are more than taxes due. Background
The conference report from the Tax Increase Prevention and Reconciliation Act of 2005 states that farm programs are explicitly intended to be covered by the new 3 percent withholding tax. For example, if a farmer or rancher
would receive a $10,000 payment for protecting streams or rivers under the Conservation Reserve Program, $300
would be withheld from the payment. A partial list of USDA payments that farmers and ranches depend on that will
be affected are: - Direct payments;
- Counter-cyclical support payments;
- Average Crop Revenue Election (ACRE);
- Dairy support programs;
- Specialty crop block grants;
- Supplemental disaster program payments; and
- Conservation programs (CSP, CRP and EQIP)
Legislative Status
H.R. 275, has been introduced by Representative Meek (D-Fla.) and Herger (R-Calif.) and S. S.292 has been
introduced by Senator Specter (D-Pa.) with Sen. Saxby Chambliss (R-Ga.), Roberts (R-Kan.) Inhofe (R-Okla.),
Vitter (R-La.), Voinovich (R-Ohio) and Isakson (R-Ga.) to repeal the 3 percent withholding tax on government
payment for goods and services. Farm Bureau supports this legislation. AFBF Policy
Farm Bureau is opposed to the 3 percent withholding tax on government payments for goods and services and
believes that the tax should be repealed.
- Farm profitability and tax liability fluctuate greatly from year to year due to weather and markets, but taxes are withheld regardless. For agricultural operations that end the year without owing taxes, the withholding amounts to an interest-free loan to the government.
- The tax is withheld on gross government payments while taxes are due on net income. This means that the amount of money withheld could be more than the entire net income of a farm or ranch business, thereby creating significant cash flow problems.
- Farm and ranch inputs are often purchased months before a commodity is sold. Reducing farm revenue by 3 percent of government payments could create cash flow problems and make it harder for farmers to purchase the supplies they need.
- Withholding taxes on emergency and disaster programs lessens the amount of assistance provided to farms and ranches affected by floods, droughts, freezes and other natural disasters.
April 2010 |