BILLINGS--An informative workshop providing insight on tax reform and its effect on ag producers was held November 9 during the Montana Farm Bureau Convention in Billings.
Amy Iverson, senior manager, WipFli, LLP, told farmers and ranchers there is good news in the new tax law (TCJA) that passed in the fall of 2017. Businesses may now be eligible for a 20-percent deduction off the top of their “Qualified Business Income.”(QBI) provided that income does not exceed $415,000 for a Married Filing Joint status if they are not a C Corporation or a “specified service” business. Corporate tax rates have been capped at a maximum of 21 percent and corporate AMT has been repealed.
“Farm groups and cooperatives had battled to preserve the domestic production credit, known as DPAD,” Iverson explained. “The co-ops will now be able to decide whether to pass DPAD deductions along to their producers for 2018. Not only will co-ops will have DPAD deductions but sales to all entities will qualify for the 20 percent QBI deduction.”
Iverson said other good news for ag business in 2018 is ag producers will be allowed a 100-percent bonus depreciation allowance on purchases. “These purchases may be new or used items, which is welcome help to producers who have had a difficult season. This bonus depreciation will remain at 100 percent through 2022 and then will begin to phase out. The Section 179 deduction remains in place and qualified purchase definitions have been expanded.”
On the downside of the TCJA, a business’s Net Operating Loss (NOL) has been capped at 80 percent of taxable income and excess losses can only be carried back for two years for certain farming losses. “Like-kind exchanges have been limited to only real property and are no longer available for equipment trade ins,” Iverson said. “Meals and entertainment (branding/shipping meals) have been limited to 50 percent deduction, as well.”
She noted the tax changes due to the TCJA are complex and complete explanations have not been handed down yet. “It will be very important to have a conversation with your tax preparer/accountant to make sure you are ready to take the most advantage of these new rulings before the start of 2019.”
The Montana Farm Bureau 99th Annual Convention runs November 7-10 in Billings.