TAXFAX Summer 2024

Washington Update

As of mid-April the fate of federal tax legislation is uncertain. On January 31 the House approved H.R. 7024, the "Tax Relief for American Families and Workers Act of 2024," by a vote of 357 to 70. The Senate has not yet taken up the bill, which contains several key business tax relief provisions, including:

• Delay five-year amortization of domestic research or experimental costs until taxable years beginning after December 31, 2025.
• Continue to allow depreciation, amortization, or depletion expense to be excluded from adjusted taxable income in determining the limitation on business interest through 2025.
• Extend 100 percent business expensing for qualified property placed in service through 2025 (and through 2026 for some longer production period property) and retain 20 percent bonus depreciation for property placed in service after 2025.
• Increase the threshold for information reporting on Forms 1099-NEC and 1099-MISC from $600 to $1,000.
• Increase the section 179 deduction for small businesses to a maximum of $1.29 million, reduced by the amount that qualifying property exceeds $3.22 million for taxable years beginning after 2023; and
• Provide disaster tax relief for individuals and businesses.

NCFC has joined with a coalition of farm organizations urging House and Senate leadership to pass the bill. However, Senate leaders have expressed disagreement with some provisions, most notably extension of the child tax credit -- Sen. Crapo (R-ID) views the provision as a government subsidy.

In early March, the White House issued a fact sheet outlining President Biden's tax priorities. While Congress certainly will not take up all the items on the list, the items do reflect the administration’s thinking on tax policy. The priorities include:

• Raise the corporate tax rate to 28 percent and the GILTI minimum tax rate (applicable to corporate foreign earnings) to 21 percent.
• Require Americans with incomes exceeding $100 million to pay at least 25 percent in income taxes.
• Increase the stock buyback tax from 1 percent to 4 percent.
• Deny corporations a deduction when they pay any of their employees more than $1 million in compensation.
• Increase the Medicare tax rate on income over $400,000 and close "loopholes" in existing Medicare taxes.
• Direct all Medicare tax revenue to the Medicare Hospital Insurance Trust Fund.
• Eliminate a tax break that gives preferential treatment to corporate jets and increase the fuel tax on corporate and private jet travel.
• Restore the expanded Child Tax Credit provided under the American Rescue Plan Act.
• Increase the earned income tax credit for certain childless workers.
• Make permanent the expansion of the premium health tax credit. 

The Congressional calendar is always challenging in a presidential election year, as members of Congress want to be at home campaigning, so there is limited time to pass tax legislation in this session of Congress. There is always a chance, though, and the lame duck session in December is often an opportunity to address last minute changes.

NCFC Tax Working Groups. This spring NCFC’s Legal, Tax and Accounting Committee re-engaged its working group on Code Section 163(j), dealing with the interest expense limitation.  The code section has some specific impacts on farmer co-ops and the group is considering seeking a letter ruling from the IRS to address those issues. Several NCFC members are engaged on this issue, including Land O’Lakes, CoBank, AGP, GROWMARK, and CHS.

The LTA’s Pillar 2 Working Group is monitoring the potential impacts on farmer cooperatives of the Pillar 2 global minimum tax. Working group members met with Treasury officials last fall and subsequently submitted comments to OECD officials. An OECD representative recently told NCFC cooperative issues are on their list of items for potential guidance.

The global minimum tax was developed by the OECD/G20; it would impose a global fifteen percent effective minimum tax on book income of companies with annual revenue of more than €750 million (currently approximately $800 million) and a physical presence in a foreign country. More than 130 countries have adopted the taxing regime. While Congressional leaders have said the U.S. will not adopt the rules, cooperatives operating in foreign countries would be subject to the tax.
 

NSAC's specialized technical journal, The Cooperative Accountant (TCA), tailored exclusively for its members, has unveiled its Summer 2024 edition. Explore the content online or opt to download and print the PDF.

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