Bill would stop unfair taxation of CRP income Self-employment versus income taxes at heart of debate by Susie Taylor A case that started in Ohio and worked its way through circuit court was the impetus for a bill introduced in the U.S. Senate before that federal body recessed for the summer. Now that senators are back in Washington, farmers are hoping senators’ attention will be turned back to what the American and Ohio Farm Bureau Federations are calling "unfair taxation." The case stems from an Internal Revenue Service (IRS) suit against an Ohio farmer to charge self-employment taxes on income received from Conservation Reserve Program payments to idle farm ground. The IRS maintains farmers provide a service to the federal government to receive those payments and should be charged self-employment taxes – 15.3 percent – on that income. Farm Bureau maintains the CRP payments are comparable to rental income and should result in the farmer paying income taxes, which is typically significantly lower than 15.3 percent, according to Pat Wolff, tax specialist with the American Farm Bureau Federation in Washington, D.C. The Senate bill, S. 1316, was introduced in late June by Sen. Sam Brownback, R-Kan, and Sen. Byron Dorgan, D-N.D., and was referred to the finance committee with a possible vote coming this fall. Wolff said the bill’s passage out of committee is likely, but once it moves to the Senate floor, "that’s where things become more problematic." Most tax-related bills are combined with other tax measures, she said, adding "then there’s the issue of whether or not Congress should be granting more tax cuts at this time." The IRS circuit court decision has perched farmers on an environmental precipice. Farmers who protect environmentally sensitive land under CRP are paying higher self-employment taxes on that income, while if that same land were rented to another farmer to grow crops, the extra tax would not have to be paid. "Everybody benefits from clean water, from habitat for wildlife. If the government is going to put in place a program to encourage farmers to do that, that’s great. But if you turn around and tax it, that means less farmers will participate and everybody loses," Wolff said. Although the bill has a good start down the legislative path, "It will be very difficult to pass any tax cut in (the government’s) current budget situation," Wolff said. "It will take a lot of work." | |