Farmers Keep Tax Break For Another Year

The Internal Revenue Service agreed Tuesday to wait another year before wiping out a big tax break for farmers.

Under pressure from more than 150 members of Congress, the IRS delayed enforcing its contentious ruling that growers must pay income tax on crops and livestock the year the commodity is sold, not when they receive payment.

In a year such as 1996, when crop prices are unusually high, deferred commodity contracts allowed farmers to reduce their tax bill. They sell and deliver the commodity in one year, but get the money - and pay taxes on it - in the next year, when prices are lower.

The agency’s delay will give Congress time to rewrite the 1986 law on which the ruling was based. However, if Congress does not act, the IRS likely will enforce its ruling for the 1997 tax year.

“This is good news for farmers who want to comply with the tax law and properly report this income on their returns,” said IRS Commissioner Margaret Milner Richardson. “They should complete their 1996 returns as they have been doing in the past, or as they have been directed to do after an IRS audit.”

Farmers and their accountants are optimistic the pro-farmer legislation will pass.

“Once the issue became nationally known, Congress began to act in unusual speed to overrule this incorrect IRS interpretation,” said Chris Hesse, director of taxation for the Spokane-based LeMaster & Daniels public accounting firm.

While standing by the IRS ruling, Treasury Secretary Robert Rubin and the IRS have expressed support for changing the law.

“There’s no such thing as a slam dunk in this town, but we’re as close to having assurance as we could have,” said Sen. Kent Conrad, D-N.D.

, DataTimes