Washington Recap

I wanted to fill you in on two issues that have had recent action taken on them in Washington, DC.

First is the Food Safety bill.

The House will not take up S. 510 (the bill that passed the Senate on Tuesday) because of certain revenue provisions contained in the bill.  Sec. 107 authorizes revenue-generating fees for select recalls, re-inspections and imports which were not in the House-passed bill (H.R. 2749). The Constitution stipulates that all revenue provisions must originate in the House.  Consequently, House leadership has “blue-slipped” the bill, preventing its consideration until the revenue issues are resolved.

Since the schedule for the lame-duck session is uncertain, it is unclear whether Congress will have time to work out the procedural complexities.  A path to send S. 510, or some version of it, to the President’s desk for enactment has not yet been determined by House and Senate leaders.

The second issue is taxes.

On Thursday the House passed H.R. 4853, Middle Class Tax Relief Act of 2010,

The legislation would:

–          Provide a two-year extension of Alternative Minimum Tax relief

–          Permanently extend lower income tax rates for middle income taxpayers making less than

$200,000/person or $250,000/couple;

–          Permanently extend higher Section 179 Small Business Expensing provisions;

–          Permanently extend lower capital gains tax rates for middle income tax payers;

–          Permanently extend the expanded child tax credit, marriage penalty relief, expanded

earned income tax credit, expanded education tax incentive and expanded adoption tax

credits; and

–          Permanently extend expanded itemized deductions and personal exemptions for middle

class taxpayers.

Farm Bureau did not support H.R. 4853, the Middle Class Tax Relief Act of 2010 because:

– H.R. 4853 does not include any estate tax relief;

– H.R. 4853 does not include an extension of tax incentives for ethanol or biodiesel; and

– H.R. 4853 does not include extension of five-year depreciation for farm business machinery and equipment, enhanced charitable deduction for donated food, an enhanced tax deduction for donating a conservation easement, or extension of Unrelated Business Income Tax provisions.

Once the Senate received the bill from the House, Majority Leader Reid (D- Nev.) filed two cloture motions that will ripen Saturday. The first cloture vote will be on the Baucus tax amendment 2742. If cloture fails, the Senate will immediately turn to a cloture vote on the Schumer amendment 4728.

Baucus Amendment

–          Reinstates the 2009 law setting the exemption at $3.5 million per person and the top tax rate at 45 percents indexed for inflation beginning in 2011.

–          Estates of those dying in 2010 are given a choice of the new exemption and rate or current 20101 law (no estate tax and modified carryover basis).

–          Contains spousal transfer of any unused exemption amount.

–          Defers estate taxes for farmland until sold outside of the family or if it ceases to be used for farming.

–          Increases valuation adjustment for donations of a conservation easement. 

–          Increases the amount of Section 2032A special use exemption to $3.5 million.

The Baucus amendment also temporarily extends the following expiring provisions supported by Farm Bureau:

–          Tax credits for ethanol. The bill extends through 2011 the per-gallon tax credits and outlay payments for ethanol.  The blender’s credit would be extended at a rate of 36 cents per gallon, while the small producer’s credit would be extended at a rate of 8 cents per gallon.  The bill also extends through 2011 the existing 14.27 cents per liter (54 cents per gallon) tariff on imported ethanol and the related 5.99 cents per liter (22.67 cents per gallon) tariff on ethyl tertiary-butyl ether (ETBE).

–          Tax credits for Biodiesel and renewable diesel. The bill extends through 2011 the $1.00 per gallon production tax credit for biodiesel, and the small agri-biodiesel producer credit of 10 cents per gallon. The bill also extends through 2011 the $1.00 per gallon production tax credit for diesel fuel created from biomass.

–          Alternative fuels credit fuel tax credit for liquid fuels derived from biomass and other sources.

Credit for electricity produced at certain open-loop biomass facilities.

–          Clean Renewable Energy Bonds (CREBs).

–          Credit for Alternative vehicle refueling property.

Additional standard deduction for real property taxes.

Deduction of State and local general sales taxes.

–          Extension of provision encouraging contributions of conservation easements.

–          Above-the-line deduction for qualified tuition and related expenses.

–          Five year depreciation for farming business machinery and equipment.

Extension of enhanced charitable deduction for contributions of food inventory.

–          Deduction for health insurance costs for self-employed.

The Baucus amendment also repeals expanded information return reporting rules that required businesses that pay $600 or more during the year to vendors and to file an information report with each provider and with the IRS.

Farm Bureau Position

Farm Bureau is not taking a position on the Baucus and Schumer amendments.

–          While the Baucus substitute does contain many estate tax provisions supported by Farm Bureau, it falls short of our primary estate tax objective of a $5 million per person exemption and top rate of 35 percent.

–          The bill contains thresholds for capital gains tax and income tax cuts.

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