Posted October 30, 2013
A proposal making its rounds in the U.S. House Ways and
Means Committee would require all entities, other than individuals, with gross
annual receipts over $10 million to use the accrual method of accounting for
income tax calculation, according to a Farm Futures article available here.
Currently, farmers may use a cash method of accounting
unless their businesses are structured as C-corporations, with gross receipts
of more than $1 million, or as a family corporation, with gross receipts of
more than $25 million.
Under the cash method of accounting, a farmer may
recognize an item of income when it is actually received and an expense when it
is actually paid. The use of this method of accounting “combined with the
ability to accelerate expenses and defer income gives farmers and ranchers the
flexibility they need to manage their tax burden.”
Jeff Wald, CEO at Kennedy & Coe, said that the
requirement to force farmers with $10 million or more in gross receipts to use
accrual accounting for tax purposes would place a “significant burden on many
mid-sized farmers, feedlots and hog, cattle and dairy operations.” Wald continued, “Many of these family
operations support dozens of employees but run at very thin margins with very
low net income. Wald added that the tax
proposal would make accounting significantly more complex for farm
operations.
House Ways and Means Committee Chairman Dave Camp
(R-MI) said that his committee will pass a tax reform bill by the end of the
year and “Member-only meetings” are reportedly taking place.
For more information on tax issues affecting
agricultural operations, please visit the National Agricultural Law Center’s
website here.
