Ag groups ask Congress to repeal IRS opinion
A coalition of 28 agriculture and accounting groups has written the leaders of the Senate Finance Committee and the House Ways and Means Committee to ask them to change a section of the tax code that led the Internal Revenue Service in 2017 to issue an opinion that a farm or ranch may be declared a “farming syndicate” and lose its ability to use the cash method of accounting if less than 65% of ownership is held by “active” farmers.
In the Sept. 19 letter, the agriculture and accounting groups wrote, “This reasoning by the IRS ignores the clear intent of Congress that active farmers should not be declared farming syndicates.”
“This reasoning also ignores the fact that many agricultural operations are structured as S Corporations, trusts, and limited liability companies for a myriad of reasons, including liability protection and inheritance and succession planning. For the thousands of farms and ranches structured in this manner, the consequences of being declared a farming syndicate would be devastating.”
The groups asked the committee leaders to write to the IRS and request that the IRS formally reverse the decision and to also explore legislative options to revise the farming syndicate provisions of the Internal Revenue Code.
“This issue could impact farm and ranch families across the United States,” said Brian Kuehl, director of Farmers for Tax Fairness. “Whether you raise corn or soy or hogs or almonds or any other ag product, you shouldn’t live in fear of an IRS audit declaring you to be a tax shelter because of the way you have structured your operation. Active farmers are not tax shelters.”
Farmers for Tax Fairness was formed in 2013 when Congress proposed limiting the ability of farmers to use the cash method of accounting.
“A farmer should not be penalized if they hold their farm through an S Corporation, complex trust, or similar entity. Farmers hold their operations using these types of structures for a variety of reasons including inheritance and succession planning and liability protection,” said Bryce Gibb, a CPA with K·Coe Isom, a national agriculture accounting and consulting firm.
“Congress and the Trump administration should work together to make sure America’s farmers aren’t hurt by this IRS ruling,” added Chris Hesse, a principal with the accounting firm CliftonLarsonAllen.