Fate of key ag deduction is murky

Area farmers and farm implement dealers continue to press for an extension of a popular federal tax break. But predicting how Congress will respond is difficult, officials say.

Area farmers and farm implement dealers continue to press for an extension of a popular federal tax break. But predicting how Congress will respond is difficult, officials say.

"It's hard to know what's going to be the outcome," Rep. Collin Peterson, D-Minn., tells Agweek.

Section 179 of the U.S. Internal Revenue Code had allowed farmers and other businesspeople to deduct up to $500,000 of new or used equipment purchased during the tax year. On Dec. 31, however, the limit was restored to $25,000, its original limit, plus a small adjustment for inflation, for the 2014 tax season.

Sen. Heidi Heitkamp, D-N.D., tells Agweek that she's optimistic the Senate will approve a Section 179 extension with a $500,000 limit, which she says benefits farm equipment manufacturers, as well as farmers and equipment dealers.

"No one, including me, agrees with going back to $25,000," she says. "We know this is something we need to be very serious about fixing."


She also says a permanent fix is needed to remove "uncertainty in the marketplace."

The House would need to agree to what the Senate decides.

Peterson doubts Congress will reinstate the $500,000 limit.

"I would be very surprised that if it's extended, it would be extended at that level. My guess would be $125,000 or $150,000. It might be higher, but I would be surprised if its $500,000," Peterson says.

Section 179 is one of about 50 expiring tax provisions. Being just one among so many complicates section 179's fate, he says.

As area agriculturalists know, the Senate and House had a long struggle to reconcile differences in their respective farm bill legislation. It's unclear if there also would be differences in reconciling potential differences involving Section 179 legislation. One important change from the farm bill: the Section 179 tax break is of interest to a wide range of businesses, not just agriculture.

Congress first raised the $25,000 limit in 2003. The limit subsequently was raised several more times, in part to stimulate the economy during the so-called "Great Recession" that began in late 2007.

Dealers, farm groups


Area farmers and farm equipment dealers say a higher limit makes sense.

Matthew Larsgaard, president and CEO of the North Dakota Implement Dealers Association, says he doesn't have a handle on what Congress will do.

"But we hope they (Congress) understand, Section 179 drives sales. It drives the economy, it creates sales," he says. "If it's not renewed, there will be less incentives to purchase new equipment"

Though farm equipment dealers want the higher limit reinstated, they can be successful without it, he says.

Richard Strom, executive vice president of the Minnesota-South Dakota Equipment Dealers Association, also supports an extension.

"Section 179 has been helpful in encouraging farmers and contractors and all small businesses to make purchases," he says.

"We're in favor of having it be made permanent," he says. "It's difficult to plan purchases if it's only temporary."

Bob Wisness, president of the North Dakota Grain Growers Association and an Arnegard farmer, says farmers and farm equipment dealers aren't the only ones with a stake in extending the higher Section 179 level.


"It's not just farmers that would benefit. It's the entire rural economy," he says.

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