What is in this article?:
- Legal issues continue to shape the present and future of American agriculture.
- The involvement of the legal system in agriculture likely will continue to grow.
- Top 10 agricultural law developments of 2012 based on their impact (or potential impact) on U.S. agriculture.
We begin 2013 with our annual look at the most significant agricultural law developments of the previous year. Legal issues continue to be at the forefront of developments that are shaping the present and future of American agriculture, and it is very likely that the involvement of the legal system in agriculture will continue to grow. The following is my list of what I view as the top 10 agricultural law developments of 2012 based on their impact (or potential impact) on U.S. agricultural producers and the sector as a whole.
1. The uncertainty caused by expiring tax legislation. Much of 2012 was consumed with uncertainty over many tax provisions set to expire at the end of 2012. The uncertainty involved income tax, transfer taxes, alternative minimum tax, and payroll tax. The expiring provisions were largely part of tax provisions enacted in 2001 that were initially set to expire at the end of 2010, but were extended in late 2010 for an additional two years. The uncertainty made tax, financial, estate, and business planning incredibly difficult through 2012. The Congress failed to enact legislation to deal with the uncertainty by the end of 2012, but as the year expired, the Congress was working to pass legislation to deal with the expiring provisions. For farmers, if tax rates increase in 2013 and beyond (outside of the tax increases included in the 2010 health care law that take effect in 2013), farm income averaging can be utilized to delay any tax increases on a large chunk of farm income for another three years. Also, the ability to make or revoke an I.R.C. §179 election on an amended return for an open tax year beginning before 2013 is an important tool farmers and ranchers can utilize to minimize the impact of higher taxes in 2013. In addition, the ability to elect out of installment sale treatment on deferred payment contracts and other installment sales can be a good tax planning tool in light of the uncertainty.
Note: On January 1, 2013, the Congress passed tax legislation (H.R. 8 — The American Taxpayer Relief Act of 2012) designed to deal with the expiring provisions. The legislation retains the existing individual income tax rates for incomes under $400,000 (single) and $450,000 (MFJ). For incomes over the threshold, the 2001 rate structure is maintained. The top capital gain rate stays at 15 percent for those under the $400,000 or $450,000 threshold, as does the top dividend rate. The legislation also enacts a permanent AMT “patch,” and retroactively reinstates expense method depreciation to the $500,000 level for 2012 and extends that level through 2013 (with a drop to $25,000 for 2014). The legislation also extends first-year bonus depreciation at the 50 percent level for 2013, and sets the unified credit exemption equivalent for estate and gift tax purposes at $5 million (inflation-indexed starting in 2012), but sets the rate at 40 percent for amounts over the exemption threshold. The Act also generally extends existing Farm Bill programs through September 30, 2013. The President signed the Act into law on January 2, 2013.