The Big, the Bold, and the Bill: What BBB Means for Ag

This Week In Ag #123

The Big Beautiful Bill was signed into law on July 4. At 887 pages, it certainly is big. As for being beautiful, that will be in the eyes of the beholders. Like most budget bills, depending on your point of view, the contents may resemble that famous Clint Eastwood film, “The Good, The Bad, and The Ugly.” But what does BBB specifically mean for agriculture?

Let’s start with what farmers will call beautiful: the end of the estate tax, unaffectionately called the death tax. The only things farmers and ranchers value more than their land are God and their family. Yet seeing God upon their death is something they can control, the same can’t be said for transitioning their land. Estate tax continues to be a pivotal election issue in farm country. When Brooke Rollins promised to abolish it during her address at Commodity Classic, the crowd roared. The estate tax is a tax on your right to transfer property at your death. For farm families, land is the lifeblood of their business. And a death tax places an undue burden on their family and complicates transition plans. At prices ranging from $10,000 to $20,000 (sometimes even more) per acre, farmland tends to inflate the optics of a balance sheet. But other than potential borrowing power, there’s little practical liquidity. Farmers must farm or graze land to economically survive. In the late 1970s, a massive jump in the estate tax helped ignite the farm crisis. Many farmers and heirs could not afford the taxes on the land they inherited, especially when both commodity prices and those very land values soon dropped. Fast-forward to the present day, and those farmers who were able to persevere are now at the stage in life where they will soon be the ones passing down their farms. BBB makes the current death tax exemption permanent and raises the exemption to $15 million.

After months of dormancy, the 45z tax incentive for biofuel makers has resprouted. Details are still emerging, but the clean fuel credit has been extended to 2029 and is limited to feedstocks made in the USA, Canada and Mexico. The 45z credit would incentivize biofuel makers for sourcing sustainably grown grain, produced with earth-friendly cultural practices and products (such as humic products). In turn, farmers should get a cut of the action with premiums offered for grain that meets these specifications.

Agricultural-facing spending by the federal government will increase by $64 Billion over the next decade. The bulk of this spending is for farm safety net provisions such as federal crop insurance and disaster assistance. Up to 30 million new base acres may be added to commodity program eligibility. To help ease the transition for the next generation of farmers, the definition of a beginning farmer has now been expanded from 5 to 10 years, providing them with a longer window of reduced FCI premiums. BBB raises price guarantees for major commodity crops by 11-21%. Funding for trade promotion, rural schools and land-grant universities was also included.

Farmers should also benefit from the lower individual tax rates enacted in 2017, restoring 100 percent bonus depreciation for equipment purchases, and increasing the deduction for qualified business income from 20 percent to 23 percent.