CRAPO SEEKS CHANGE IN TAX CODE TO BENEFIT FARMERS
Legislation would help producers update farm equipment
WASHINGTON, D.C. - Today Idaho Senator Mike Crapo joined North Dakota Senator Kent Conrad in introducing bipartisan legislation that would provide tax benefits for farmers by updating the depreciation schedules for farm equipment. The bill addresses an injustice in the tax code that spreads the tax benefit of farm equipment over seven years, even though average machinery has a life span of only five years.
"It is time to fix this outdated system to reflect modern needs in our agricultural community," said Crapo, who serves on both the Senate Finance and Agriculture committees. "This bill will help improve agricultural productivity in Idaho and throughout the country and will help our producers maintain competitiveness in the industry.
"Under the current system, many farmers end up keeping out-of-date machinery just to avoid the tax penalty associated with updating their farm equipment," Crapo continued. "By shortening the deprecation period to five years, this bill enables farmers to invest in equipment that operates more efficiently and safely, boosting farm productivity and income."
Currently, if a farmer purchased a $100,000 tractor, he or she could deduct the cost of the tractor over a seven-year period. This system is called "depreciation." However, with advances in agriculture technology and intense usage of farm equipment, the realistic life span and utility of farm machinery is only five years.
The rules governing tax depreciation schedules for farm equipment have remained mostly unchanged since the 1980's when the Congress passed the Tax Reform Act of 1986. In previous tax reforms, tax laws for farm equipment were not examined separately as they were for construction equipment. Thus, although the current depreciation systems for construction equipment and farm equipment are structured the same, construction equipment has a five-year depreciation schedule, and farm equipment has a seven-year depreciation schedule.
This legislation will be referred to the Senate Finance Committee, where Senators Crapo and Conrad both serve.