House Passes Farm Legislation

On May 14, 2008, the House approved the conference agreement on the Food, Conservation, and Energy Bill of 2008 (HR 2419) by a vote of 318 to 106. Following long and difficult negotiations, the $290 billion measure seems to include enough provisions satisfying various members to assure Congressional passage. The main issue appears to be whether the Senate vote margin will be wide enough to overcome a promised veto from President Bush. The President wants much more significant reductions in farm subsidies. The House voted 75 percent in favor, much more than the 67 percent needed to override a veto.

Included in the tax and trade title of the legislation were $1.67 billion in tax relief and incentives and a larger amount of revenue raisers. Retired farmers and farmers on disability who participate in land conservation reserve programs will be permitted to count payouts under the program as investment income, preventing reductions in Social Security or disability benefits. New deductions and credits include a deduction for endangered species recovery expenditures and a credit for agricultural chemicals security measures. Deduction and credit enhancements include an increase in the cellulosic biofuels credit and an extension of the conservation easement deduction. Another provision creates uniform three-year depreciation for horses and allows horse sales to qualify for the 15 percent capital gain rate. Also included are a couple of provisions related to timber REITs. Bond provisions include authorization of forest conservation bonds and increased loan limits on Aggie Bonds.

The principal offsetting revenue comes from a reduction in the ethanol credit. Some of the additional revenue is raised by limiting the ability to offset farm losses against nonfarm income, excluding denaturant from the alcohol fuels credit, and creating an optional self-employment tax for Social Security.

The Senate is expected to take up the legislation in the next few days.