Senate Passes Farm Legislation

On May 15, 2008, following House approval on May 14, the Senate approved the conference agreement on the Food, Conservation, and Energy Act of 2008 (HR 2419) by a vote of 81 to 15. The legislation now moves on to the President for his expected veto. The President wants much more significant reductions in farm subsidies. The legislation passed both houses easily with veto proof majorities, but it is not clear that all of those votes will still be there to override a Presidential 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.

It is not clear whether the President will veto the legislation in time for the House and Senate to try to overturn the veto before the Memorial Day recess begins at the end of next week.