Congress Votes to Override Presidential Veto of Farm Legislation Amid Procedural Mistake

The House, on May 21, 2008, by a vote of 318 to 108, and the Senate, on May 22, 2008, by a vote of 82 to 13, voted to override the Presidential veto of the Food, Conservation, and Energy Act of 2008 (HR 2419). Both votes were by the necessary margins to override the veto. However, the enrolled bill vetoed by the President did not include, due to a procedural error, one of the titles to the legislation originally passed by Congress. The override votes were also of the legislation without the missing title. Democratic Congressional leaders now believe that the legislation without the missing trade title has become law. Additional measures are underway to enact the missing title. The tax title was included in the legislation sent to the President and in the override votes by Congress. It is not clear if the procedural mix-up will result in litigation challenging the legislation.

Included in the tax 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 increased cellulosic biofuels producer credit and an extension of the conservation easement charitable deduction. Another provision creates uniform three-year recovery period for race horses. Also included are a couple of provisions related to qualified timber gains and timber REITs. Bond provisions include authorization of Qualified Forestry Conservation Bonds and increased loan limits on qualified small issue bonds for new farmers. A number of Katrina relief provisions are extended to apply to tornado and storm damage in Kiowa County, Kansas. The legislation also authorizes like-kind exchange treatment of stock of mutual ditch, reservoir or irrigation companies where the state’s highest court or a statute has classified the stock as real property – apparently a reference at least to Colorado.

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, creating an optional self-employment tax for Social Security, and the ever popular acceleration of corporate estimated tax payments.

If the override votes hold up to any court challenge, the enactment date for the legislation will be May 22, 2008.