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PAG LIN
1 1 HOUSE CONCURRENT RESOLUTION NO. __
1 2 BY WEIGEL
1 3 A Concurrent Resolution to request that the United States
1 4 Internal Revenue Service and the United States Congress act to
1 5 allow farmers to use deferred payment contracts without being
1 6 subject to alternative tax liability.
1 7 WHEREAS, farmers are forced to face volatile income
1 8 swings that result from unpredictable and
1 9 uncontrollable weather and markets; and
1 10 WHEREAS, a deferred payment contract is a legal
1 11 instrument allowing farmers to sell a commodity for a
1 12 fixed price in a tax year for payment in a later tax
1 13 year; and
1 14 WHEREAS, United States tax code provisions have
1 15 allowed farmers to manage their tax burden in order to
1 16 evenly spread income over a period of years to
1 17 mitigate against the effects caused by volatile swings
1 18 of income; and
1 19 WHEREAS, under the regular income tax the income
1 20 from deferred payment contracts is allowed to be
1 21 reported in the tax year the cash is received; and
1 22 WHEREAS, the federal alternative minimum tax is a
1 23 separate tax that parallels the regular income tax and
1 24 applies to ensure that at least a minimum amount of
1 25 income tax is paid by corporate and high-income
1 26 noncorporate taxpayers who reap large tax savings by
1 27 making use of certain tax deductions and exemptions,
1 28 such as accelerated depreciation, tax credits, or
1 29 itemized deductions; and
1 30 WHEREAS, the Internal Revenue Service is asserting
2 1 that for alternative minimum tax purposes, deferred
2 2 payment commodity contracts of farmers who report
2 3 their income on a cash basis are installment sales and
2 4 the income from these contracts should be taxed in the
2 5 year of sale, not when the cash is received by the
2 6 farmer in the following tax year; and
2 7 WHEREAS, for a farmer who uses deferred payment
2 8 contracts this policy may create a substantial tax
2 9 burden in one tax year from which it is difficult or
2 10 impossible to recover in subsequent tax years; and
2 11 WHEREAS, farmers who have entered into deferred
2 12 sales contracts to lock in high prices of the recent
2 13 market may be subject to alternative tax liability
2 14 before any income is received on the sale of their
2 15 crop; and
2 16 WHEREAS, this places a potentially crippling
2 17 penalty on farmers, and especially small farmers, who
2 18 oftentimes have difficulty maintaining cash on hand;
2 19 and
2 20 WHEREAS, the position of the Internal Revenue
2 21 Service is based on a reading of the Tax Reform Act of
2 22 1986 which is contrary to the intentions of the United
2 23 States Congress and four decades of case law and
2 24 revenue rulings supporting the deferral of income
2 25 through deferred payment and deferred pricing
2 26 contracts; NOW THEREFORE,
2 27 BE IT RESOLVED BY THE HOUSE OF REPRESENTATIVES, THE
2 28 SENATE CONCURRING, That the United States Internal
2 29 Revenue Service immediately reexamine its position
2 30 regarding deferred payment contracts; and
3 1 BE IT FURTHER RESOLVED, That the United States
3 2 Congress provide a permanent solution to this problem
3 3 by enacting legislation similar to HR 4072 introduced
3 4 in 1996, in order to clarify the law and
3 5 unquestionably allow farmers to continue to use
3 6 deferred payment contracts while recognizing income
3 7 when they receive payment; and
3 8 BE IT FURTHER RESOLVED, That copies of this
3 9 Resolution be sent by the Chief Clerk of the House of
3 10 Representatives to the President of the United States;
3 11 the Commissioner of Internal Revenue, United States
3 12 Internal Revenue Service; the Office of Taxpayer
3 13 Advocate, United States Internal Revenue Service; the
3 14 President of the United States Senate; the Speaker of
3 15 the United States House of Representatives; and Iowa's
3 16 congressional delegation.
3 17 LSB 1546HH 77
3 18 da/sc/14
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