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1 1 SENATE CONCURRENT RESOLUTION NO. __
1 2 (PROPOSED COMMITTEE ON AGRICULTURE RESOLUTION
1 3 BY CHAIRPERSON RENSINK)
1 4 A Concurrent Resolution to request that the United States
1 5 Internal Revenue Service and the United States Congress act to
1 6 allow farmers to use deferred payment contracts without being
1 7 subject to alternative tax liability.
1 8 WHEREAS, farmers are forced to face volatile income swings
1 9 that result from unpredictable and uncontrollable weather and
1 10 markets; and
1 11 WHEREAS, a deferred payment contract is a legal instrument
1 12 allowing farmers to sell a commodity for a fixed price in a
1 13 tax year for payment in a later tax year; and
1 14 WHEREAS, United States tax code provisions have allowed
1 15 farmers to manage their tax burden in order to evenly spread
1 16 income over a period of years to mitigate against the effects
1 17 caused by volatile swings of income; and
1 18 WHEREAS, under the regular income tax the income from
1 19 deferred payment contracts is allowed to be reported in the
1 20 tax year the cash is received; and
1 21 WHEREAS, the federal alternative minimum tax is a separate
1 22 tax that parallels the regular income tax and applies to
1 23 ensure that at least a minimum amount of income tax is paid by
1 24 corporate and high-income noncorporate taxpayers who reap
1 25 large tax savings by making use of certain tax deductions and
1 26 exemptions, such as accelerated depreciation, tax credits, or
1 27 itemized deductions; and
1 28 WHEREAS, the Internal Revenue Service is asserting that for
1 29 alternative minimum tax purposes, deferred payment commodity
1 30 contracts of farmers who report their income on a cash basis
1 31 are installment sales and the income from these contracts
1 32 should be taxed in the year of sale, not when the cash is
1 33 received by the farmer in the following tax year; and
1 34 WHEREAS, for a farmer who uses deferred payment contracts
1 35 this policy may create a substantial tax burden in one tax
2 1 year from which it is difficult or impossible to recover in
2 2 subsequent tax years; and
2 3 WHEREAS, farmers who have entered into deferred sales
2 4 contracts to lock in high prices of the recent market may be
2 5 subject to alternative tax liability before any income is
2 6 received on the sale of their crop; and
2 7 WHEREAS, this places a potentially crippling penalty on
2 8 farmers, and especially small farmers, who oftentimes have
2 9 difficulty maintaining cash on hand; and
2 10 WHEREAS, the position of the Internal Revenue Service is
2 11 based on a reading of the Tax Reform Act of 1986 which is
2 12 contrary to the intentions of the United States Congress and
2 13 four decades of case law and revenue rulings supporting the
2 14 deferral of income through deferred payment and deferred
2 15 pricing contracts; NOW THEREFORE,
2 16 BE IT RESOLVED BY THE SENATE, THE HOUSE OF REPRESENTATIVES
2 17 CONCURRING, That the United States Internal Revenue Service
2 18 immediately reexamine its position regarding deferred payment
2 19 contracts; and
2 20 BE IT FURTHER RESOLVED, That the United States Congress
2 21 provide a permanent solution to this problem by enacting
2 22 legislation similar to HR 4072 introduced in 1996, in order to
2 23 clarify the law and unquestionably allow farmers to continue
2 24 to use deferred payment contracts while recognizing income
2 25 when they receive payment; and
2 26 BE IT FURTHER RESOLVED, That copies of this Resolution be
2 27 sent by the Secretary of the Senate to the President of the
2 28 United States; the Commissioner of Internal Revenue, United
2 29 States Internal Revenue Service; the Office of Taxpayer
2 30 Advocate, United States Internal Revenue Service; the
2 31 President of the United States Senate; the Speaker of the
2 32 United States House of Representatives; and Iowa's
2 33 congressional delegation.
2 34 LSB 1546SC 77
2 35 da/sc/14
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