In a letter to Congress, 28 of America’s leading agricultural businesses and associations called for the repeal of an Internal Revenue Service (IRS) opinion that threatens the livelihoods of thousands of farm and ranch operations nationwide "by calling into question the accounting methods traditionally used by the agriculture industry and exposing farmers and ranchers to needless litigation with the IRS."

The letter, coordinated by Farmers for Tax Fairness, was signed by state and national agriculture associations and businesses representing hundreds of thousands of farmers nationwide who raise all types of crops and livestock.

Farmers for Tax Fairness formed in 2013 when Congress proposed limiting the ability of farmers to use the cash method of accounting. Farmers for Tax Fairness helped demonstrate to Congress why the cash method of accounting is critical to farm and ranch operations, and Congress ultimately elected not to limit this important financial tool.

The letter notes that IRS issued an action on decision letter (AOD) in February 2017 in response to a loss in the Fifth Circuit Court of Appeals in the case Burnett Ranches Ltd. vs. U.S. "AOD 2017-17 places a cloud over thousands of legitimate agricultural businesses and threatens the livelihoods of American farm and ranch families," the letter said.

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The agricultural organizations and businesses are calling for the repeal of AOD 2017-17 and asked Congress to consider changing this section of the tax code to protect the ability of active farmers to use the cash method of accounting.

“This issue could impact farm and ranch families across the United States,” Farmers for Tax Fairness director Brian Kuehl said. “Whether you raise corn or soy or hogs or almonds or any other ag product, you shouldn’t live in fear of an IRS audit declaring you to be a tax shelter because of the way you have structured your operation. Active farmers are not tax shelters.”

Farmers for Tax Fairness is concerned that the IRS ruling on farming syndicates will affect active farm and ranch operations, many of which may not even be aware that they are at risk.

“What U.S. pork producers and other farmers don’t need right now is more uncertainty,” said National Pork Producers Council president David Herring, a pork producer from Lillington, N.C. “At a time when many farmers are facing export market and other headwinds, more uncertainty is exactly what we will face without access to the cash method of accounting used by so many farmers.”

Leading agricultural accounting firms also joined on the letter, explaining how American farmers could be affected by this ruling.

“A farmer should not be penalized if they hold their farm through an S corporation, complex trust or similar entity. Farmers hold their operations using these types of structures for a variety of reasons, including inheritance and succession planning and liability protection,” said Bryce Gibbs, a certified public accountant with K·Coe Isom, a leading national agriculture accounting and consulting firm. “Congress and the Trump Administration should work together to make sure America’s farmers aren’t hurt by this IRS ruling.”

Chris Hesse, a principal with the accounting firm CliftonLarsonAllen who works closely with U.S. producers, added, “The farm syndicate rules have taken on a heightened importance as a result of the Tax Cuts & Jobs Act. It would be helpful if Congress would at least provide an exception for small farm entities that otherwise meet the gross receipts test. Abusive situations are already covered under other provisions.” 

Bryan Powell, national practice leader for Moss Adams’ Agribusiness Service, concluded: “Having Congress’ continued support for American farm and ranch families is critical to their sustained success. Clarifying this substance-over-form issue will remove uncertainty that jeopardizes our family farm and ranch operations.”