March 22, 2018
The omnibus spending bill set to be approved before a deadline of March 23 includes a number of positive developments for those in agriculture, including language that would prevent 200,000 farms and ranches from being regulated like toxic waste sites, delaying the implementation of electronic logging devices (ELDs) for livestock haulers for another six months, fixing the broken method of fighting forest fires and refining the tax code to address the Section 199A issue.
The vote passed in the House on Thursday by a vote of 256-167. It now heads to the Senate, where it could pass later Thursday or sometime Friday.
From an overall funding standpoint, for agricultural agencies, the bill contains $146.1 billion in discretionary and mandatory funding, $9.4 billion below the budget request and $7.6 billion below the fiscal 2017 enacted level. (See a full summary for agricultural funding here.)
The U.S. Department of Agriculture's Animal & Plant Health Inspection Service saw a $35.7 million increase from last year’s enacted level and a $172.25 million bump from the budget request. Funding increases will help address wildlife damage management issues, combat specialty crop diseases, respond to low-pathogenic avian influenza, expand activities to combat cattle fever and improve pre-departure inspections of agriculture imports.
Specifically, the bill offers $600 million for a new rural broadband pilot grant/loan program targeted at areas that currently lack access to broadband service. The fiscal 2018 budget bill includes more than $1 billion for rural water infrastructure.
Colin Woodall, senior vice president of government affairs for the National Cattlemen's Beef Assn., said the group and its affiliates "have been working closely with Congress to ensure the spending bill addresses issues of concern for U.S. ranchers and beef producers, and we are glad to see our policy priorities reflected in the legislation.”
The Section 199A fix included in the bill will equalize the tax treatment of commodity sales to cooperatives and non-cooperatives while also providing a flow-through deduction from co-ops to their members similar to the old Section 199 deduction for domestic production activities.
The National Grain & Feed Assn. (NGFA) and the National Council of Farmer Cooperatives agreed on the compromise, which was developed after months of collaboration and extensive analysis.
The legislative provisions would amend Section 199A as it currently exists, whereby producers can deduct up to 20% of gross payments received on sales to agricultural cooperatives without certain limitations based on income. Meanwhile, farmers selling to private/independent companies are restricted to deducting 20% of net business income -- a considerably smaller deduction.
"There is a huge sense of urgency in getting this issue resolved, as producers continue to make marketing decisions, particularly given the welcome rally in corn and soybean prices in recent weeks," NGFA president and chief executive officer Randy Gordon said. "Thousands of grain elevators and other agribusinesses -- most of them small businesses that provide economic vitality to rural communities -- will be making costly decisions on whether to reorganize their business to be able to compete or even whether to remain open for business during coming weeks.”
Earlier in the week, small grain facilities were considering closing their doors or filing paperwork to become a cooperative. The deal offers restoration of the marketplace.
Paul Kroeker, whose central Nebraska grain facility handles several-million bushels of corn and soybeans every year, said the current system was resulting in 30% fewer sales to start off the year. Without a fix, he was looking to either close his doors or being forced to merge with a cooperative.
Kroeker said he is guardedly optimistic that it will all work out, but he won’t be calling any producers just yet. still, he said, “I have a feeling I’ll sleep better tonight than I have in a long time.”
Patrick O’Connor, a partner at the lobbying outfit CGCN Group who served as the spokesman for dozens of independent businesses that would have been hurt if Congress did not act to fix Section 199A, said, “Thousands of independent businesses can finally breathe a sigh of relief. By stepping up to correct this unintended mistake, Congress will shield thousands of small businesses across the country from the heartache of closing their doors while preserving an important tax deduction for farmers and farmer-owned cooperatives and ensuring the long-term stability of America’s agricultural economy.”
Gordon also noted that the urgency and necessity of correcting the current Section 199A are compounded by the fact that the skewed tax benefits are not limited to agricultural cooperatives but, conceivably, to any business or group of citizens that might want to form a cooperative. "The implications of this spreading well beyond agricultural businesses could be devastating to the generation of tax revenues to the federal treasury," he said.
With a federal court order set to impose a massive reporting deadline on farmers May 1, the omnibus bill includes a permanent on-farm exemption for reporting air emissions from manure under the Comprehensive Environmental Response, Compensation & Liability Act (CERCLA).
In 2008, the U.S. Environmental Protection Agency exempted most farms from reporting the release of manure-related ammonia and hydrogen sulfide under both CERCLA and the Emergency Planning & Community Right-to-Know Act of 1986, deeming such reports unnecessary. However, in April 2017, the District of Columbia Court of Appeals directed the removal of this exemption for dairy and other livestock operations from the two federal laws.
The omnibus bill includes the Fair Agricultural Reporting Method (FARM) Act -- introduced in the Senate on Feb. 13 by Sens. Deb Fischer (R., Neb.) and Joe Donnelly (D., Ind.). The bipartisan FARM Act also would restore the farm exemption for reporting emissions from manure to the U.S. Coast Guard.
Ag trucking rule delay
The bill includes a provision that would grant livestock haulers an exemption from the ELD rules until Sept. 30, 2018. A further delay will provide the Federal Motor Carrier Safety Administration (FMCSA) with more time to educate livestock haulers on ELDs while the industry works on solutions to the current hours-of-service rules that do not currently work for those truckers driving livestock across the country.
A U.S. Department of Transportation rule issued in 2015 required truckers of commercial vehicles involved in interstate commerce to replace their paper driving logs with ELDs by Dec. 18, 2017. In September 2017, agricultural groups petitioned the agency for a waiver and exemption from the requirement, and DOT provided livestock haulers with an initial 90-day waiver – until March 18 – from the mandate.
ELDs -- which can cost $200-1,000 plus a $30-50 monthly fee -- record driving time, engine hours, vehicle movement and speed, miles driven and location information. They electronically report the data to federal and state inspectors and supposedly help DOT enforce its hours-of-service regulation. That rule limits commercial truckers to 11 hours of driving time and 14 consecutive hours of on-duty time in any 24-hour period. Once drivers reach that limit, they must pull over and wait 10 hours before driving again.
On March 13, FMCSA administrator Ray Martinez granted a 90-day exemption to provide additional time to offer guidance. The action in the omnibus package offers even more time.
Agricultural groups hope the additional six months will give FMCSA more time to educate livestock haulers on the ELDs while the industry works on solutions to the current hours-of-service rules, which are difficult to adhere to for those hauling live animals.
Fire budget fix
Provisions in the spending bill would help move away from the current funding model for wildfire suppression and recovery whereby the U.S. Forest Service is forced to dip into other accounts after running out of appropriated funds during catastrophic fire seasons.
“This bill finally fixes the U.S. Forest Service’s broken budget and provides new tools to restore our national forests and protect communities from devastating wildfires,” Sen. Debbie Stabenow (D., Mich.) said.
There are two components to the fix: It freezes the 10-year average cost of fire suppression upon which appropriated funds are based and permits funding costs above that 10-year average using natural disaster funding. This ends the need for ever-increasing appropriations for fire and halts the steady erosion of funds for non-fire activities at the Forest Service, which currently spends more than half of its budget on fire suppression activities.
There is also bipartisan support for provisions that will help the Forest Service expedite active management of forest habitat. Combined with the fire funding fix, the agency will not only have more tools to work on habitat restoration but will have the funding to accomplish it.
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