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We are here from the government to help you, and arbitrarily penalize your ability to take part in government programs….

Starting crop year 2014 , producers whose average adjusted gross income is over $900,000  over the preceding three years are not eligible to receive payments or benefits from most   FSA/NRCS programs. Unfortunately, depending on how you hold your assets will determine how much of the income is counted.  

For a C corporation, the limit is calculated by taking taxable income plus charitable contributions.  However, for S corporations only ordinary income is reviewed.  For estates or trusts, FSA looks at taxable income plus charitable deductions.  For limited liability companies, limited liability partnerships ,limited partnerships, or similar entities, FSA uses total income from trade or business plus guaranteed payments to partners.  For individuals, adjusted gross income is used. The problem is what line they look on to get this taxable income.

S corporations  or partnership do not get the advantage of 179 (accelerated depreciation)  as rules require it to be reported on the tax return under a separate line and the FSA guidance doesn't account for the  separate reporting. A C- Corporation  or self employed tax forms folds Section 179 expenses right into the income determination line. In practice this produces a lower income level for FSA/NRCS purposes even though for tax purposes they have the same net result.

Many folks use S corps for farming operations as C Corps have a double taxation issue that many like to avoid. While it would be a simple fix to tell the USDA/NRCS to fold back in Sec. 179 it is never that easy getting two divisions of the administrative branch of government to figure things out. I bet either the courts or the legislature will have to provide the fix, which could take months or years to happen.

Wednesday, July 24, 2019
  • Patrick B. Dillon
  • Jill Dillon
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Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
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Jill Dillon focuses on family law, estate planning and IRS matters. Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill spent extensive time advocating for low income tax payers in front of the IRS and the State of Iowa Department of Revenue while at Drake.

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