IRS plan would make CRP land expensive

When my assistant handed me a news release from U.S. Senator Russ Feingold’s office last week titled “Feingold presses IRS to leave CRP farmers alone” I nearly fell out of my chair. NOT because Feingold, a Wisconsin Democrat, is pressing the IRS to stop seeking retroactive taxes from those who have participated in the Conservation Reserve Program, or currently have some acres enrolled in the environmentally-friendly program, but because the IRS is considering going after farmers for taxes on their CRP land, all the way back to 1996.

As most of you know, the Conservation Reserve Program provides technical and financial assistance to eligible farmers and ranchers to address soil, water, and related natural resource concerns on their lands in an environmentally beneficial and cost-effective manner. The program encourages farmers to convert highly erodible cropland or other environmentally sensitive acreage to vegetative cover, such as tame or native grasses, wildlife plantings, trees, filterstrips, or riparian buffers. Farmers receive an annual rental payment for the term of the multi-year contract.

The Sixth District Court of Appeals, in it’s infinite wisdom, has ruled that farmers who take part in CRP should be subject to self-employment payroll taxes on CRP programs. Landowners who participate in CRP but do not farm are exempt from the tax because their payment are considered rental or real estate income.

Enter the Internal Revenue Service. Senator Feingold, a Harvard grad and Janesville, Wisconsin resident, who sits on the Senate Budget committee, sent a letter last week to IRS Commissioner Mark W. Everson, pressing him to stop seeking restroactive taxes from farmers who participate in CRP.
The Sixth District Court of Appeals decision overturned a 1998 Tax Court Ruling that CRP payments quality as rental payments made by the government for taking environmentally sensitive land out of production. Since other rental payments are exempt from this additional tax, CRP payments have been considered exempt as well.

I have several acres of filter strips on my farm for which I receive a CRP payment. The 9 1/2 acres along either side of Howard’s Creek which I have enrolled will not make me rich, but I believe that as stewards of the land, my fiance’ and I are enhancing wildlife habitat, restoring biodiversity, and improving soil and water quality by taking this land out of production.

We are committed to 4 more years in the program, and will more than likely renew the contract when the time comes. However, if it becomes law that I have to pay self-employment taxes on the rental payment I receive for those filter strips, I will not offer up any of my land for re-enrollment in this program. My guess is that many of you will not either. It is a very good program, too, and it would be a shame if we failed to call the lawmakers who represent us in rural America while they are back in their districts for August recess, and urge them to join Senator Feingold’s campaign to stop the IRS from seeking retroactive taxes from farmers enrolled in conservation programs.

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