SCHUMER: FEDERAL RESTRICTIONS ARE PREVENTING CORTLAND COUNTY FAMILY FARMERS FROM INVESTING IN NEW EQUIPMENT; SCHUMER BILL WOULD HELP SMALL FARMERS PURCHASE NEW EQUIPMENT THAT WILL INCREASE EFFICIENCY, SAVE MONEY & HELP KEEP THEM IN EXISTENCE
Current Federal Restriction Greatly Constrict Small Farmers’ Ability To Purchase Expensive Farm Equipment; Due to Uncertainty In the Tax Code, Farmers Are Forced To Use Old & Inefficient Equipment Until It Breaks Down, Stagnating Growth, Constricting Already-Tight Profit Margins and Sometimes Delaying Harvest
Schumer Bill Would Restore and Make Permanent An Incentive For Small Farmers To Quickly Recover Costs From Purchasing Expensive Farm Equipment; Family Farmers Will Save Money
Schumer: Feds Should Plant New Tax Incentives for Cortland
Standing at CNY Farm Supply in Cortland, NY, U.S. Senator Charles E. Schumer today said the current federal tax code is preventing farmers from investing in new farm equipment. The modern equipment available for farmers today, while expensive, is fitted with the latest safety features to help prevent injury and loss of life, as well as technology that increases efficiency and employs emission controls that help reduce air pollution and fertilizer runoff. Schumer said if small farmers had better incentives to purchase new farming equipment, those in Cortland County and around New York State would be more inclined to make these costly investments. Therefore, Schumer urged his colleagues in the Senate to support the bi-partisan tax plan that would help family farmers and ranchers finance new equipment, putting money back in their wallets, so they can invest in their business and strengthen the local economy. This bill, theAgriculture Equipment and Machinery Depreciation Act, would restore and make permanent the 5-year depreciation recovery period for the cost of farming machines and equipment. This bill is supported by the American Farm Bureau and the National Farmers Union.
“Farmers throughout the Central New York Region need greater certainty and better incentivizes that allow them to purchase the critical equipment needed to help their farms operate and grow. Allowing them to take advantage of the depreciation tax deductions in a shorter timeframe will be good for business. Having more cash on hand, and sooner, will be a boon for farmers across Cortland County and the Central NY economy,” said Schumer.
Schumer explained that farmers purchase new equipment for many reasons, including newer, safer technology becoming available, advances in engineering lowering the maintenance costs of new machinery and increased fuel efficiency and emissions controls that help reduce pollution. However, Schumer said, small, often family-owned farms must wait until their equipment has exceeded its usable life because replacing it can be incredibly costly.
The general wear and tear of the machinery used on farms results in the depreciation of the value of this machinery until it is eventually obsolete. This depreciation on equipment is a cost incurred by farmers over time that the tax code helps buffer through a depreciation deduction. This deduction allows farmers to recover the cost of the depreciation of an asset over time through lower taxes. The length of time that this deduction is taken is known as the recovery period.
Schumer said that, under the current federal tax code, farmers are less likely to invest in new farm equipment because the recovery period for the deduction does not align with the useful life of equipment or the averaging financing schedule of machinery. According to surveys from the USDA’s Farm Service Agency farmers and ranchers finance farm equipment and machinery for five years on average. However, farmers currently have to take their depreciation deductions over a 7-year recovery period. Aligning the recovery period with the financing schedule at five years would help farmer finance new equipment purchases and invest in their farms. The depreciation deductions farmers receive over many years is more valuable if farmers receive them in a shorter time frame, as there is less inflation over a shorter period of time and having more cash on hand enables farmers to reinvest that money and expand earnings. The effect of taking the deduction over a shorter time period would be more investments in farms and the strengthening of local farm communities.
For example, if a farmer purchases a tractor for $100,000 with a salvage value of $30,000 after its useful life, its depreciation cost is $70,000. Currently, the farmer is only able to receive a deduction for this $70,000 depreciation cost over seven years, resulting in a $10,000 per year deduction for seven years. Schumer’s bill would allow farmers to receive the depreciation deduction over five years, allowing farmers to deduct $14,000 per year for five years. This $14,000 deduction can be used to pay off a farmer’s loans on the tractor, or can be used for additional investments in the farm. Either way, Schumer notes, having more cash on hand, and sooner, is a boon for farmers across Upstate NY.
As a result, he is pushing legislation that would restore and make permanent an incentive that would allow small farmers to quickly recover costs from purchasing expensive equipment. Schumer cosponsored legislation, the Agriculture Equipment and Machinery Depreciation Act introduced by Senator Klobuchar (D-MN), which would amend section 168 of the Internal Revenue Code to make it easier for farmers to pay for farm equipment. This legislation would improve the depreciation deduction by moving the 7-year timeline up to five years in order to better match farming equipment financing schedules and give farmers more money up front for their purchases.
Schumer said a change must be made to incentivize farmers to purchase equipment while restructuring the tax code to allow greater certainty for farmers looking to make investments. Schumer said this legislation would provide farmers with more financial certainty as they prepare to make expensive equipment purchases and give them more cash on hand as they prepare to purchase equipment. It would also bring greater business opportunities to places that sell farm equipment and machinery, like CNY Farm Supply in Cortland.
Schumer was joined by CNY Farm Supply owners and operators David and Eric Law, along with local farmers.
“We hear from local farmers all the time: being able to recover costs of new equipment quicker boosts the likelihood of future investment. That type of certainty has positive ripple effects for family-owned retail outlets like ours,” said David Law, owner of CNY Farm Supply in Cortland. “From farmers who purchase new equipment to those who manufacture and sell it, Senator Schumer’s efforts to make the tax code more favorable to the agriculture industry is huge.”
“Investing in new equipment is essential for any farmers’ operations. However, the high cost and uncertainty around the tax code can make those necessary investments less likely,” said Mike McMahon, owner of McMahon’s E-Z Acres Farm in Cortland. “Senator Schumer’s legislation will give farmers like myself the certainty needed and also free-up some cash to invest back into our businesses.”
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