Republican lawmakers are saying a tax law approved last session and signed into law by the governor is now costing farmers thousands of dollars. Specifically, farmers and other business owners who traded equipment are having that trade value counted as income and can likely expect a substantial bill from the Department of Revenue.
State Representative Paul Anderson of Starbuck, the lead Republican on the House Greater Minnesota Jobs and Economic Development Finance Division, said in a statement his committee has been hearing from farmers “who are in shock by this news.” Anderson said he warned last session that the lack of tax conformity was going to be a real problem, and now he sees them “coming back to bite farmers.”
The tax problems center on the failure to fully conform to Section 179 – accelerated depreciation – in the federal tax code. Under last session’s law, the Department of Revenue is directed to review Section 179 claims, adjust for new expensing limits, and review any gains or losses from the equipment they traded in.
For a farmer or business owner who traded in farm equipment or other machinery in 2018, and realized a financial gain on that equipment, the Department of Revenue will send a letter to them stating income taxes will now be owed on that gain immediately, while the higher expensing limits will only benefit them over time.
Anderson is working with Rep. Greg Davids of Preston on legislationn to fully fund conformity to Section 179, and also cancel any penalties and interest leveled by the revenue department on unpaid debts due to the Section 179 situation. He said he hoped the proposal would be met with urgency when the 2020 legislative session begins.