"The omnibus bill is a win for farmers," Grassley said. "I'm glad to see the congressional leadership and the White House recognize the challenges facing American farmers. The tax code should work for farmers, not against them. I'm pleased with the inclusion of these common-sense reforms that will be meaningful to farmers in Iowa and all over the country."
The omnibus bill also contains a six-month extension of Chapter 12 bankruptcy protection for farmers. Grassley fought for the extension to provide emergency protection for farmers duringthe current farm crisis. He pushed through Chapter 12 protection in 1986 during the 1980s farm crisis. The provision expired Sept. 30. Grassley will continue to push for making Chapter 12 a permanent part of the bankruptcy code.
"Chapter 12 is an important leverage tool to help family farmers manage their debts," Grassley said. "The current farm price crisis underscores the importance of giving farmers permanent bankruptcy protections they can count on in the future."
Tax fairness for farmers is a priority for Grassley as a senior member of the Agriculture and Finance Committees. He said congressional leaders and White House negotiators confirmed the inclusion of the following farm provisions in the omnibus bill. Congress is expected to vote on the bill later this week.
The omnibus bill contains at least four tax provisions to help farmers:
* Grassley's Farm and Ranch Risk Management Act of 1998. Introduced with Sen. Max Baucus (D-Mont.) in May, this bill uses the tax code to more fully equip farmers to deal with factors outside their control, such as weather and trade barriers.
Specifically, the bill allows eligible farmers to make contributions to tax-deferred accounts known as FARRM accounts. The contributions would be tax-deductible and limited to 20 percent of a farmer's taxable income for the year. Contributions would be invested in cash or other interest- bearing obligations. Funds could stay in the account for up to five years. Upon withdrawal, the money would be taxed as regular income.
Grassley said farmers would have five-year windows to manage their money in a way that is best for their operations. A farmer could contribute to the account in good years and withdraw from the account when his or her income is low.
"I'm very pleased to see this bill so close to passage," Grassley said. "A farmer's income can vary quite a bit from year to year. This bill makes it easier for farmers to save money during good years for a cushion during bad years. Getting the President's signature on this bill will help farmers better manage their money."
* Permanent income averaging for farmers in the tax code. Because of the fluctuation of their income, farmers can pay federal taxes in different tax brackets from year to year. The differences can cause them financial hardship. Income averaging means farmers can lower their tax burden by offsetting good income years with poor ones.
* A five-year net operating loss carry-back. This will allow farmers to use this year's loss to offset income earned in the last five years. This provision could result in an immediate refund for many farmers.
* Language clarifying taxes related to the early release of federal funds for farmers. The language will clarify that farmers who choose not to take their 1999 farm transition payments in 1998 will not be taxed on the 1999 payments this year.
"We're ending the 105th Congress on a positive note for farmers," Grassley said. "Progress toward tax fairness for farmers represents a real legislative accomplishment. Bankruptcy protection is a welcome safety net for those facing immediate hardships."