Omnibus Bill Passes

Capitol buildingThe House passed H.R. 1625, the fiscal year 2018 omnibus spending bill by a vote of 256-167. The Senate passed the bill by a vote of 65-32. The president signed the bill into law after threatening to veto the bill earlier in the day.

The bill includes all 12 appropriations bills and increases domestic program funding by $63 billion over previous budget limits. The full text can be viewed here. The House Appropriations Committee bill-by-bill summaries can be found here. The Senate Appropriations Committee bill-by-bill summaries can be found here.

Key provisions included in the omnibus follow:

Cooperative Tax Deduction:

Amends the cooperative tax deduction, Section 199A. This provision restores balance to commodity markets and reestablishes fairness between cooperative and non-cooperative agriculture producers. Details on the fix can be found in the Impact section.

CERCLA:

The bill amends Section 103 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to clarify that air emissions from animal waste at a farm are not applicable under this act and thus farmers do not need to report their emissions.

Electronic Logging Devices:

The bill prohibits through the remainder of FY18 the Department of Transportation from enforcing the electronic logging device mandate on those haulers transporting livestock and insects.

Farm Program:

The bill allows for pilot program for the 2017 crop year for county-level agriculture risk coverage payments where a supplemental payment is made based on alternative calculations if the National Agricultural Statistics Service data currently used creates payment disparities within comparable counties in a state.  One alternative calculation can be based on Risk Management Agency data. This is designed to address the payment disparities observed in ARC-CO program payments during the previous crop years.

Forest Management:

The bill provides critical forest management reforms and allows the U.S. Forest Service to adjust its cap when its fire-suppression budget goes above the 10-year average. This provision is critical to the long-term fiscal health of the Forest Service.

Rural Broadband:

Creates a pilot program within the Rural Utility Service to allocate $625 million in funding to underserved and unserved areas.

Following are the FY18 Agriculture Highlights:

$23.3 billion in discretionary funding, which is $2.1 billion above the FY17 enacted level

Agriculture Research:

Provides $3.03 billion for agriculture research, which is $138.8 million above the FY17 enacted level.

Includes $400 million for the Agriculture and Food Research Initiative;

$244 million for the Hatch Act;

$483.6 million to support extension service activities; and

$140.6 million for Agricultural Research Service Building and Facilities.

Animal and Plant Health:

Includes $985.1 million for the Animal and Health Inspection Service, which is $36 million above the FY17 enacted level.

Conservation Programs:

Provides $1.03 billion for conservation programs, which is $8 million above the FY17 enacted levels.

Includes $160 million for infrastructure rehabilitation projects.

Provides $150 million for the Watershed and Flood Prevention Operations program.

Farm Service Agency:

Includes $1.7 billion for farm programs, which is $2 million more than the FY17 enacted level.

Prohibits the closure of FSA county offices and provides additional funding for the hiring of more loan officers.

Rural Development:

Provides more than $4 billion for rural development programs, which is $1.125 billion above FY17 enacted level.

More than $3 billion for rural water and waste program loans

Nearly $1 billion in water and waste grants

$6.9 billion for rural electric and telephone infrastructure loans

$52 million for Distance Learning and Telemedicine grants to assist rural communities connect with educational and health clinics to address the opioid epidemic.

Provides $919 million for the rural business and industry loan program.

Food Safety and Inspection Service:

Provides $1.06 billion, which is an increase of $25 million above the FY17 enacted level, for food safety and inspection programs.

Provides $7.5 million in hiring incentives for veterinarians.

Fully funds the catfish inspection program.

Food and Drug Administration:

Includes more than $2.9 billion for the FDA, which is $134 million above the FY17 enacted level.

$94 million is designated for combating the opioid epidemic;

$10.5 million is for food safety activities; and

$60 million for the 21st Century Cures Act.

Commodity Futures Trading Commission:

Provides $249 million for the CFTC, which is $1 million below the FY17 enacted level.

International Programs:

Includes $2.1 billion for food aid programs, which is $130 million above the FY17 enacted level.

$1.76 billion for PL 480, Title II Food for Peace grants.

$207.6 million for the McGovern-Dole International Food for Education and Child Nutrition Program, with $10 million designated for the Local and Regional Food Aid Procurement at the Foreign Agriculture Service.

Food and Nutrition Programs:

Provides $6.175 billion for the Women, Infants and Children Program, which is $175 million below the FY17 enacted level.

Includes $24.3 billion in mandatory funding for child nutrition programs, which is $1.5 billion above FY17 enacted level.

Provides $74 billion in mandatory funding for the Supplemental Nutrition Assistance Program, which is $4.5 billion below FY17 enacted level.

Section 199A Fix

Following is a summary of the Section 199A proposal. The proposed changes are retroactive to January 1, 2018, and are available to pass-through businesses (sole-proprietors, partnerships, S corporations).

PASS-THROUGH BUSINESS DEDUCTION

Pass-through business owners with taxable income below $157,000 per individual/ $315,000 joint return can take a business deduction that equals 20 percent of their net income from commodity sales up to the farmer’s taxable income. The deduction is restricted when taxable income exceeds the thresholds.

When commodities are sold to a cooperative, the deduction is reduced by either 9 percent of the net income from the farmer’s cooperative sales or 50 percent of wages attributed to such sales whichever is less.  However, the farmer can claim any deduction passed through from the cooperative up to the farmer’s taxable income including capital gains.

COOPERATIVE TAX DEDUCTION

Cooperatives have a deduction of the lesser of 9 percent of adjusted gross income or 50 percent of W-2 wages and have the option of retaining their deduction or passing some of their deduction to their farmer patrons.

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