Peggy Bennett: Some farmers could be put out of business
Capitol Comments by Peggy Bennett
Imagine working on your taxes and coming upon the surprise discovery that you owe the IRS $100,000. Immediately.
Though it may sound far-fetched, it is reality.
Last fall, a Wells farmer received a $100,000 tax bill that he had no idea was coming. Not having tens of thousands of dollars sitting around, he was forced to mortgage his house to pay for it. Unless the issue that caused this immense tax bill is fixed, he will go out of business next year.
I have heard from other area farmers and business owners with similar horror stories, as have other lawmakers around the state.
So what is causing these unbelievable tax bills? A failure of the Minnesota Legislature to fully conform with the federal tax code. Specifically, Section 179, which deals with accelerated depreciation.
Last session, Gov. Tim Walz signed into law a plan that directed the Department of Revenue to review Section 179 claims, adjust for new expensing limits and review any gains or losses from the equipment they traded in.
This meant a farmer or business owner who traded in farm equipment or other machinery in 2018, and realized a financial gain on that equipment, was subject to paying income taxes on that gain immediately. Whereas on the federal level, that tax increase was negated by higher upfront expensing limits. The tax bill signed by Gov. Walz only allowed the higher expensing limits over a six-year period, resulting in a tax increase in year one for farmers with only a promise it would be negated over six years.
While it may sound confusing, it’s definitely not a laughing matter for farmers and other small business owners — such as dry cleaners or dental offices — that find themselves in this impossible situation.
This session I am co-authoring legislation that would fully fund conformity to Section 179 in order to help those who have traded equipment and had that trade value counted as income. The legislation would also cancel any penalties and interest issued by the Department of Revenue on any unpaid debts that had been created due to this ordeal.
In talking with those who are dealing with these enormous tax bills, these people are going to be forced to leave a profession they love unless the Legislature acts. With a $1.5 billion budget surplus, we have funds available to make things right and easily fix this Section 179 mistake that was approved by House Democrats and signed into law last year.
State Rep. Peggy Bennett, R-Albert Lea, represents Minnesota House District 27A, which includes almost all of Freeborn County, along with parts of Faribault, Mower, Steele and Dodge counties. She can be reached by phone at 651-296-8216 or by email at rep. email@example.com.