As farmers completed harvest and fall work in 2021, a key piece of legislation was passed by Congress, while the United States House passed another proposal that could greatly affect the agriculture industry and rural communities.
After months of negotiations, the Federal Infrastructure Investment and Jobs Act, or the so-called bipartisan infrastructure framework, was passed by Congress and enacted by President Biden.
And recently, the United States House passed the $ 1.75 trillion Build Back Better Act, which deals with funding for several potential social and climate change programs. The Build Back Better Act is being debated and considered in the US Senate, but had not been approved at the time of writing. Below is a brief summary of the bipartite infrastructure framework and the legislative texts to better rebuild as it relates to the financing of farmers and the agricultural industry.
Highlights of the bipartite infrastructure framework legislation’s provisions include $ 1.2 trillion in funding for basic infrastructure projects. This includes roughly $ 550 billion in new spending, with the remaining $ 650 billion in earmarked funds for highways and other projects that were already planned.
The following is a breakdown of some of the provisions for new funding in the legislation.
About $ 284 billion, or 52% of new funding, would be allocated to surface transportation needs:
- $ 110 billion for roads and bridges. The federal government estimates that 173,000 miles of freeways and major roads, as well as 45,000 bridges, are in poor or failing condition, many of which are in rural areas of the United States.
- $ 66 billion to expand and modernize the US rail system, which can be extremely important for freight transportation issues for farmers and agribusiness.
- $ 17 billion spent on investments and improving ports and waterways, which are also critically important to keeping export markets open for U.S. agricultural products and access to imports of related inputs. Agriculture.
- Funds are also allocated for public transport, airports, surface transport, electric vehicle chargers and other arrangements.
The remaining $ 266 billion, or 48% of new funding, is allocated to other basic infrastructure projects:
- $ 65 billion to expand and improve broadband access, especially in underserved areas, many of which are in rural areas of the United States
- $ 60 billion for energy and electrical projects aimed at improving the American electricity grid.
- $ 55 billion for projects to improve water and wastewater infrastructure, which could greatly benefit many rural areas that are struggling to finance needed improvements in aging water treatment infrastructure and waste.
- There are also funds for flood mitigation projects, specialized watershed projects, electric vehicle charging stations and other specific programs.
Highlights of the agriculture-related provisions in the Build Back Better Bill that passed the US House follow.
This broad-based bill would address many issues and increase targeted spending for climate change, renewables, health care, child care, education, immigration and other provisions relating to social infrastructure. Parts of this legislation would likely affect farmers and the agricultural industry in the future. It is estimated that approximately $ 82 billion in provisions and expenses related to agriculture are included in the proposal.
Some of these proposals include $ 27 billion in new conservation-related funding that would be primarily targeted to help farmers increase so-called “climate-smart” farming practices to sequester carbon and reduce greenhouse gas emissions. tight :
- $ 5 billion for a five-year program to pay farmers $ 25 an acre to plant cover crops.
- $ 9 billion in additional funds for the Environmental Quality Incentive Program, commonly known as EQIP.
- $ 4.1 billion for the conservation stewardship program.
- $ 7.5 billion for the Regional Conservation Partnership Program.
- $ 1.7 billion for the Conservation Easement Program.
Most of the funded programs are existing conservation programs that are currently administered and funded through the Farm Bill process. It is not clear how the proposed Build Back Better legislation would affect current or future conservation programs or funding that has traditionally been included in the Farm Bill.
The Build Back Better Act passed by the US House would also include other provisions for new programs and spending on rural development programs, as well as funding for other programs that could affect farmers and rural communities:
- Over $ 25 billion in new funding for rural cooperatives and renewable energy development, as well as state and local government grants for renewable energy projects.
- Extend the $ 1 per gallon tax credit for biodiesel and renewable diesel until 2026, which is expected to generate billions of dollars in tax credits for these industries.
- Money for research and development of “sustainable” aviation fuels, including a new $ 1.25 per gallon tax credit for the sale and use of these fuels, which could be a cost potential future growth opportunity for the biofuels industry.
- $ 7 billion to repay Farm Service Agency loans to underserved farmers and ranchers, which supersede previous FSA debt relief provisions in the US bailout, which have been challenged by several lawsuits.
- $ 320 billion in tax credits for businesses and consumers to finance clean energy to increase the use of electric vehicles, install solar panels and improve energy efficiency, some of which can benefit farm families and rural communities.
One of the big issues surrounding the passage of the bill by Congress was the sizable amount of dollars allocated, now and in the future, as well as the tax provisions that could be included to pay for this additional funding. The Build Back Better Bill that was passed by the US House of Representatives does not increase the capital gains tax rate and does not include any adjustment to the “grossed up base” rule. agricultural assets. No changes are proposed to the amount of the farm inheritance tax exemption, which is expected to rise to over $ 12 million by 2022. Currently, the legislation would not change tax rates individuals and would only increase the tax rate for corporations with incomes greater than $ 5 million. The bill maintains the maximum personal income tax rate at 37% and the capital gains tax rate at 20%.
What does all this mean?
The process of implementing the basic infrastructure legislation of the Bipartite Infrastructure Framework has already started, which is expected to benefit farmers and rural communities by providing much needed funding for upgrading roads and bridges, improvement of railways and waterways, improvement of broadband and many other local projects.
The much larger and more diverse Build Back Better bill may or may not be passed by the Senate in the language of the original House version. However, if a compromise is reached that allows it to be passed by both houses of Congress and enacted, it will likely include several provisions that could affect farmers and the agricultural industry. There will likely be opportunities through the climate parts of legislation for renewable energy and carbon sequestration efforts; however, farmers remain very wary of the potential future costs and possible tax implications of this legislation.
For more information, contact Kent Thiesse, Farm Management Analyst and Senior Vice President, MinnStar Bank, Lake Crystal, Minnesota, at 507-381-7960 or [email protected]