newsletter article, December 1998
Omnibus Spending Bill *
By Neil Harl, Charles
F. Curtiss Distinguished Professor in Agriculture and Professor of Economics,
On October 15, 1998, the
Congress and the Administration reached agreement on an Omnibus Spending Bill.
Several provisions are of particular importance to the agricultural sector
and are discussed briefly here.
The legislation contains
a six-month extension for Chapter 12 bankruptcy (which had expired on September
30, 1998). The extension expires on April 1, 1999. The Bankruptcy Reform
Bill, which did not pass, would have made Chapter 12 permanent.
The omnibus legislation
embraced four tax provisions for the farm and small business sectors—
Income averaging for
farmers was made a permanent part of the Internal Revenue Code. The concept
would otherwise have expired after 2000.
A special five year
net operating loss carryback for farmers was adopted. Tax refunds may be
obtained for net operating loss carrybacks.
A provision was adopted
preventing application of the doctrine of constructive receipt to AMTA payments
(the payments under the 1996 farm bill). Earlier, Congress had acted to
allow the Spring, 1999 payment to be available for payment in the fall of
1998. Under the new provision, payments will be included in income in the
year payment is actually received. Without the legislation, the payments
could have been deemed to be constructively received—and hence taxable—in
1998 even though not actually received until 1999.
of health care insurance premiums for self-employed individuals is accelerated
by the legislation. Self-employed individuals will be able to deduct 60
percent in 1999 through 2001, 70 percent in 2002 and 100 percent in 2003
and later years.
The legislation includes
$2.575 billion in funding to address crop disaster losses. The Secretary
of Agriculture is given broad authority to create and implement a disaster
Single year disaster
— the legislation makes $1.5 billion available to assist producers with
crop losses in 1998.
— an additional $875 million is made available to provide assistance to
producers who have suffered a multiple-year crop loss, especially for farmers
in the Upper Midwest whose crops have suffered from wheat scab disease and
assistance — $200 million in funding is provided for cost share assistance
to livestock producers who lost their 1998 supplies of feed to disasters.
Several conditions are
imposed on the legislation—
Payments will be
available to all producers of all crops who have had crop losses.
Payments will be allowed
for losses in quantity and quality (specifically including aflotoxin) as
well as severe economic losses because of damaging weather or related conditions.
The Secretary is given
authority to determine eligible crop losses, loss thresholds, eligible persons,
payment limitations and payment rates.
The Secretary is authorized
to provide incentives to those who purchased crop insurance in 1998.
Recipients of 1998
disaster assistance who did not purchase crop insurance in 1998 are required
to purchase crop insurance for the next two years.
The legislation provides
$3.15 billion in payments to producers eligible for contract payments under
provisions of the 1996 farm bill. The assistance will be paid in the form
of a one-time payment similar to the Agriculture Market Transition (AMTA)
payments under the 1996 farm bill. The additional payment will total about
52 percent of the AMTA payment received by a producer in fiscal year 1998.
From the amount allocated
for market loss assistance, dairy producers will receive payments totaling
$200 million through procedures to be determined by the Secretary.
In order to provide market
loss assistance to soybean producers who are not eligible for AMTA payments,
the legislation amends the Energy Policy Act of 1992 to provide fuel use credits
to operators of vehicle fleets who use fuel containing at least 20 percent
bio diesel by volume. It is estimated that the increased demand will increase
prices by up to 14 cents per bushel.
A one-year pilot project
and study of price reporting is included with pork added in the final stages
* Reprinted with permission
from the October 14, 1998 issue of Agricultural Law Digest, agricultural
law press publication. Footnotes not included.
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