Bills Offered on PABs, Sales Tax Deductions

WASHINGTON — Two Republicans have introduced separate bills that would ease private-activity bond restrictions for first-time farmers and permanently extend the state and local general sales tax deduction.

Rep. Tom Latham, R-Iowa, introduced H.R. 4757 on the use of PAB proceeds by first-time farmers on May 30.

About 17 or 18 states in the nation provide financing programs for first-time farmers, with Iowa having the largest program, sources said.

The federal tax code permits first-time farmers to use tax-exempt PAB proceeds for land or depreciable property. Legislation enacted within the last few years raised the dollar amount of depreciable farm property, such as equipment and certain land improvements, to $509,600, with annual increases for inflation. It had been $250,000.

But there is still a $62,000 limit on the amount of bond proceeds that can be used for farm equipment. The bill would repeal this limit.

Current tax law, in determining whether a farmer is first-time, says he or she must not have previously owned and operated "substantial farmland," defined as land equal in size or larger than 30% of the median size of farms in the same county. The bill would change "median" to "average," which would probably mean an increase in size because very large farms would affect the average more than the median. One Iowa official said a number of small "hobby farms" have started up in some states and have been skewing the numbers downward.

Rep. Stephen Lee Fincher, R-Tenn. has joined at least four other lawmakers in the House and Senate to introduce legislation that would make the deduction for state and local sales taxes permanent.

Fincher's bill, H.R. 4789, was introduced on May 30.

Provisions in the federal tax code had permitted taxpayers to deduct state and local general sales taxes in lieu of state and local income taxes, but they have expired. Fincher's bill would reinstate the provisions and make them permanent.

The measure would level the playing field for taxpayers in the eight states that do not have state income taxes — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Washington.

Other similar bills are: H.R. 3086, H.R. 434, S. 31, S. 127, and S. 1431. In addition, Senate Finance Committee chairman Ron Wyden, D-Ore., has a bill pending that would extend the sales tax deduction provisions through 2015.

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