Overview

Cattle farms and ranches are family-owned small businesses, but they face a number of unique challenges that are specific to agriculture. Farmers and ranchers plan and budget for the long-term, but changes in the tax code can harm their success.

Axe the Death Tax

One of the biggest threats to family-owned farms and ranches is the Death Tax, or federal estate tax. The Death Tax is paid by heirs who inherit the farm or ranch when a family member passes away. This tax is a massive burden on cattle operations and its high cost can force producers to sell off land, livestock, equipment, or other assets to pay the tax, which in turn puts the farm or ranch in a worse financial position. Cattle operations are also asset rich, cash poor businesses so while they may seem like high-valued enterprises, much of their value comes from assets like land or equipment that are not easily converted into cash and are critical to the success of the operation.

By the numbers:

• Over 33% of cattle producers have been impacted by the Death Tax
  • Of those respondents, 35% have been forced to pay the Death Tax more than once
• 40% of cattle producers expect to be impacted by state-level estate taxes
• 27% of producers view the Death Tax as their greatest concern
• 18% of producers have been forced to sell land, livestock, or other assets to pay for the Death Tax
• 9% of producers have gone into debt with a personal loan or lien to pay for the Death Tax
• 25% of producers could not invest in their operation due to high Death Tax bills

Source: 2023-2024 NCBA Tax Survey, Published 10.8.2024

Protecting Pro-Business Tax Provisions

Cattle producers rely on long-standing provisions in the tax code that help them reduce costs, including stepped-up basis, like-kind exchanges, and the Section 199A Small Business Deduction. These tax deductions are critical for the success of farming and ranching operations.

Why This Matters

With more than 40 percent of farmland expected to transition in the next two decades, Congress must prioritize policies that support land transfers to the next generation of farmers and ranchers. When doing this, lawmakers need to consider the complexity of the implications of taxes on family-owned agricultural businesses. In the case of farms and ranches, the United States Department of Agriculture (USDA) reports that 91 percent of assets are illiquid. This means that to pay off tax liabilities at the time of an owner’s death, surviving family members may be forced to sell off land, farm equipment and sometimes parts of the operation. If farmland is lost, and therefore transitioned out of production, the environmental benefits that come along with the deliberate stewardship done by farmers and ranchers will be lost as well. Federal tax policy that facilitates generational transfer and allows the next generation of producers to build upon the environmental and economic benefits of today’s farmers and ranchers is just as important for fifth-generation producers as it is for first-generation, veteran, and minority community producers who are breaking into and establishing a foothold in the industry.

Resources

2023-2024 NCBA Tax Survey Report

Contact

Kent Bacus
202-347-0228

Kelsea Kemp
202-347-0228