Urged by farm-state legislators, the federal government has stepped up to the plate to assist cattle producers impacted by the nation's ongoing drought. In a timely late-summer announcement, producers were told the tax-deferment period for weather-related sales of livestock — known as involuntary conversions — has been extended from two years to four years.
That means they'll have additional time to purchase replacements for livestock they were forced to sell due to drought. Plus, when the animal is replaced, the tax liability for the sale will not exist.
“The language also gives the Secretary of the Treasury authority to further extend the deferral period,” says Jason Jordan, National Cattlemen's Beef Association (NCBA) manager of legislative affairs. “Extending the tax deferment period will allow producers to replace breeding animals they were forced to sell at a more feasible time.”
Some producers are coming to the end of their four-year replacement period from the 2002 drought.
“This announcement means ranchers still dealing with horrific effects of that drought won't have to restock their herds until one year after the official end of their drought conditions,” Jordan says.
IRS Notice 2006-82 explains how a taxpayer can determine whether additional time is available. In addition, the IRS says it will publish a list of counties that experienced exceptional, extreme or severe drought for the 12-month period ending Aug. 31, 2006. The extension could apply to ranchers in at least 20 states.
“We agonize over the certainty of taxes, so this is welcome news,” says Matt Brockman, Texas and Southwestern Cattle Raisers Association executive vice president. “The drought has dealt ranchers a big blow and this extension allows us to fight another day.”
The four-year replacement period was set to expire Dec. 31. The one-year extension applies for any week in the 12 months ending Aug. 31 in counties dealing with any of the three worst drought designations. Using data from a map produced by the National Drought Mitigation Center, the IRS will publish a list of eligible counties for the extension.
Eligible states could include Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Tennessee, Texas and Wyoming.
Other federal help
Earlier this fall, USDA Secretary Mike Johanns also announced $780 million in assistance would be available to help farmers and ranchers manage drought and weather-related production challenges. This funding includes a new $50-million program for livestock producers impacted by drought, focusing nearly $30 million in unused conservation funds on drought, and accelerating the delivery of an estimated $700 million in counter-cyclical payments.
The new $50-million program for livestock producers, the Livestock Assistance Grant Program (LAGP), will provide $50 million to states in block-grant form. States will distribute to livestock producers in counties designated as D3 or D4 on the Drought Monitor anytime between March 7 and Aug. 31, 2006.
Conservation funds
Nearly $30 million in unused conservation funds available to producers includes almost $19 million in unused Emergency Conservation Program (ECP) funds and $11 million in unused Grassland Reserve Program (GRP). The ECP funds will go to 27 states. Information on eligibility and a list of the states and funding are also posted online at www.fsa.usda.gov/Internet/FSA_File/ecp_allocations_082906.pdf.
The GRP funds will help protect drought-affected grazing lands, and will be distributed to 14 states. These funds will be focused on pending GRP applications for rental agreements in drought-affected areas.
Johanns also directed Natural Resources Conservation Service (NRCS) state conservationists to work with their producers and state technical committees to focus remaining FY 2006 and a portion of FY 2007 conservation program funds on resource-conservation practices related to drought response and mitigation. Programs such as the Environmental Quality Incentives Program (EQIP), the Wildlife Habitat Incentives Program, the Agricultural Management Assistance program, and GRP have built-in flexibility and local decision-making ability in order to encourage a focus on state-specific concerns, such as those related to drought.
Existing USDA assistance
As always, emergency loans are available to help producers in counties declared disaster areas. These low-interest loans are for producers who have suffered production or physical losses resulting from a natural disaster or quarantine in counties designated disaster areas by President Bush, or disaster or quarantine areas by Secretary Johanns.
Prior to this announcement, USDA has allocated over $30 million in emergency conservation program and emergency watershed protection program funds for 2006 disasters, including drought. The agency has released considerable Conservation Reserve Program (CRP) acreage to emergency haying and grazing and lowered the rental rate reduction to 10% from 25%.
Federal crop insurance and the Noninsured Crop Disaster Assistance Program (NAP) are also available to crop producers each year to help mitigate the risks associated with the adverse affects of heat and drought. In addition, NAP is available for producers who grow crops for which crop insurance is not available.
Other legislative efforts
At press time, Sen. Conrad Burns' (R-MT) package, the Emergency Wildfire and Farm Relief Act of 2006 (S. 3860) specifies an additional $200 million for EQIP. His legislation also requests an additional $100 million for the LAGP.
Sen. Kent Conrad's (D-ND) bill, the Emergency Farm Relief Act of 2006 (S. 3855) includes $30 million to address the current needs of the ECP. The Conrad bill already has 22 cosponsors in the Senate.
This language was also filed as an amendment to the SAFE Port Act (H.R. 4954). Sen. Ben Nelson (D-NE) filed the amendment in September aimed at providing $6.5 billion in emergency agricultural disaster assistance.
