Farm Programs

In late August, President Biden signed complete data collection on greenhouse The IRA Bill allows Medicare to negotiate the the “Inflation Reduction Act of 2022” gas emissions through the Renewable costs for some prescription drugs with the manufac(IRA) into law. The IRA was previously Fuels Standards program. turers and would cap the out-of-pocket drug costs Approximately $19.7 billion, or about 45 percent of the total IRA funding allocated toward agriculture and rural development programs is targeted toward existing conservation programs on working farmland. All of these conservation programs are currently included under the Conservation Title (Title II) of the Farm Bill. The current Farm Bill is set to expire in 2023, so it is not known how this new conservation funding will dovetail into the existing conservation funding when the next Farm Bill is passed by the U.S. Senate by a slim margin and later approved by the U.S. House of Representatives. In both Houses of Congress, the IRA Bill passed along party lines with support from Democratic members of Congress and opposition from Republican members of Congress. The opposition was largely due to the rather large cost of the legislation and questions as to whether the legislation could accomplish all the goals and objectives that were set forth in promoting the bill. FARM PROGRAMS By Kent Thiesse MARKETING for some seniors enrolled in Medicare. There is considerable disagreement on whether the IRA legislation will actually meet the goal of reducing the Federal deficit and controlling inflation. However, analysts do project the IRA will generate approximately $700 billion in new revenue over the next ten years (2022-2031). The revenue enhancement will come via a 15 percent minimum corporate tax for large corporations, a 1 percent excise tax on the value of stock buy backs and increased Internal Revenue Service enforcement efforts. The 15 percent minimum tax would be on the income that large corporations (over $1 billion

The IRA legislation is a $740 billion tax, climate written. It should be noted that the IRA legislation in profits) report to their shareholders. It is estiand health care reconciliation package, including did not provide any additional funding related to mated this change will only affect about 150 corpoover $370 billion targeted toward climate-smart the popular Conservation Reserve Program. rations in the United States. The IRS will receive projects and renewable energy spending over the next ten years (2022-2031). Based on early analysis, there would be nearly $44 billion in the IRA legislaConservation funding and provisions in the IRA legislation $80 million through the IRA legislation to boost tax audit capacity by adding up to 87,000 IRS employees, which is projected to generate over $200 billion tion to fund agricultural conservation, rural devel- • $8.45 billion over 10 years for the in added income taxes which are legally owed. opment and forestry programs. The IRA legislation calls for greenhouse-gas emissions to be reduced to 44 percent below 2005 levels Environmental Quality Incentives Program (EQIP). EQIP provides farm operators and ranchers incentive payments to enhance conservation efforts. The Inflation Reduction Act has been quite controversial and politically divisive, due to some of the provisions contained in the legislation and the rathby 2030, which was enhanced from a 35 percent • $3.25 billion for the Conservation Stewardship er large price tag of the legislation. We are in the reduction under previous federal policy. Program (CSP). CSP provides farm operators 5-year very early stages of the implementation process for The IRA legislation includes several provisions to enhance the production and promote the use of electric vehicles, including EV tax credits. There were also several agriculture-related rural energy and biofuel provisions in the IRA legislation. incentive payments to implement new conservation practices. • $4.95 billion for the Regional Conservation Partnership Program (RCCP). RCCP involves NRCS partnering with landowners and private entities on larger conservation projects. the IRA legislation. However, it does appear there will be funding for climate related energy and conservation projects and programs, as well as health care initiatives, which could impact farm operators and rural residents. It may take some time for USDA and the other Th bill allocates approximately $3 billion for the U.S. Department of Agriculture’s “Rural Energy for America Program” (REAP) to fund programs that improve the technology and efficiency of producing, storing and delivering electrical energy resources in rural areas. It provides $9.7 billion specifically targeted toward rural cooperatives for assistance with rural electric systems to purchase renewable energy, to upgrade renewable energy and zero emissions systems, to improve storage systems, and to enhance carbon capture, as well as other initiatives. The legislation contains $500 million in new funding to add blender pumps and other biofuels infrastructure; and extends the $1.00 per gallon blenders tax credit for biomass-based diesel fuel through AD COPY INSTRUCTIONS Please read attached email CODE AND REP NAMES ALREADY ON AD THE LAND 3.417 x2” The Land Federal agencies to roll out the full implementation of these programs — some of which will be an expansion to existing programs and others may be new programs. On the surface, it does not appear there will be a large tax impact on most rural residents. However, we do not know what effect that the increased IRS audits and potential future taxes may have on farmers and other small businesses in rural areas. Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com. v • $1.4 billion for the Agricultural Conservation Easement Program (ACEP). ACEP involves working with NRCS on specific long-term conservation efforts on working farmland. The IRA legislation extends through the 2031 federal fiscal year. However, most of the expenditures for the conservation-related initiatives are scheduled to occur from 2023 to 2026. So, any additional funding for these conservation programs beyond 2026 may need to come through the Farm Bill or other legislation. There are other provisions in the IRA Bill which could impact residents in rural America. $5 billion has been allocated for wildfire prevention and climate resiliency projects on public and private lands. 2024 and would then replace that tax credit with a An additional $5.3 billion in farm debt relief will new tax credit based on the biofuel’s carbon rating. go to “distressed” borrowers who hold direct or guarThe bill also creates a temporary $1.25 per gallon tax credit for the production of sustainable aviation fuel to serve as a bridge until the new clean fuels tax credit is in place in 2025, which will be an incentive for SAF production through 2027. anteed Farm Service Agency loans — including $2.2 billion targeted toward farmers who had experienced discrimination when applying for or during the administration of USDA farm loan programs. These payments would be capped at $500,000 per producer. Some of these program provisions were

The IRA legislation also included $10 million for previously passed under the American Rescue Plan new grants to support advanced biofuels and $5 in 2021, which has been held up in court proceedmillion for the Environmental Protection Agency to ings.