Agricultural Retailers Association: Environmental Policy, Taxation Top Issues To Watch
With the 2012 elections determined, it seems that we can expect more of the same from our nation’s capital unless our elected officials can find a way to get along. The Agricultural Retailers Association (ARA) is anticipating movement on a multitude of regulatory and legislative issues that will affect retailers and distributors of crop inputs especially with regards to areas such as the Farm Bill, environmental issues, taxation and finance and gearing up for a new surface transportation bill in 2014.
The 2012 Farm Bill legislation brought forth by the Senate and House Agriculture Committee represents an attempt towards balanced reform to the farm safety net program. Although there is room for negotiation within commodity and nutrition titles, compromise is not too far out of sight.
ARA has significant interest in the passage of the 2012 Farm Bill and has been working diligently to see membership policy goals achieved. If passed, we are likely to see the preservation of a strong crop insurance program, streamlining of the agency review process regarding biotechnology and many needed reforms within the conservation title such as reduction of the Conservation Reserve Program acreage cap and changes to the Technical Service Provider program that will allow all industry representatives to participate in conservation partnerships.
Water quality issues remain of great importance to the agricultural industry. A top priority from 2012 will remain one in 2013 as the fight continues to stop the implementation of a Pesticide General Permit under the Clean Water Act (CWA) for aquatic pesticide applications. Over the past year, the agricultural industry has been fighting tooth-and-nail for legislation (H.R. 872 & S. 3605) that would eliminate the need for CWA National Pollution Discharge Elimination System permits for pesticide applications that are FIFRA-compliant (Federal Insecticide, Fungicide, and Rodenticide Act). Most within the agricultural community see this as a redundancy that only adds more cost and paperwork to a regulation that applicators are already in compliance with.
In 2013, it is also likely that EPA will continue to move forward with regulation of nutrients in bodies of water. Over the past year, we have seen Total Maximum Daily Load develop in the Chesapeake Bay and other watersheds in order to regulate the amount of nitrogen, phosphorus and sediment a body of water may contain. ARA remains skeptical of the data and methodology used in determining thresholds and criteria for water quality standards. The modeling techniques used by EPA generally overestimate the agricultural sector’s impact on water quality without considering other significant sources such as bank erosion.
Another issue of particular concern is EPA’s disregard of the 10th Amendment in forcing water quality standards on states instead of allowing them to set standards themselves, case in point, the Florida Numeric Nutrient Criteria. Whether it concerns the six states that surround the Chesapeake Bay or Florida, EPA constantly asserts authority over states citing the CWA. In doing so, EPA often issues a criterion based on information that is not scientifically defensible and often fails to recognize conservation practices that the agriculture industry is already utilizing in an effort to improve water quality. These factors lower production and demonstrate a lack of desire from EPA to get to the true source of water pollution through a spirit of cooperative federalism.
Finally, in an effort to complicate things further, EPA is still pursuing efforts to expand the definition of navigable waters under CWA to include all ephemeral streams. ARA continues to work with Congress, the agencies and other allied groups to thwart attempts of inaccurate and unnecessary rule-making.
Taxation & Finance
Each political party has its own compelling story of who is at fault for our debt or which plan to make America prosperous again would work. To some degree, both parties are right. Currently, the U.S. is spending too much and not raising enough revenue for the current levels of spending, hence the “fiscal cliff” the country was heading towards at the end of 2012. “Taxmaggeddon,” as many like to call it, is the major tax increase that is likely to fall on the shoulders of American families and businesses after January 1, if Congress did not get its fiscal house in order.
Of the $500 billion dollars that is due, $165 million of that total would be dedicated to the expiration of the 2001 and 2003 Bush tax cuts of which the majority of those benefits were arguably dedicated to helping middle and low-income tax bases. Additionally, the child tax credit will be cut in half, the fixes from the Alternative Minimum Tax will be erased, retiree’s dividends will soar up nearly 25 percentage points and the $124 billion dollar cut in the payroll tax will end. With the simultaneous lapse of these tax relief provisions, the average American household could see a general tax increase of $3,800.
Among the tax expenditures that expired with the others in 2012 is the Ag Chemical Security Tax Credit, which provides a 30% credit to agribusinesses that invest in facility security measures in order to keep potentially dangerous crop inputs out of the hands of criminals or terrorists. This credit, Section 450 of the Tax Code, was enacted with the passage of the 2008 Farm Bill and considering the budget constraints we face today and the fact there was no tax title proposed in the 2012 Farm Bill; pushing for extension has been an uphill fight. Senator Pat Roberts (R-KS) offered an amendment in favor of the credit when the Senate Finance Committee met to mark-up the Family and Business Tax Cut Certainty Act of 2012, but it was ruled out of order. Both chambers have agreed that a “tax extenders” package can wait until the fiscal cliff reaches resolution and ARA will continue to work to extend this much needed tax credit.
The upcoming year will also bring an opportunity to revisit the seven-year depreciation schedule that is applied to farm equipment and make permanent the five-year schedule that similar construction equipment enjoys. This “fix” will make the tax code more consistent and get debt service and depreciation in line and in doing so, increase farm income by over $850 million a year. ARA supports this change because it will help farmers and ranchers replace older equipment by easing the ability to receive financing on new machinery.
In the wake of the financial collapse our country endured, Congress rushed to pass the Dodd-Frank Act, which was designed to act as a consumer protection barrier from poor and malicious investment. Unfortunately, as with most reactionary policy, this Congressional intent was misinterpreted. ARA is currently working to protect non-financial end users that legitimately hedge their business risks and pose no systemic risk to our financial system. These entities should not be required to comply with the regulations set forth by the CFTC, SEC and the Prudential Regulators for swap dealers and major-swap participants. We expect Congress to revisit Dodd-Frank, especially Title VII, early in 2013.
ARA enjoyed many successes from the surface transportation bill that was passed this year. The hours of service agriculture exemption and the increase of the air mile service radius from 100 to 150 were big wins for ARA and its members. We congratulate the new Transportation and Infrastructure Committee Chairman, Representative Bill Shuster, and look forward to working with him in the future.
For more information on ARA’s work on specific policy issues in 2013, visit www.aradc.org.