• Prevent All Soring Tactics Act of 2017 (PAST) Act

Tell Congress to Pass the Prevent All Soring Tactics (PAST) Act of 2018!

 

Background:

The U.S. horse industry, which supports nearly one million American jobs and contributes $122 billion to Gross Domestic Product (GDP), urges Congress to pass the bipartisan Prevent All Soring Tactics (PAST) Act (H.R. 1847/S. 2957).  The PAST Act lays out a common sense solution to prevent the continued practice of taking action on a horse’s limb to produce a higher gait that may cause pain, distress, inflammation, or lameness.  The bill establishes a new system for inspecting horses for soring, revises penalties for violations of the Act, and modifies enforcement procedures.

 

Limited in scope, the bill outlines a specific framework to focus enforcement efforts on three horse breeds that continue to be the target of soring practices, including Tennessee Walking Horses, Spotted Saddle Horses, and Racking Horses.  The treatment of these select breeds stands in stark contrast to the dramatic decline in the overall mistreatment of horses that has occurred since enactment of the HPA more than 40 years ago.  By supporting the PAST Act, your elected officials will help modernize the Horse Protection Act of 1970 and end the practice of “soring” in the U.S.

 

Status:

Since Reps. Yoho (R-FL) and Schrader (D-OR) introduced the PAST Act (H.R. 1847) in 2017, the House bill has won co-sponsorship from 280 House lawmakers, representing nearly two-thirds of elected representatives!  Since that time, House leadership has referred the bill to the Energy and Commerce Committee. On the Senate side, Sens. Crapo (R-ID) and Warner (D-VA) led a bipartisan group of 10 original co-sponsors on May 24 to introduce S. 2957, which is identical to the House bill.  Senate leadership has referred the legislation to the Commerce Committee, where it might receive a hearing.

 

Action:  

House Message:  Tell your representative to urge Speaker Ryan (R-WI) and Minority Leader Pelosi (D-CA) to schedule a vote on the House floor and pass the bi-partisan PAST Act!  Also, tell your lawmakers to support the PAST Act as an amendment to the 2018 farm bill, which the House is expected to consider before September 30.

Senate Message:  Tell your senators to join the growing list of original co-sponsors of S. 2957, and add momentum to this important, common-sense measure!  If your senators are already co-sponsors, thank them for their support, and ask them to recruit senate colleagues to join the bipartisan group of PAST Act supporters!

 

  • Agriculture Policy Act of 2018 (H.R. 2)

 

Farm Bill, Take 2!  House Lawmakers Pass Ag Legislation, Boost Animal Health Programs

 

In the wake of a failed vote on the 2018 farm bill on May 18 – largely precipitated by controversy surrounding unrelated immigration policy issues – on June 21, House lawmakers revisited the legislation and finally passed the Agriculture and Nutrition Act of 2018 (H.R. 2) by a vote of 213 to 211.  Since Senate Majority Leader Mitch McConnell (R-KY) announced that he plans to pass companion legislation in the upper chamber before July 4, Congress appears to be poised to finalize a bill prior to expiration of Department of Agriculture (USDA) programs on September 30. During meetings on Capitol Hill the week of June 11, multiple senate offices echoed a commitment to the deadline, reminding members of the horse industry that the chamber is prepared to work into the August recess to complete its legislative business prior to the mid-term elections in the fall.   

      

Fortunately for the horse industry, the $868 billion, five-year package includes provisions addressing some of AHC’s top priorities:  authorization of a new National Animal Disaster Preparedness and Response (NADPR) program; additional support for the National Animal Health Laboratory Network; and creation of the National Animal Health Vaccine Bank that will prioritize risks posed by Foot and Mouth Disease (FMD), among other threats.  

 

A preliminary review of the bill shows that although lawmakers generally met industry’s full funding request – totaling $250 million for the priority issues outlined above – for FY2019 only, the bill reduces those funds during subsequent fiscal years.  For example, the horse industry and its partners requested $70 million each year to fund the NADPR, but received $30 million for 2020 and beyond. Fortunately for the horse industry, the final bill authorizes $150 million for a “priority FMD vaccine bank,” opening the door for funding vaccines that will mitigate other diseases.

 

AHC will continue to advocate for industry priorities as the legislation moves forward.  To view a copy of the legislation, please click here: https://www.congress.gov/115/bills/hr2/BILLS-115hr2rh.pdf.   

 

  • Horseracing Integrity Act of 2018 (H.R. 2651)  
  • Horse Protection Amendments
  • Fiscal Year (FY) 2018 Appropriations

Lawmakers Boost Funds for Equine-Assisted Therapy

 

Buried in the text of the 2,232 page omnibus spending bill enacted in late March, Congress included a provision to increase funds available for equine-assisted therapy by $1 million in FY2018.  Within the Department of Veterans’ Affairs (VA), Veterans’ Benefits Administration provision, the law appropriates “an additional $1 million … to the Adaptive Sports Program to encourage VA to increase … grants for equine therapy for mental health issues.”  A committee statement that accompanies the legislative text goes on to outline the rationale for the increased funds by acknowledging that there are “promising results reported using equine therapy for veterans with posttraumatic stress disorder.” The enhanced equine therapy provision traces its roots to a pro-horse industry amendment that Rep. Barr (R-KY) offered to a FY2018 spending bill in late July 2017, directing Congress to allocate more resources to VA for equine therapy. 

 

While addressing members of the Congressional Horse Caucus during an event unveiling the horse industry’s 2017 economic impact study in early March, Rep. Barr (R-KY) discussed the importance of expanding access to evidence-based equine treatment for veterans who’ve suffered trauma during combat.   According to the economic study, equine-assisted therapy operations support more than 6700 jobs and generate $311.7 million in annual revenues. If you would like more information about the equine therapy provision or other federal appropriations issues, please contact Bryan Brendle at bbrendle@horsecouncil.org.    

 

  • Fiscal Year (FY) 2019 Appropriations  

Tell Congress to Increase Funds for Equine-Assisted Therapy for Veterans!

 

Background:

The U.S. horse industry, which supports nearly one million American jobs and contributes $122 billion to Gross Domestic Product (GDP), urges Congress to continue to increase funds for equine assisted activity therapy (EAAT) to help our nation’s warriors when they return from combat.  In the Fiscal Year (FY) 2018 spending bill, Congress included a provision to increase funds available for EAAT by $1 million in FY2018 within the budget for the Department of Veterans’ Affairs (VA). Specifically, the law appropriates “an additional $1 million … to the Adaptive Sports Program to encourage VA to increase … grants for equine therapy for mental health issues.”  The FY2019 VA spending bill includes an identical provision, directing Congress to increase funds for EAAT by $1 million.

 

The enhanced equine therapy provision traces its roots to pro-horse industry measures championed by Rep. Barr (R-KY), directing Congress to allocate more resources to VA for equine therapy.  In addition to providing invaluable services to U.S. veterans, equine-assisted therapy operations support more than 6,700 jobs and generate $311.7 million in annual revenues, according to a 2017 economic impact study.    

 

Status:

The House Appropriations Committee has approved a FY2019 spending bill to increase funds for EAAT to benefit veterans by $1 million.  The horse industry supports any effort to promote EAAT as the FY2019 spending bill moves forward. On the Senate side, the Appropriations Committee has not yet finalized a FY2019 VA spending bill, as of May 24, 2018.  

 

Take Action:  

House Message:  Tell your representative that you are encouraged by existing measures within H.R. 5786, the FY2019 VA spending bill, to allocate equine therapy resources for warriors.  Also, ask your lawmaker to support any measure that increases EAAT resources for veterans as the spending package moves forward.

 

Senate Message:  Tell your senators that at a minimum, they should support a companion measure in the senate spending bill, or existing provisions in H.R. 5786, which is the House version of the VA spending bill, to increase resources for EAAT.  Equine therapy gives a leg-up to veterans adjusting to civilian life.

  • H-2B Visa Reform

1. Fiscal Year (FY) 2018 Appropriations

 

Congress Delivers H-2B Visa “Cap Relief” Omnibus Bill

Shortly after midnight on Friday, March 23, Congress approved a massive $1.3 trillion omnibus spending bill for Fiscal Year (FY) 2018 to fund federal government operations through September 30.  The 2,232 page bill includes several regulatory measures that will provide flexibility for the horse industry, most notably H-2B visa cap relief for seasonal, guest workers and a temporary enforcement exemption for the transportation of livestock from the Electronic Logging Device (ELD) regulations.  The legislation also includes policy “riders” to defund Department of Agriculture (USDA) and Environmental Protection Agency (EPA) programs that will impact the equine sector and broader agriculture economy.

 

Lawmakers Raise the Ceiling on H-2B Guest-Worker Visas:

Despite opposition from a large number of lawmakers from both political parties, the horse industry and its allies persuaded Congress to effectively raise the Department of Homeland Security (DHS) cap on H-2B temporary worker visas from the current cap of 66,000 to 129,500 visas for FY2018.   A provision tying the number of H-2B visas to a number not to exceed the maximum number of participants from the returning worker program in a previous year has effectively doubled the number of visas the agency may issue in 2018. Because of the fast approaching seasonal labor needs for breeding farms, race tracks, and other seasonal employers, AHC and its partners are urging DHS to implement the flexibility measures as quickly as possible to mitigate paperwork bottlenecks during the remainder of the year.  Other key H-2B provisions include acceptance of private wage surveys to determine “prevailing wage” requirements, and language that defines “seasonal need” as a 10-month period within the context of the program. The coalition has already begun to focus efforts on creating permanent cap relief in future legislative vehicles. This would decouple the H-2B visa issue from the annual appropriations process and create an environment of investment certainty.

  

AHC will deliver updates on more details within the 2018 omnibus spending package that impact the horse industry as they emerge.  To view a copy of the 2232 page bill, please click here: https://docs.house.gov/billsthisweek/20180319/BILLS-115SAHR1625-RCP115-66.pdf.  If you have questions about FY2018 appropriations, please contact Bryan Brendle, Director of Policy and Legislative Affairs, at bbrendle@horsecouncil.org.

 

2. Fiscal Year (FY) 2019 Appropriations

 

DHS Sets High Bar for 15,000 Extra H-2B Visas for Racetracks, Horse Farms

Following several weeks of tense discussions between Congress and the Administration, on June 1 the Department of Homeland Security (DHS) published a final rule in the Federal Register authorizing issuance of 15,000 additional H-2B visas for the remainder of Fiscal Year (FY) 2018.  As reported this spring, Congress authorized the Department of Homeland Security (DHS) to raise its cap on H-2B temporary worker visas from the current cap of 66,000 to 129,500 visas for FY2018 within the context of the omnibus appropriations law passed in late March. DHS states that by issuing 15,000 extra H-2B visas – significantly below the additional 63,500 authorized by the FY2018 omnibus – the agency will prioritize employers who demonstrate that they would suffer “irreparable harm” to their business unless they are able to hire additional seasonal workers during the summer and fall 2018 seasons.  DHS further states that it seeks to avoid possible abuse of the H-2B program by limiting the pool of extra visas to 15,000.

According to the rule, DHS punts the broader temporary worker shortage issue to Congress, urging lawmakers to reform the Immigration and Nationality Act, which establishes the H-2B visa program.  During the course of the extended back-and-forth discussions between the legislative and executive branches this spring, DHS claims that only congressional action can provide long-term certainty with respect to the issuance of more guest worker visas.  According to federal regulators, addressing worker shortages through the annual appropriations process fails to create certainty, undercutting the ability of the business community to plan long-term.

Since moving forward with a limited cap increase, DHS’s United States Citizenship and Immigration Service (USCIS) has outlined some practical considerations for filing an H-2B petition per the new regulation:  

  • An employer “must meet all existing H-2B eligibility requirements ,” which includes receipt of “an approved temporary labor certification (TLC) from the Department of Labor (DOL) that is valid for the entire employment period stated on the petition.”  DHS reminds employers that “the employment start date on the petition must match the employment start date on the TLC, even if that date has passed.”
  • Employers must also “conduct a fresh round of recruitment for U.S. workers if the TLC contains a start date of work before April 15, 2018.”
  • And finally, a business must “submit an attestation on Form ETA 9142-B-CAA-2 (PDF) in which the petitioner affirms, under penalty of perjury, its business will likely suffer irreparable harm if it cannot hire all the requested H-2B workers before the end of the fiscal year.”  The agency provides Form ETA 9142-B-CAA-2 Instructions (PDF) to properly complete the attestation.
  • DHS further states that it “will not accept” an “expired ETA 9142-B-CAA from fiscal year 2017.”  The agency will reject any “petition that does not include the new ETA 9142-B-CAA-2 attestation form for fiscal year 2018.”  

Recognizing the time constraints associated with the application process, DHS states that it will “adjudicate” applications within 15 calendar days for employers opting for “premium processing,” and 30 days for standard applications.  To learn more about how to fast-track an H-2B visa application, please click on the following link: https://www.uscis.gov/forms/how-do-i-use-premium-processing-service.   

As details unfold related to practical considerations associated with the new rule, AHC will continue to inform members about developments and helpful anecdotes for members who are considering moving forward with summer applications.  

As a reminder, AHC will be conducting a panel discussion featuring congressional and industry experts on Tuesday, June 12, in Washington, D.C., as part of the association’s annual meeting.   To view a copy of the final rule, click here: https://www.gpo.gov/fdsys/pkg/FR-2018-05-31/pdf/2018-11732.pdf.  To learn more about guest worker visas and broader immigration policy developments, please contact AHC’s Bryan Brendle at bbrendle@horsecouncil.org or 202-296-4031.  

 

3. Save Our Small and Seasonal Businesses Act of 2017 (S. 792)

 

Guest Worker Visa Reform Gains Momentum, Tell Congress to Finish the Job!  

 

Status update:  

On September 15, the House of Representatives passed a $1.2 trillion funding bill for Fiscal Year (FY) 2018 that will serve as a benchmark for negotiations with the Senate on a final package.  Congress must negotiate a final bill by December 8, when the current continuing resolution (CR) to fund federal programs at FY2017 levels will expire. While the equine industry and its allies have taken an important first step by inserting some H-2B visa reform measures within the text of the current House spending bill (such as wage-survey flexibility), the fight to insert broader visa cap relief in a final spending bill continues.   

 

Legislation Moving in Congress:

Fortunately, Congress can fix the broken guest worker visa program by acting on legislation currently moving through the legislative process.  AHC members can help push the legislative process forward by weighing in with your elected officials in Washington. Contact your federal lawmakers today and urge them to support H2B visa reform through the following vehicles:

  • FY2018 Appropriations – Tell your lawmakers to include H-2B visa cap relief provisions in the final spending bill.  This must-pass legislation is the most active vehicle moving through Congress. Meaningful cap relief includes common-sense exemptions for returning guest workers.    
  • Strengthen Employment and Seasonal Opportunities (SEASON) Act (H.R. 2004) – Tell your representative to cosponsor H.R. 2004, which will provide cap relief by establishing an exemption for well-vetted workers who have already held a visa.  This bill currently has 30 co-sponsors, a number which must grow to gain more political traction. If your representative is already a sponsor, tell him to contact leadership to assure passage.   
  • Save Our Small and Seasonal Businesses Act of 2017 (S. 792) – Call both of your senators and tell them to cosponsor S. 792, legislation that will expedite applications to meet labor demands during peak seasons.  This bipartisan bill currently has 12 sponsors, and will need many more to win floor time in the Senate. If your senators are already sponsors, tell them to contact leadership to make the bill a high priority.   

To contact your lawmaker’s Washington office, please call the Capitol switchboard at 202-225-3121, and ask to be connected to your elected official’s office.  Also, you can tweet your representative and senators by using #SaveH2B.  

 

Emerging Legislation, Next Steps:

House Judiciary Committee Chairman Bob Goodlatte (R-VA) is soon expected to introduce the Agricultural Guest Worker Act of 2017, legislation that would replace the cumbersome H-2A program with more flexible H-2C visas.   The draft text shared with AHC from House Judiciary Committee staff would accomplish the following benefits for large segments of the equine sector:

  • The bill would replace the H-2A program outright, with a new program that creates incentives to hire foreign labor through legal channels;
  • Reduce financial and paperwork burdens on agricultural employers by discarding H-2A mandates such as free housing and transportation;
  • Create marketplace flexibility by establishing “at will” employment between visa holders and agricultural employers;
  • Establish a baseline of 500,000 visas, with a built-in “escalator” that can result in 10% increases in the number of guest visas issued in subsequent years.  According to State Dept. stats, the number of H2A visas has fluctuated between 65,000 and 135,000 during the past five fiscal years. 

The House Judiciary Committee postponed a hearing scheduled for Wednesday, October 4 to formally introduce and review the bill.  AHC will keep you updated on developments related to the Agriculture Guest Worker Act, and other legislation impacting hiring practices for the equine sector.  If you would like a summary of the draft bill, or have perspectives on immigration policy and priorities you would like to share, please contact Bryan Brendle at bbrendle@horsecouncil.org.

4. Strengthen Employment and Seasonal Opportunities (SEASON) Act of 2017 (H.R. 2004)

 

  • H-2A Visa Reform

 

1. Agricultural Guest Worker Act of 2018

 

Status update

On September 15, the House of Representatives passed a $1.2 trillion funding bill for Fiscal Year (FY) 2018 that will serve as a benchmark for negotiations with the Senate on a final package.  Congress must negotiate a final bill by December 8, when the current continuing resolution (CR) to fund federal programs at FY2017 levels will expire.  While the equine industry and its allies have taken an important first step by inserting some H-2B visa reform measures within the text of the current House spending bill (such as wage-survey flexibility), the fight to insert broader visa cap relief in a final spending bill continues.  

 

Legislation Moving in Congress:

Fortunately, Congress can fix the broken guest worker visa program by acting on legislation currently moving through the legislative process.  AHC members can help push the legislative process forward by weighing in with your elected officials in Washington.  Contact your federal lawmakers today and urge them to support H2B visa reform through the following vehicles:

  • FY2018 Appropriations – Tell your lawmakers to include H-2B visa cap relief provisions in the final spending bill. This must-pass legislation is the most active vehicle moving through Congress.  Meaningful cap relief includes common-sense exemptions for returning guest workers.    
  • Strengthen Employment and Seasonal Opportunities (SEASON) Act (H.R. 2004) – Tell your representative to cosponsor H.R. 2004, which will provide cap relief by establishing an exemption for well-vetted workers who have already held a visa. This bill currently has 30 co-sponsors, a number which must grow to gain more political traction.  If your representative is already a sponsor, tell him to contact leadership to assure passage.   
  • Save Our Small and Seasonal Businesses Act of 2017 (S. 792) – Call both of your senators and tell them to cosponsor S. 792, legislation that will expedite applications to meet labor demands during peak seasons. This bipartisan bill currently has 12 sponsors, and will need many more to win floor time in the Senate.  If your senators are already sponsors, tell them to contact leadership to make the bill a high priority.  

To contact your lawmaker’s Washington office, please call the Capitol switchboard at 202-225-3121, and ask to be connected to your elected official’s office.  Also, you can tweet your representative and senators by using #SaveH2B. 

 

Emerging Legislation, Next Steps:

House Judiciary Committee Chairman Bob Goodlatte (R-VA) is soon expected to introduce the Agricultural Guest Worker Act of 2017, legislation that would replace the cumbersome H-2A program with more flexible H-2C visas.   The draft text shared with AHC from House Judiciary Committee staff would accomplish the following benefits for large segments of the equine sector: 

  • The bill would replace the H-2A program outright, with a new program that creates incentives to hire foreign labor through legal channels;
  • Reduce financial and paperwork burdens on agricultural employers by discarding H-2A mandates such as free housing and transportation;
  • Create marketplace flexibility by establishing “at will” employment between visa holders and agricultural employers;
  • Establish a baseline of 500,000 visas, with a built-in “escalator” that can result in 10% increases in the number of guest visas issued in subsequent years.  According to State Dept. stats, the number of H2A visas has fluctuated between 65,000 and 135,000 during the past five fiscal years. 

The House Judiciary Committee postponed a hearing scheduled for Wednesday, October 4 to formally introduce and review the bill.  AHC will keep you updated on developments related to the Agriculture Guest Worker Act, and other legislation impacting hiring practices for the equine sector.  If you would like a summary of the draft bill, or have perspectives on immigration policy and priorities you would like to share, please contact Bryan Brendle at bbrendle@horsecouncil.org

 

  • Recreation Not Red-Tape (RNR) Act of 2017 (H.R. 3400, S. 1633)

 

Congress Must Pass the Recreation Not Red-Tape (RNR) Act, Promote the Nation’s Trails!

 

Background:

The U.S. horse industry, which supports nearly one million American jobs and contributes $122 billion to Gross Domestic Product (GDP), urges Congress to pass the bipartisan Recreation Not Red-Tape (RNR) Act (H.R. 3400/S. 1633).  This important bill will increase access to the nation’s trails for recreational riders and other outdoor enthusiasts. Importantly, the RNR Act leverages taxpayer dollars by allowing the Bureau of Land Management (BLM) to promote the role of volunteers in trail maintenance.  The bill also cuts red tape by allowing the Department of Agriculture (USDA) and BLM to develop a “trail management plan” that assures uniform maintenance standards for trails managed by two different agencies. These efficiencies will improve the “outdoor experience” for all Americans seeking to enjoy the country’s natural resources, including equestrians, while maximizing taxpayer dollars.  Groups including the American Horse Council, the Back Country Horsemen of America, the Outdoor Industry Association, and the Western Governors’ Association all support the RNR Act.

 

Status:

Since House Natural Resources Committee Chairman Rob Bishop (R-UT) introduced the RNR Act in 2017, the chairman conducted a full committee hearing, resulting in passage of the legislation on April 18, 2018.   Because the bill has passed the committee, House leadership has the discretion to schedule a vote on H.R. 3400 before the end of the year. The legislation currently has six bipartisan co-sponsors.

 

On the other side of the Capitol, Sen. Ron Wyden (D-OR) introduced a companion bill, S. 1633, which has won bipartisan co-sponsorships from Sens. Ernst (R-IA), Tester (D-MT) and King (I-ME).  Although leadership has referred the bill to the Senate Energy and Natural Resources Committee, no hearings have yet been scheduled.

 

Take Action:  

House Message:  Tell your lawmaker to co-sponsor the RNR Act, and put some horsepower into a bill that has gained momentum since it passed a key committee vote in April!   Also, ask your representative to urge Speaker Ryan (R-WI) and Minority Leader Pelosi (D-CA) to schedule a vote on the House floor, and pass the bi-partisan RNR Act!  

Senate Message:  Tell your senators to join the list of co-sponsors of S. 1633, and build support for this important measure that will promote recreational riding on the nation’s trails!  If your senators are already co-sponsors, thank them for their support, and ask them to recruit senate colleagues to join the bipartisan group of RNR Act supporters.   

 

 

 

  • Gaming Accountability and Modernization Enforcement (GAME) Act of 2017
  • Federal Legislative Response to Supreme Court decision in Murphy v. National Collegiate Athletic Assoc.  

 

  • Tax Reform

1. Tax Cuts and Jobs Act of 2017 – Equine Sector Highlights

 

Horse Industry Canters Into New Tax Territory

Two major policy developments have dramatically changed the tax landscape for horse owners and millions of other Americans as they make financial plans for their businesses and families in 2018 and beyond:  enactment of the Tax and Jobs Act of 2017, which rewrites major business and individual provisions of the tax code; and passage of the Bipartisan Budget Act of 2018 (aka, “tax extenders”), which extends for one year a host of tax incentives that expired at the end of 2016.  Demands that the Internal Revenue Service (IRS) issue guidance documents to clarify the nearly 1100 pages of new tax law, especially provisions intended to reduce tax burdens on small business, have followed in the wake of the first major rewrite of the tax code since the Reagan Administration.  As a broad spectrum of stakeholders push for IRS guidance, business interests including the American Horse Council continue to campaign for additional tax extenders and technical corrections to the new law. Based on the scope of the changes made to the code, AHC recommends that members consult their tax professionals to begin assessing their tax obligations moving into 2018 and beyond.  Please see the below highlights from the new tax law and tax extenders package.

 

New Tax Laws for Business

New Law Imposes a 21% “Flat Rate” on Corporate Income – The Tax Cuts and Jobs Act reduces the corporate income tax rate from 35% to a flat rate of 21%, effective January 1, 2018.  Tax reform proponents tout the new 21% flat rate as a central feature to a simplified tax system from a business perspective. AHC members filing as “C corporations,” which are generally identified by the suffix, “Inc.,” will see an immediate reduction in their official, or statutory tax rate.  Examples of companies filing as “C corporations” would include racetracks, makers of pharmaceuticals and agricultural equipment, and large breeding operations governed by officers and a board of directors. While many policy experts believe that the new tax code will be easier to navigate from a business perspective, corporate taxpayers’ effective liability will vary to the extent they are able to utilize the new code’s remaining deductions, some of which are outlined below.  Also, given the complexity and limitations emerging from the new provisions related to “pass-through” entities (see below), some AHC members may want to consider re-organizing as C corporations.

 

IRS, Tax Policy Officials, Must Clarify Scope of New Provisions for Small Business – While the new law establishes a 20% deduction for “certain services or trades” organized as “pass-through” entities, an army of stakeholders is requesting immediate guidance from IRS to define statutory terms that identify who benefits from the new deduction, and by how much.  The plain language of the new statute provides that the deduction applies to the first $315,000 of joint income, or $157,500 for individual filers. Furthermore, it will apply to certain “pass-through” entities such as partnerships, sole proprietorships and S corporations. As a general matter, the new provision could benefit small businesses that generally report incomes at or near the threshold level.  While various types of “pass-throughs” constitute the fastest growing segment of AHC members, they also include the majority of U.S. farms.

 

In late January, the American Institute of Certified Public Accountants (AICPA) urged IRS to issue “immediate guidance in 39 areas affected” by the new tax law.  The letter focused on three key issues, most notably a request to provide more information with respect to the 20% deduction for pass-through income, the new statute’s signature provision intended to provide relief for small business, including AHC members.  The CPAs state that “the definition of specified trade or business … and the calculation of the new … deduction for complex business structures” pose a daunting challenge for tax experts seeking to advise clients in 2018 and beyond. The CPAs point out other specific issues raised by the new pass-through deduction, including the calculation of qualified business income (QBI), especially as it relates to “multi-tiered entities,” and how losses from one business might be “netted against gains from another.”  The small business provisions are so opaque that a new coalition is emerging within the business community – including advocates from the “S Corporation Association,” among others – to address implementation issues as they arise in preparation for FY2018 filings. AHC will keep members informed about the availability of guidance and other information intended to clarify the small business provisions of the new law.

 

Unrelated Business Income Tax (UBIT), Fringe Benefits – The new tax law also addresses provisions that will impact AHC members operating in the non-profit sector. Fortunately, the law preserves an exemption for passive income from royalties, from unrelated business taxable income.  The non-profit sector succeeded in convincing senators to drop a provision included in their bill that would have subjected royalty income to UBIT. Unfortunately, the tax code will now subject certain “fringe benefits” to UBIT, including parking, transportation costs such as mass-transit vouchers, and on-site athletic facilities.  

 

Significantly, the new law will also require non-profits to calculate UBIT for each unrelated business activity.  This will mandate multiple calculations by tax professionals advising organizations that run several unrelated business operations.  The new requirement effectively prevents losses from one unrelated activity, such as proceeds from the sale of donated goods, to offset income from other unrelated business activities, such as trade shows or distribution of low-cost gifts related to an organization’s fundraising operation.  Fortunately for non-profits, the IRS has identified the new requirements as a priority for issuing guidance. It’s not clear whether the agency will define “activity” in broad terms, grouping together sales from all publications, for example, as an unrelated business; or in more narrow terms, whereby each event, such as a trade show or discrete sale of an individual publication would require its own computation.   

 

Bonus Depreciation of Equipment – In an important victory for the agriculture sector, the tax law includes 100% bonus depreciation through December 31, 2022, for property placed in service after September 27, 2017.  This is an increase from 50% under the old law. In 2023, bonus depreciation will decline from 100%, to 80% in 2024, then by 20% increments each year through 2026. Farm equipment used in a business operation, breeding stock and race horses will benefit from the new deduction.  

 

Section 199 Deduction – The new law eliminates the 3% deduction for “domestic production activities,” also known as the “manufacturers’ deduction.”  Domestic manufacturers of equine pharmaceuticals, agricultural equipment, and saddlery and tack will no longer be able to use this once popular tax break.  

 

New Tax Laws for Individuals

While the new tax law may cause some AHC members to reconsider their current business classification, there are significant changes on the horizon for horse owners’ individual filings.     Significant increases in the standard deduction, major changes to the estate tax, and treatment of state and local taxes (SALT) will transform the way many horse owners approach their future tax filings.   

 

Standard Deductions – According to tax reform proponents, the new law’s doubling of standard deductions constitutes the central pillar for middle class tax relief.  Beginning in FY2018, the new law will allow a $12,000 deduction for singles and $24,000 for married couples choosing not to itemize their deductions.  

 

Estate, Gift Tax – The final law ultimately preserves the estate tax, but doubles the exemptions from $5.49 million to approximately $11.2 million for individuals.  Raising the statutory threshold will reduce the number of farms and family businesses subject to the tax. It will also spare many family-run businesses from jumping over accounting hurdles to avoid the tax altogether.  The new law retains the gift tax exclusion at $15,000 annually. In 2026, the benefits are scheduled to sunset, reverting to the old law.

 

State and Local Taxes (SALT) – The tax law includes a significantly downsized, itemized deduction for up to $10,000 of state and local property taxes.  This provision – which eliminates the unlimited, longstanding deduction for state, sales and local property taxes – may pose challenges for AHC members who file returns in high-tax states next year.  Although a handful of high tax states such as California and New Jersey are exploring “work around” measures to mitigate the impacts of the new limits on SALT deductions, AHC recommends that individuals consult with their tax professionals before attempting to take advantage of new, conforming vehicles that may be gaining traction at the state level.    

 

Alternative Minimum Tax (AMT) – The new law preserves the AMT for individuals, but raises the exemption amounts from $50,600 to $70,300 for singles, and from $78,750 to $109,400 for married couples filing jointly.  The new provision is expected to eliminate the AMT for a majority of farmers.

 

Capital Gains Tax – No change.  Married taxpayers filing jointly pay no tax up to approximately $100,000.  The threshold exemption amount for single taxpayers is $50,000. The maximum tax rate on capital gains remains 20%.

 

Mortgage Interest – The new law reduces the current $1 million cap on mortgage interest to $750,000, which the Internal Revenue Service (IRS) will apply to homes purchased after January 1, 2018.

 

Congress Passes One-Year “Extenders” Fix for Expired Incentives, Considers Next Steps

On February 9, Congress passed the Bipartisan Budget Act of 2018 to fund the federal government to March 23 and eliminate budget caps for one year, attempting to create flexibility that will allow lawmakers to address the nation’s longer term funding issues, including FY2018 appropriations.  Within the budget bill, lawmakers included a limited tax extenders package that renewed 36 expired provisions for FY2017 only, including the three-year depreciation measure for racehorses.

 

A group of business partners including AHC has agreed to campaign for extenders for FY2018 and beyond.  A likely vehicle includes budget legislation that Congress must address prior to expiration of the current funding bill on March 23.  Other vehicles include an infrastructure bill that would include a provision authorizing the sale of private activity bonds, thereby opening an opportunity for tax extenders.  With respect to stand-alone legislation, a member of the House Ways and Means Committee informed AHC staff that his committee would likely focus on a package that includes 17 energy and conservation-focused credits.  In the event tax extenders legislation gains traction, lawmakers may include “technical corrections” to address the underlying law’s ambiguities.

 

AHC recommends that members consult their accountants or other tax professionals to begin assessing the new tax landscape for 2018 and thereafter.  Meanwhile, AHC staff will continue to share information related to IRS guidance and possible rulemakings that the agency will initiate to implement the new law.  To view a 550-page copy of an explanation of the final conference report for the Tax Cuts and Jobs Act of 2018 (H.R. 1, Public Law 115-97), please click here: https://docs.house.gov/billsthisweek/20171218/Joint%20Explanatory%20Statement.pdf.  For more information related to the new tax laws and next steps, please contact Bryan Brendle, Director of Policy and Legislative Affairs, at bbrendle@horsecouncil.org.

 

2. Tax Cuts and Jobs Act of 2017 – Implementation

 

Tax Law Implementation Issues

House Ways and Means Committee Chairman Kevin Brady (R-TX) repeatedly identified issues related to “pass-through” entities, expensing and international provisions of the new tax law as areas where guidance is most needed.

 

Although the House debated a “tax rescissions” package on June 7, it is not yet certain when Congress would address clarifications to the new law.   In the event that Congress moves “technical corrections” legislation, the bill would be narrow in scope, focusing on blatant typographical errors in the original law.  For example, there are instances where the code stipulates that a provision applies to income thresholds “above” a certain dollar amount, where the tax writers intended to state that the law applies to amounts “below” a certain threshold.  

 

  • Other Tax Issues

 

1. Three-Year Depreciation of Race Horses/Tax Extenders

 

Congress Strikes Budget Deal in Wake of Brief Funding Lapse, Renews 3-Year Depreciation for Race Horses for FY2017

Following a procedural roadblock in the Senate that initiated a five-hour government shutdown early Friday – the briefest lapse on record and second in three weeks – Congress passed the Bipartisan Budget Act of 2018, legislation that will fund government operations through March 23 and remove budgetary obstacles to allow longer-term FY2018 appropriations talks to move forward.  Fortunately for the horse industry, lawmakers approved an important tax incentive to restore three-year depreciation of racehorses for FY2017, allowing race horse owners to take advantage of the incentive within their FY2017 tax submission.  This will allow racehorse owners to capture tax benefits that expired in FY2016.  As you recall, the new tax law includes 100% depreciation for racehorses.  The industry will continue to advocate for the 3-year depreciation provision for 2018 and beyond. 

 

In addition to enacting an important capital cost recovery tool for the horse industry, the budget agreement also removes spending caps until March 2019 and authorizes nearly $300 billion in additional federal spending for the next two years.   Lawmakers hope that addressing the funding caps, effectively ending the “sequester” for the next year, will pave the way for smoother and more long-term budget negotiations through the remainder of 2018.  For more information related to the nation’s rapidly changing tax policies, please contact Bryan Brendle, AHC’s Director of Policy & Legislative Affairs at bbrendle@horsecouncil.org or 202-296-4031.

 

2. IRS “Winnings” Rule

 

 

  • Fiscal Year (FY) 2018 Appropriations

 

Electronic Logging Devices (ELD) and Commercial Driver’s License (CDL) Regulations

 

Background:

The horse industry was blindsided by inaccurate assumptions and claims arising from the impending enforcement of the “ELD Mandate” rule. This rule highlighted the lack of understanding within the equine community related to regulations governing the transportation of horses in intra and inter-state commerce. In late 2017, AHC shared specific issues with the Department of Transportation (DOT) and the Federal Motor Carrier Safety Administration (FMCSA) and submitted requests for clarification of aspects of the rule.  In early 2018, the agency released information tailored to the horse transporting community highlighting the sector’s compliance expectations in the form of equine-specific guidance.

 

Status:

The CDL clarifications issued in early 2018 by the Department of Transportation’s (DOT) Federal Motor Carrier Safety Administration (FMCSA), coupled with the delay of ELD enforcement granted in the 2018 Appropriations Omnibus to September 30, have accomplished a great deal in calming equine enthusiasts and allowing our industry to continue to participate in events all across the country. The House Appropriations Committee stamped approval on a 2019 Department of Transportation funding bill that would give livestock haulers until October 2019 to adopt an electronic logging device, if the bill clears Congress.

 

Additional efforts to address the issues brought into the light include S.2938, the ‘Transporting Livestock Across America Safely (TLAAS) Act,” which will allow livestock haulers to more appropriately note on duty, off road hours of service and also increases the “air mile rule” to 300 miles. Also H.R.5358, the Developing Responsible Individuals for a Vibrant Economy (DRIVE-Safe) Act, which will allow 18 years olds to apply for a CDL. H.R.5948, the Small Carrier Electronic Logging Device Exemption Act of 2018 will exempt carriers with 10 or fewer trucks from the ELD mandate and H.R.5949, the Agricultural Business Electronic Logging Device Exemption Act of 2018 would completely exempt agricultural businesses.

 

Take Action:  

AHC is analyzing legislative proposals and will continue to work with federal policy makers to pursue additional rule changes and flexibility to prevent further confusion.  Federal policy makers must continue to explore flexibility measures to effectively insulate the horse industry from the unintended consequences stemming from regulating America’s commercial shipping industry.

 

  • Fiscal Year (FY) 2019 Appropriations
  • Transporting Livestock Across America Safely Act of 2018 (S. 2938)

 

 

  • Department of Agriculture (USDA) funding – Foreign Agricultural Service (FAS)
  • Department of Agriculture (USDA) funding – Animal Plant and Health Inspection Service (APHIS)
  • Safeguard American Food Exports (SAFE) Act

 

 


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