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December 20, 2017

The Senate hustled early Wednesday morning, December 20 to pass the Tax Cuts and Jobs Act of 2017 by a vote of 51-48.  Although the House passed the bill Tuesday afternoon, congressional budget rules required the Senate to return the bill to the House for a revote on Wednesday to address technical changes.  While details related to the 1100-page conference report on the final legislation continue to emerge, please see the below highlights that will have the most direct impact on the horse industry:   

Business Provisions

  • Corporate Taxes: The new tax law reduces the corporate income tax rate from 35% to 21% and takes effect January 1.  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.  AHC members 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, among others.  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.  
  • Small Business, “Pass-Through” Deduction: The Tax Cut and Jobs Act establishes a 20% deduction for the first $315,000 of joint income, or $157,500 for individual filers, from “pass-through” entities such as partnerships, sole proprietorships and S corporations.  This new provision could benefit small businesses that generally report incomes at or near the new 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.  According to Department of Agriculture data, 85% of domestic agriculture production comes from “pass through” entities.
  • Bonus Depreciation of Equipment:  The House and Senate conference report includes 100% bonus depreciation – an increase from the current 50% rate - through December 31, 2022, for property placed in service after September 27, 2017.  Beginning in 2023, bonus depreciation is reduced from 100%, to 80% in 2024, then falls by 20% increments each year through 2026.  Farm equipment used in a business operation, breeding stock and according to a preliminary reviews of the final language, race horses will benefit from the robust deduction.         
  • Losses at the Racetracks: The final law preserves the deduction of losses “sustained … on wagering transactions to the extent of the gains” realized “during the taxable year.”  However, the law clarifies that the “limitation on losses from wagering transactions applies not only to the actual costs of the wages, but to other expenses incurred by the individual in connection with the conduct of that individual’s gambling activity.”  For example, the law subjects the deduction for travel expenses to and from a racetrack to the cap established by the amount of the gains.  Like many of the deductions in the bill, the provision sunsets after 2025.       
  • Alternative Minimum Tax (AMT) – The new law repeals the corporate AMT, ending the need to calculate tax liability twice for a single filing.

 

Individual Provisions

  • Estate Tax:  The final law ultimately preserves the estate tax, but doubles the current exemptions of $5.49 million for individuals and $10.98 million for married couples.  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.    
  • 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. 
  • 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. 
  • Charitable Contributions:  In cases of individual cash contributions, the final law increases the percentage-limit deduction from the current rate of 50% of the donor’s adjusted gross income (AGI) to 60% of AGI.   

Now the Real Work Begins

Tax policy experts predict that the fast moving tax law will result in a lengthy bill in 2018 to address technical corrections to clarify ambiguous provisions.  The Internal Revenue Service (IRS) will also begin a years-long process of promulgating regulations to implement the new law.  AHC recommends that members consult their accountants or other tax professionals to begin assessing the new tax landscape for 2018 and beyond. To view a 550-page copy of an explanation of the final conference report of the bill, please click here:  https://docs.house.gov/billsthisweek/20171218/Joint%20Explanatory%20Statement.pdf. For more information related to the new tax law and next steps, including technical corrections and implementation, please contact Bryan Brendle, Director of Policy and Legislative Affairs, at bbrendle@horsecouncil.org

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December 11, 2017

The American Horse Council (AHC) is pleased to announce that they are accepting management proposals for the popular Time to Ride program. Time to Ride is an initiative of the AHC’s Marketing Alliance, formed in 2012 to connect people with horses and encourage horse-interested consumers to enjoy the benefits of horse activities. The AHC Marketing Alliance is made up 22 industry organizations and associations, all from various segments of the vast equine industry.

The Time to Ride program engages new and returning horse enthusiasts to increase participation in the industry primarily through its successful Challenge. The annual Time to Ride

Challenge awards $100,000 cash and prizes to stables, clubs and professionals who introduce

newcomers to horses through beginner-friendly outreach events. Additionally, the Pledge to Take a Friend Riding sweepstakes and Collegiate Challenge give equestrians of all backgrounds the chance to get involved by sharing the joy of horses with new participants.

“As we celebrate 5-years of the program, we can take excitement from the fact we have exposed over 120,000 people to horses,” said AHC President Julie Broadway. “As we embark on the new phase of the program we are seeking fresh ideas that will help further the ultimate goal of getting more people active with horses, as well as creating a demand for horse ownership and horse enthusiasts.”

To request a copy of the RFP or learn more contact AHC President Julie Broadway via email at jbroadway@horsecouncil.org

 

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December 4, 2017

Senators scrambled Saturday, December 2, to muster the necessary 51 votes to pass its version of the Tax Cuts and Jobs Act of 2017, effectively laying down a marker to jump start negotiations with the House of Representatives on a final package.  While details related to the senate bill continue to emerge, please see the below highlights of key provisions that will impact the equine industry.  Many of these provisions diverge from the House-passed version and could be subject to changes during the House and Senate conference, which congressional leadership will organize this week: 

Business Provisions

  • Corporate Tax Rate: The senate bill delays reduction of the corporate tax rate from 35% to 20% until 2019. By contrast, H.R. 1 provides an immediate corporate tax cut, effective in 2018.  Lawmakers will have to bridge this gap during the conference committee. 
  • Small Business:  The senate vehicle establishes a 23% deduction for small business income of “pass-thru entities,” or small companies which opt to pay taxes under the individual rate.  Senators included this deduction to address concerns from lawmakers who claimed that previous versions of the bill did not create sufficient tax relief for small business.     
  • Expensing: While the House bill and a previous version of the senate vehicle provided 100% bonus depreciation, the final senate bill appears to modify treatment of bonus depreciation to “phase down … the percentage from 100% by 20% per calendar year.”  AHC largely supports the House treatment of expensing, which according to Hill sources, includes a broad legislative definition to allow full expensing of horses.     
  • Alternative Minimum Tax (AMT) – According to Hill sources, the senate vehicle preserves a 20% corporate, alternative minimum tax.  The House bill repeals the unpopular provision altogether, laying the groundwork for a major discussion point during negotiations for a final package. 
  • Name and Logo Royalties:  The senate bill strikes a provision from a previous version of the bill that treated “name and logo royalties” as unrelated business taxable income.
  • Wagering Losses:  A previous version of the senate bill states that it amends the existing tax code provision that addresses treatment of gambling winnings, without specifying how.   The current senate vehicle does not appear to clarify this provision, which AHC will continue to monitor. 

Individual Provisions

  • Estate Tax: The Senate preserves it commitment to double the estate tax exemption, currently valued at $5.49 million for individuals, without full repeal.  By contrast, H.R. 1 eliminates the estate tax within six years of enactment.                       
  • State and Local Taxes (SALT) – Senators agreed to an itemized deduction for up to $10,000 in state and local property taxes, which resembles a compromise included in the House bill. 
  • Mortgage Interest: The senate version will cap the deduction for mortgage interest indebtedness at $1 million.  H.R. 1, however, establishes a $500,000 cap on interest from new home purchases, a provision drawing criticism from the homebuilders. 
  • Charitable Contributions:  In cases of individual cash contributions, the senate bill increases the percentage-limit deduction from the current rate of 50% to 60%. 

Heading to the Finish Line

When congressional leaders appoint conferees, who will be recruited from the Senate Finance Committee and the House Ways and Means Committee, serious negotiations will begin, with a goal of presenting a final package to the president for his signature before Christmas.  To view a copy of a four-page table outlining highlights related to the various revenue impacts of the bill’s key provisions, please click here: https://www.horsecouncil.org/wp-content/uploads/2017/12/Table-Revenue-Impacts.pdf.

For more information related to tax reform issues, please contact Bryan Brendle, Director of Legislative Affairs, at bbrendle@horsecouncil.org

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December 1, 2017

USDA’s National Agricultural Statistics Service has started mailing the 2017 Census of Agriculture to America’s horse farms. Mailing in phases, all census questionnaires should be received by late December. If you do not receive a questionnaire this year, or have not received one ever, but wish to be included, you can sign up at https://www.agcounts.usda.gov/legacy0/cgi-bin/counts. Producers can respond online at www.agcensus.usda.gov or by mail. The American Horse Council encourages all qualified operations to participate and be counted. The deadline to respond is February 5, 2018.

Conducted once every five years, the census aims to get a complete and accurate picture of American agriculture. The resulting data are used by trade associations, researchers, policymakers, extension educators, agribusinesses, and many others. The data can play a vital role in community planning, farm assistance programs, technology development, farm advocacy, agribusiness setup, rural development, and more. This information may provide a critical snapshot of the equine industry that, when coupled with the AHC Economic Impact Study, will provided the evidence needed to affect important change here in Washington D.C.

For more information, visit www.agcensus.usda.gov or call (800) 727-9540.

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November 30, 2017

Over the past months the American Horse Council (AHC) has reached out to the equine community to determine the potential impact of the upcoming Electronic Logging Device mandate. Based on the information received, the AHC, in collaboration with the rest of the animal agriculture community, has requested that the Department of Transportation (DOT) grant a one-year enforcement delay followed by a waiver and limited exemptions from compliance with the December 18, 2017 implementation date for the Final Rule on Electronic Logging Devices (ELDs) and Hours of Service (HOS). Additionally, we requested that the DOT address the significant problems with the mandate that will occur if the compliance deadline is not extended. The welfare, safety, and health of the animals in transit, together with the safety of other drivers on the road, are top priorities for the equine industry and its enthusiasts.

The livestock sector has consistently been one of the safest of the commercial hauling sectors. The Large Truck Crash Causation Study, conducted by the Federal Motor Carrier Safety Administration (FMCSA) and the National Highway Traffic Safety Institute, showed that of 1,123 accidents involving trucks hauling cargo, only five involved the transportation of livestock. Similarly, the report titled Trucks Involved in Fatal Accidents Fact-book 2005, conducted by the Transportation Research Institute, shows that livestock transporters accounted for just 0.7 percent of fatal accidents. The ELD mandate itself, which is the subject of this petition, does nothing to improve that record of safety over paper logs.

While this figure is not irrelevant, and any safety improvements should be considered, the trajectory of this rule’s implementation has left much to be desired.  Despite its being issued nearly two years ago, awareness of this rule among livestock haulers and the equine industry is nearly non-existent. For instance, FMCSA’s recent change to include livestock in its interpretation of the 150-air mile exemption for agricultural commodities, a change that the industry strongly supports and appreciates, has raised many additional questions from livestock haulers who are unsure about the mechanics of the new exemption and even if it means they are exempt from the ELD mandate altogether. More time is needed to reach out to the horse industry, and ensure that industry outreach can address ELD compliance and ELD impact.

Many horse operations and competitions are in rural areas, routinely requiring long, and repeated, trips. These animals, when loaded onto trailers, are vulnerable to changes in temperature, humidity, and precipitation. Horse haulers are accustomed to managing these changing conditions through planning, log books and notations in those books. These planning techniques have adapted and evolved over decades as technology has improved. Unfortunately, the quick transition to ELDs does not allow for the natural trial and error process to adequately meet the needs of the horse industry. 

The equine industry and the millions of horse fans who attend equine events rely on safe and effective methods of transportation from every corner of the United States. Domestic transit of our competition and breeding animals is critical to the business continuity of our industry and largely relies on the use of large commercial haulers. These individuals have expressed their concern with the implications of this rule in regards to the negative impacts to standards in welfare, biosecurity and cost.

We are disappointed that the FMCSA did not feel the need to reach out to the larger livestock industry stakeholders prior to finalizing this rule, but specifically for not reaching out to the equine industry considering the constant and repeated travel inherent to the competitive, coast to coast nature of our industry. While horse haulers are able to provide more accommodating shipping conditions compared to other livestock sectors, the issues we have with immediate implementation of the rule mirror those of the larger animal agriculture community.       

The American Horse Council will continue to petition for an enforcement delay, to be followed by a waiver and/or limited exemptions from compliance with the final rule on ELDs, and specifically the expected Hours of Service (HOS). Additionally we will continue to take advantage of any opportunity to collaborate with FMCSA and the DOT during this delay to better meet the needs of the animal agriculture community on future regulatory efforts. 

Please contact Cliff Williamson at the American Horse Council with questions or comments at 202-296-4031 or at cwilliamson@horsecouncil.org .

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November 10, 2017

On the heels of the House of Representatives’ release of the Tax Cuts and Jobs Act (H.R. 1) last week, the Senate Finance Committee began to roll out details related to its tax reform bill on Thursday afternoon, not releasing text and an official revenue “score” until Thursday night.  There are some major differences between the two bills that both chambers must reconcile prior to presenting legislation to the president’s desk for his signature.   Notably for the equine and broader agriculture sectors, the senate plan would double the exemption for the estate tax without eliminating it altogether, as provided in H.R. 1. The Senate Finance Committee will begin to mark-up the legislation on Monday, November 13. Please see the below highlights, outlining some key provisions that will impact the equine industry: 

Business Provisions

  • Corporate Tax Rate: The senate bill delays reduction of the corporate tax rate from 35 percent to 20 percent until 2019. By contrast, H.R. 1 provides an immediate corporate tax cut, effective in 2018.  
  • Expensing: The senate bill provides “100% bonus depreciation within five years,” which is similar to a provision in H.R. 1.     
  • Business Interest: The plan states that small businesses will be able to deduct interest on loans intended to finance the growth of operations and inventory. 
  • Alternative Minimum Tax (AMT) – Like H.R. 1, the senate bill eliminates the unpopular AMT, which doubles the amount of time taxpayers must spend to calculate their business or individual tax liability within any given year.

Individual Provisions

  • Estate Tax: The senate bill doubles the amount of the estate tax exemption, currently valued at $5.49 million for individuals, but falls short of an outright repeal.  By contrast, H.R. 1 eliminates the estate tax within six years of enactment.  AHC partners are already reaching out to senators to offer a repeal amendment during the mark up scheduled to begin early next week.                    
  • State and Local Taxes (SALT) – The senate bill includes a full repeal of the SALT deduction for individuals.  The House bill, however, includes a compromise provision allowing limited deductions for state and local property taxes.    
  • Mortgage Interest: Senators state that the provision will cap the deduction for mortgage interest indebtedness at $1 million.  H.R. 1, however, establishes a $500,000 cap on interest from new home purchases, a provision drawing criticism from the homebuilders. 
  • Charitable Contributions:  In cases of individual cash contributions, the senate bill increases the percentage-limit deduction from the current rate of 50% to 60%. 

Next Steps

Because of the major differences between the House and Senate tax bills, the two chambers will likely convene a conference committee to negotiate a final package to send to the president.  The House Ways and Means Committee concluded its four day mark-up of H.R. 1 on Thursday afternoon, and will send the bill to the floor for a vote next week.  This puts the House on track to pass its tax bill prior to the Thanksgiving Holiday.   The Senate, however, will likely vote on its final package after Thanksgiving, according to a statement from Senate Majority Whip John Cornyn (R-TX).     

To keep track of ongoing tax policy developments, AHC is conducting a webinar  featuring congressional and industry presenters on Monday, November 13 at 3:00 PM ET.  To view a copy of an outline of the bill’s key provisions and revenue impacts, please click here: https://www.finance.senate.gov/imo/media/doc/11.9.17%20JCT.pdf. To see a two-page copy of the plan’s “policy highlights,” please click here:  https://www.finance.senate.gov/imo/media/doc/11.9.17%20Policy%20Highlights.pdf 

To view a 253-page description of the bill’s provisions, please click here:

https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman's%20Mark.pdf 

For more information, please contact Bryan Brendle, Director of Legislative Affairs, at bbrendle@horsecouncil.org.  

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December 20, 2017

The Senate hustled early Wednesday morning, December 20 to pass the Tax Cuts and Jobs Act of 2017 by a vote of 51-48.  Although the House passed the bill Tuesday afternoon, congressional budget rules required the Senate to return the bill to the House for a revote on Wednesday to address technical changes.  While details related to the 1100-page conference report on the final legislation continue to emerge, please see the below highlights that will have the most direct impact on the horse industry:   

Business Provisions

  • Corporate Taxes: The new tax law reduces the corporate income tax rate from 35% to 21% and takes effect January 1.  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.  AHC members 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, among others.  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.  
  • Small Business, “Pass-Through” Deduction: The Tax Cut and Jobs Act establishes a 20% deduction for the first $315,000 of joint income, or $157,500 for individual filers, from “pass-through” entities such as partnerships, sole proprietorships and S corporations.  This new provision could benefit small businesses that generally report incomes at or near the new 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.  According to Department of Agriculture data, 85% of domestic agriculture production comes from “pass through” entities.
  • Bonus Depreciation of Equipment:  The House and Senate conference report includes 100% bonus depreciation – an increase from the current 50% rate - through December 31, 2022, for property placed in service after September 27, 2017.  Beginning in 2023, bonus depreciation is reduced from 100%, to 80% in 2024, then falls by 20% increments each year through 2026.  Farm equipment used in a business operation, breeding stock and according to a preliminary reviews of the final language, race horses will benefit from the robust deduction.         
  • Losses at the Racetracks: The final law preserves the deduction of losses “sustained … on wagering transactions to the extent of the gains” realized “during the taxable year.”  However, the law clarifies that the “limitation on losses from wagering transactions applies not only to the actual costs of the wages, but to other expenses incurred by the individual in connection with the conduct of that individual’s gambling activity.”  For example, the law subjects the deduction for travel expenses to and from a racetrack to the cap established by the amount of the gains.  Like many of the deductions in the bill, the provision sunsets after 2025.       
  • Alternative Minimum Tax (AMT) – The new law repeals the corporate AMT, ending the need to calculate tax liability twice for a single filing.

 

Individual Provisions

  • Estate Tax:  The final law ultimately preserves the estate tax, but doubles the current exemptions of $5.49 million for individuals and $10.98 million for married couples.  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.    
  • 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. 
  • 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. 
  • Charitable Contributions:  In cases of individual cash contributions, the final law increases the percentage-limit deduction from the current rate of 50% of the donor’s adjusted gross income (AGI) to 60% of AGI.   

Now the Real Work Begins

Tax policy experts predict that the fast moving tax law will result in a lengthy bill in 2018 to address technical corrections to clarify ambiguous provisions.  The Internal Revenue Service (IRS) will also begin a years-long process of promulgating regulations to implement the new law.  AHC recommends that members consult their accountants or other tax professionals to begin assessing the new tax landscape for 2018 and beyond. To view a 550-page copy of an explanation of the final conference report of the bill, please click here:  https://docs.house.gov/billsthisweek/20171218/Joint%20Explanatory%20Statement.pdf. For more information related to the new tax law and next steps, including technical corrections and implementation, please contact Bryan Brendle, Director of Policy and Legislative Affairs, at bbrendle@horsecouncil.org

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