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Minnesota Legislature

Legislative News and Views - Rep. Greg Davids (R)

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Thursday, October 03, 2019

ST. PAUL – A bad tax law approved by House Democrats and signed into law by Governor Walz last session is now costing farmers thousands of dollars. 

Specifically, farmers and other business owners who traded equipment are having that trade value counted as income and can likely expect a bill from the Department of Revenue, and it won’t be cheap. 

“We are hearing from farmers who are in shock by this news,” said State Representative Paul Anderson (R-Starbuck), the lead Republican on the House Greater Minnesota Jobs and Economic Development Finance Division. “I warned people during the last session that the lack of conformity was going to be a real problem and now, unfortunately, those concerns are coming back to bite farmers.” 

“For some reason we expect farmers to have thousands of dollars just sitting around when the tax man unexpectedly comes calling,” said State Representative Greg Davids (R-Preston), Republican Lead of the Minnesota House Taxes Committee. “We have had House floor debates discussing high stress levels being faced by farmers and the growing number of suicide rates among them, and now they are facing a new and unnecessary financial burden.” 

The tax problems center on the failure to fully conform to Section 179 – accelerated depreciation – in the federal tax code. Under last session’s law, the Department of Revenue is directed to review Section 179 claims, adjust for new expensing limits, and review any gains or losses from the equipment they traded in. 

For a farmer or business owner who traded in farm equipment or other machinery in 2018, and realized a financial gain on that equipment, the Department of Revenue will send a letter to them stating income taxes will now be owed on that gain immediately, while the higher expensing limits will only benefit them over time. 

Davids and Anderson say they are working on legislation to alleviate this financial hit on farmers. The bill will fully fund conformity to Section 179. It will also cancel any penalties and interest leveled by the revenue department on unpaid debts due to the Section 179 debacle. 

“Our proposal should be met with urgency when the 2020 session begins,” Anderson said. “Farmers deserve better than this and we need to make it right.”