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Our Views

Our Views Columns

Date: 7/10/2014

Title: NCBA Urges Congress to Consider Ramifications of Changes to Cash Accounting

Today, the House Small Business Committee Subcommittee on Economic Growth, Tax and Capital Access held a hearing on cash accounting. NCBA president Bob McCan, Victoria, Texas cattleman submitted a letter to the committee urging the Subcommittee to ensure adherence to a simple tax code that encourages economic growth and maintains options for cattlemen and women to remain competitive.

The tax code is one of the few areas where ranching families and beef operations can seek relief when disasters strike. Unfortunately small businesses continue to the face the uncertainty of an ever-changing tax code, absent meaningful tax reform. For our producers, this changing tax code is as variable as the weather and market factors we face daily. Under one proposed change to the tax code, agricultural business with more than $10 million in gross receipts would be required to shift from the cash accounting method to an accrual method of accounting. Given the fluctuating income inherent in agriculture resulting from cropping practices, weather and markets; farmers and ranchers need all the tools available to them to manage this risk and flux while complying with their tax liabilities under the law.

Requiring agricultural businesses to shift to accrual accounting could dramatically reduce working capital and equity available for investment and increase complexity within the code while decreasing flexibility for America’s cattle producers. Moreover, cash accounting is a pre-requisite for ranchers to take advantage of disaster relief found in the tax code, disaster provisions like postponing taxable gain from the sale of livestock in a drought year, or avoiding gain for livestock sold in a drought if that stock is replaced within a specified time period. These options are critical to our ability to weather loss and rebuild herds, without facing tax liability for gains and losses that are beyond our control.

NCBA supports the efforts of Congress to simplify the tax code in a way that stimulates the economy. Cash accounting is a tool for America’s cattle producers and we urge Congress to consider the ramifications of shifting more farming and ranching families to accounting methods that may in effect penalize their operations and stifle rural economic growth.