Overview
Title
To amend the Internal Revenue Code of 1986 to exclude from gross income capital gains from the sale of certain farmland property which are reinvested in individual retirement plans.
ELI5 AI
This bill lets people who sell certain farms put the money they make into their retirement savings without paying extra taxes, as long as the farmland was used for farming for many years.
Summary AI
S. 930 aims to amend the Internal Revenue Code to allow people who sell certain farmland to reinvest the profits into individual retirement plans without paying income tax on the gains. To qualify, the farmland must have been used for farming by the seller or leased to someone for farming for at least ten years. The bill also sets rules to ensure the farmland continues to be used for farming, or additional taxes could apply. This amendment is intended to encourage the sale of farmland to active farmers and support retirement plan growth.
Published
Keywords AI
Sources
Bill Statistics
Size
Language
Complexity
AnalysisAI
Summary of the Bill
The proposed legislation, identified as S. 930, seeks to amend the Internal Revenue Code of 1986 to allow certain capital gains exclusions. It provides a tax incentive for taxpayers who sell farmland and reinvest the proceeds into individual retirement plans. Specifically, when farmland is sold to a "qualified farmer" and reinvested within 60 days into retirement plans, the capital gains from the sale are excluded from the seller's taxable income. The bill outlines definitions for "qualified farmland property" and "qualified farmer" and introduces tax implications if the farmland is not used for farming or sold again within ten years.
Summary of Significant Issues
Several significant issues arise from the bill's drafting. First, the bill's reliance on external legislative definitions, such as "qualified farmer" from the Food Security Act of 1986, may introduce confusion if those definitions change or are misunderstood by taxpayers. Additionally, terms like "substantially all" are vague and open to interpretation, potentially leading to inconsistent applications.
The irrevocable nature of electing this tax benefit might restrict taxpayers who face evolving financial circumstances. Moreover, complex calculations required for potential additional taxes introduce difficulty for taxpayers' understanding, which could lead to errors. The necessity for the taxpayer to sign a binding agreement without a comprehensive understanding of future tax liabilities may further complicate compliance.
Finally, the bill's frequent references to other sections of tax code without context may hinder a layperson's ability to fully grasp its implications, potentially leading to non-compliance or misuse of tax benefits.
Broad Public Impact
For the general public, especially those engaged in agriculture, this bill could create an incentive to sell farmland. By excluding certain capital gains from taxable income, retiring farmers could benefit financially when planning their futures. However, the need for detailed knowledge of tax codes and external legislation may pose a barrier.
Moreover, the provision allowing additional taxes if the land ceases to be used for farming within ten years could discourage quick sales or changes in land use, potentially stabilizing farming land use patterns.
Impact on Specific Stakeholders
Farm Owners and Retiring Farmers: This group could see positive impacts from capital gains relief, fostering financial growth and retirement security. However, the bill's complexity might necessitate professional tax advice to prevent compliance issues or financial penalties.
New or Expanding Farmers: By potentially making farmland more available, the provisions could benefit those looking to enter or expand their presence in agriculture. Yet, their liability for additional taxes if farmland use changes poses a risk.
Tax Professionals and Advisors: The necessity of expert guidance for understanding and utilizing this tax benefit could increase demand for professional services in the law and accounting sectors.
Overall, while the bill aims to support agricultural community stability and aid retirement planning for farmers, its technical nature and inherent complexities require careful navigation to avoid unintended consequences for those it seeks to benefit.
Issues
The definition of 'qualified farmer' in Section 1 relies on external legislation (subsections (b) and (c) of section 1001 of the Food Security Act of 1986), which may lead to legal ambiguity if those sections change or are not well understood. This ambiguity could affect the eligibility of farmers and create uncertainty for taxpayers.
The term 'substantially all' used in the definition of 'qualified farmland property' in Section 1 is vague and could be open to interpretation. This lack of clarity might lead to inconsistent applications of the tax code and could result in legal disputes.
The irrevocable nature of the election in Section 1 may be financially restrictive and could create issues for taxpayers who face changing circumstances, possibly leading to unforeseen tax liabilities.
The complexity of calculating the additional tax in Section 1(c) makes it difficult for taxpayers to understand their potential liability, which could lead to taxpayer errors or financial hardship.
The provision in Section 1 for an extended statute of limitations for assessing tax under subsection (c) could potentially leave taxpayers in a prolonged period of uncertainty, which is financially and legally significant.
The section references several other legal provisions (e.g., sections 2032A, 1031, 6621), which could make the section difficult to interpret without prior detailed knowledge of these provisions, potentially leading to non-compliance or errors in tax filings.
The requirement for the qualified farmer to sign an agreement consenting to subsection (c) implications in Section 1(d)(2) may not be clear to all parties involved, especially if they are not fully aware of the financial consequences outlined, which could lead to legal disputes.
The provision allows a rule for no double benefit regarding section 219 deductions in Section 139J, introduced without clear explanation, which might be confusing for individuals unfamiliar with retirement contribution tax intricacies, potentially resulting in misuse or misunderstanding of tax benefits.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Exclusion of certain capital gains from the sale of certain farmland property Read Opens in new tab
Summary AI
The proposed legislation introduces a tax benefit for farmers, allowing them to exclude capital gains from the sale of farmland to another farmer from their taxable income, as long as the sale proceeds are contributed to retirement plans within 60 days. The bill also sets conditions for establishing a "qualified farmer" and includes rules for tax implications if the land is later sold or used for non-farming purposes within 10 years.
139J. Gain from the sale or exchange of qualified farmland property to qualified farmers Read Opens in new tab
Summary AI
The section describes a tax provision that allows a taxpayer to exclude some gains from selling qualified farmland to a qualified farmer from their gross income, as long as they contribute the sale amount to an individual retirement plan within 60 days. It includes conditions for the land to qualify, obligations for both the seller and buyer, and potential tax liabilities if the farmland is not used as intended within ten years.