April 2017

April 2017

Tax Treatment of Water District Assessments

Water districts in Iowa assess landowners in the district for the costs the district pays to build and maintain improvements such as drainage ditches, dams, terraces, water ways, and tile lines. Because these improvements benefit the land in the water district and not the public in general, landowners cannot deduct their assessment as a tax on real property. However, I.R.C. §§ 164(c)(1) and 175(f) allow landowners to claim one the following income tax benefits for part or all of water district assessments.

  1. A deduction for the tax year in which he or she paid the assessment
  2. A deduction spread over ten years beginning with the tax year in which he or she paid the assessment, or
  3. An addition to the basis of the taxpayer’s land that is in the water district.

The tax benefit the landowner can claim depends on the water district’s purpose for the assessment and whether the landowner is in the business of farming for purposes of the I.R.C. § 175 soil and water conservation deduction.

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How Did Agriculture Fare During the 2017 Iowa Legislative Session?

The Iowa Legislature’s 2017 session drew to a close on April 22, 2017. For agriculture, the session was largely marked by the state’s revenue shortfall, which left tax cuts important to farmers on the table. It also meant the session adjourned for another year without a long-term water quality funding mechanism.

Nonetheless, the legislators passed a number of bills impacting agriculture or rural landowners this session. Following are highlights.

Classifying Palmer Amaranth as a Primary Noxious Weed and an Invasive Plant

Palmer Amaranth is an invasive plant that presents a grave danger to Iowa’s corn and soybeans. It has begun to invade Iowa from the south and is now found in up to 82 counties. HF 410 places palmer amaranth on the primary noxious weed list. It also classifies the weed as an invasive plant that is prohibited for import, sale, or distribution in Iowa. Violation of the prohibition is punishable by fines.

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Unveiling of Tax Reform "Plan" Generates More Questions Than Answers

As President Trump’s first 100 days were winding down, his Administration unveiled a purported tax reform proposal designed to stimulate “economic growth” and increase “American jobs.” The proposal was unveiled during a press conference April 26. It was accompanied by a one-page list of bullet points. The headline from the media event was that President Trump is seeking to implement a “massive tax cut,” reducing corporate taxes from 35% to 15%. The reality of the announcement is that we really have no more detail about Trump’s proposed tax reform. The April 26 announcement was essentially a rehash of the broad, high level proposals discussed by the President during his campaign.

The announcement was made by Gary Cohn, Director of the National Economic Council, and Steven Mnuchin, the new Treasury Secretary. The plan was billed as “one of the biggest tax cuts in American history.” The short presentation was made in two parts. First, Cohn outlined the rough principles associated with proposed individual income tax reform and Mnuchin walked through the outline of business tax proposals.

Continue reading here.


 

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