Missouri Dairy Business Update  
Volume 7, Number 6
June 2007

New Tax Provisions
(Two Enacted and One on the Governor’s Desk)

By Parman Green
Ag Business Specialist
University of Missouri Extension

The recently enacted “U.S. Troop Appropriations bill contains numerous other provisions impacting a wide array of individuals and businesses.  The bill contains two tax-related provisions of particular interest and value for farmers and other small businesses.

The first provision, also the one that will impact the greatest number of businesses, increases the 2007 Section 179 deduction from $112,000 to $125,000.  Additionally, the maximum annual investment in qualifying property is also increased from $450,000 to $500,000.  There is a continuing dollar for dollar phase-out for investments in qualifying assets over the $500,000 amount.  The Section 179 provision is of significant tax planning value to small businesses.  Really large businesses frequently will make annual investments in qualifying property greater than $625,000 thus eliminating the Section 179 deduction available on their tax return.

The second provision is more for show than doe – for most taxpayers.  This provision allows a husband and wife, both materially participating in a sole proprietorship business, to each report one-half of the income and expenses on separate Schedule Fs or Schedule Cs.  Prior to this legislation, a husband and wife operating a sole proprietorship together – had to report the income and expense on either the husband’s or the wife’s business schedule, but not both.  Previously the only way they could split the income was to file a partnership tax return.  So this provision does provide some tax simplification. 

However, couples will want to give considerable thought to the self-employment tax costs and the probably Social Security retirement benefits before electing to split the reporting of business income and expenses. 

The last tax provision I’d like to mention today, is one that is getting substantial debate around the State of Missouri.  This bill, passed by the Missouri House and Senate, is now sitting on the governor’s desk – is the Qualified Beef Tax Credit.  This bill, if signed by the governor, provides a Missouri tax credit to beef producers, if they retain their calves and sell them at a weight greater than 450 pounds. The credit would be equal to 10 cents per pound for weights of qualified animals above 450 pounds.  Qualifying beef animals are defined as an animal born in this state after August 28, 2008 that was raised and backgrounded or finished in this state – that weighs more than 450 pounds, excluding any beef animal more than thirty months of age.

If the total claimed beef tax credits from all qualified producer/applicants exceeds $10 million in any year, the $10 million will be prorated among the qualified producer/applicants.

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