It seems extremely unfair to allow the owner of a large apartment complex to not pay self employment taxes on the cash rental income but the farmland owner who might only rent a few acres has to pay 15.3 percent self employment taxes on their cash rental income. Legislation has been introduced in both the Senate and House to remedy this matter. H.R.1261 and S.529 would reinstate Congressional intent by restoring the election by farmland owners. Communicating for Agriculture is working toward the enactment of this legislation, and we encourage you to include it in a tax package this year. On my farm in South Dakota, as well as farms and ranches all over America, it is common for there to be wide swings in income from year to year.
Agriculture is inherently a volatile business.
The weather plays such a critical role in production, and most farmers are at the mercy of mother nature. Weather problems, coupled with uncertain prices for most farm commodities, makes for widely varied income levels that can push farmers to a high income tax bracket one year yet leave them with no income or even a loss the next year when mother nature and the markets don't cooperate. In the 1970s and early 80s income averaging was available to help level the income taxes paid by farmers from year to year. Last year's Budget Bill brought back income averaging on a limited basis for farmers and ranchers and only until the year 2000. This useful tool needs to be extended past the next three years.