The Inflation Reduction Act is a political hot button right now as Americans face record inflation rates and sky-high prices on everyday essentials. However, in this post, we want to focus on how the Inflation Reduction Act helps rural farm families.
We get it! Times are tough on everyone. With so many of our clients running ag operations, we see firsthand how much farmers are struggling. But it looks like some of the money coming through the Inflation Reduction Act may help.
What Is The Inflation Reduction Act
The Inflation Reduction Act (which we wrote about in more detail in a recent post on “Does the Inflation Reduction Act Raise Taxes?”) was passed by Congress and signed into law in August of 2022. It is a bill that will deliver a lot of money to several government programs and infrastructure projects over the next 10 years with the stated goal of improving our nation’s economy. Whether or not that is actually the case continues to be a hotly debated subject.
How Will The Inflation Reduction Act Affect Agriculture?
This bill looks to be a big win for farmers, however. For instance, the agriculture community was effective in the campaign to prevent the inclusion of tax provisions that would have been harmful to agriculture – such as the repeal of stepped-up basis, a higher tax rate on capital gains, and the repeal of the enhanced estate tax threshold.
This alone is a huge relief for family farms that hope to pass their legacies on to the next generation. If the step-up basis had been repealed, we could have seen many families struggling to raise cash to pay tax bills of as much as 50% of the value of the family farm.
The entire nation has felt the effect of rising prices and the decreasing value of every dollar. And the current economic situation in our country has been especially difficult for those involved in agricultural operations.
The Economic Research Service of the U.S. Department of Agriculture’s recent Food Price Outlook Summary Findings report for 2022 & 2023 shows a continued increase in most food categories based on the Consumer Price Index (CPI). This means that prices at the grocery store won’t be coming down soon.
By also looking at the Producer Price Index (PPI) – a measure of the average prices paid to food producers – we can often forecast what the CPI will look like since fluctuations in food prices will move along the multiple steps of our food supply chain along with the meat and produce farmers are providing.
If you look closely at the report above, you can see price decreases in virtually every area of production (with the exception of eggs that are in limited supply due to a recent widespread avian flu outbreak).
This means that farmers are making less for their products than in the past while at the same time trying to operate their farms under increased costs for fuel, feed, and supplies. With this kind of strain, hard-working farm families need all the help they can get!
Inflation Reduction Act Helps Rural Farms
Hopefully, some relief for rural farms will come through the Inflation Reduction Act. The final bill passed with approximately $770 billion in total funding.
This includes nearly $40 Billion for agriculture, including forest and rural development. Various programs supporting the ag industry will be charged with administering this funding. This includes working lands programs such as the:
- Environmental Quality Incentives Program (EQIP)
- Regional Conservation Partnership Program (RCPP)
- Conservation Stewardship Program (CSP) and
- Agricultural Conservation Easement Program (ACEP).
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Conservation Funding for Working Lands
The IRA provides for a total of nearly $20 billion for conservation efforts related to agriculture and will also add about $18 billion in additional funding for existing farm bill working lands conservation programs through fiscal year 2026. This is the biggest outlay of investment in conservation since the 1930s.
- EQIP was appropriated $8.45 billion.
- RCPP was appropriated $4.95 billion.
- CSP was appropriated $3.25 billion.
- ACEP was appropriated $1.40 billion.
Over the next four years, the IRA invests 9.35 times the amount of funding previously included in the 2018 farm bill for the four programs.
The IRA provided a total of $5 billion for forest management, planning, and restoration activities for federal and nonfederal forests.
- $2.15 billion is set aside for management activities of the National Forest System: hazardous fuel reduction or vegetation management projects on National Forest System lands, inventorying and protecting old-growth and mature forests on National Forest System lands, and improving environmental reviews.
- $2.75 billion is for grants and financial assistance to be used for nonfederal forest management activities.
Biodiesel Income Tax Credit Extended
The current tax credit of a $1-per-gallon biodiesel tax credit for producers or blenders of pure biodiesel and a $1-per-gallon renewable diesel tax credit for producers or blenders of biomass-based diesel or diesel/renewable diesel blends is extended through 2024.
The IRA is one of our nation’s largest efforts at funding climate change initiatives. A significant amount of money is going to be spent on renewable and clean energy projects. Farmers will soon see even more incentives to run their operations using green energy sources.
The IRA provides a total of $3 billion for renewable energy projects in rural areas. The USDA will have the option to use up to $1 billion for loans for renewable electricity projects. $1.7 billion is also available for eligible projects under the popular farm bill program known as the Rural Energy for America Program (REAP). Another $304 million is for grants and loans for underutilized renewable energy technologies, along with technical assistance for previously mentioned REAP projects. Additional spending of $500 million is for grants intended to increase the sale and use of agricultural commodity-based fuels through infrastructure improvements for blending, storing, supplying, or distributing biofuels.
Get The Most From The Inflation Reduction Act
The U.S. government is preparing to spend $40 billion on programs and initiatives ranging from farm bill working lands conservation and technical assistance to renewable energy and biofuels. There are also funds provided for rural development and drought mitigation.
Helping farmers and ag operation owners navigate difficult economies and complex financial situations is something we’ve been doing for over 40 years now. With offices all across West Tennessee (in Jackson, Dyersburg, Milan, Martin, Paris, Brownsville, and Ford’s soon-coming Blue Oval City), we understand what farm families are facing. Schedule a call to team up with one of our tax and business pros today to make sure you get the most from the opportunities coming your way in the Inflation Reduction Act!