What does tax reform mean for the deductibility of soil and water conservation expenses?
Excerpt
SOIL erosion is a persistent problem on farmland in the United States. Some land erodes at rates that may reduce long-term soil productivity and/or generate important off-site damages. A variety of public programs and policies attempt to induce landowners to give their land more favorable conservation treatment. Perhaps the most subtle and least understood of these is a federal income tax provision dealing with soil and water conservation investments. This provision, Internal Revenue Code Section 175, allows certain conservation investments to be treated as an ordinary, deductible business expense.
A recent Reagan Administration proposal, “The President's Tax Proposals to the Congress for Fairness, Growth, and Simplicity,” would repeal Section 175 and, as a consequence, treat conservation investments as a nondepreciable capital item. H.R. 3838, which passed the House of Representatives in December 1985, puts limitations on the use of the section (7), as does the proposal by Senate Finance Committee Chairman Robert Packwood (8).
Repeal or modification of Section 175 is but one element of a comprehensive initiative to reform the federal income tax. The tax reform package also includes reductions in individual and corporate tax rates, modifications in investment tax credit …
Footnotes
William D. Anderson is section leader in the Land Branch, Natural Resource Economics Division, Economic Research Service, U.S. Department of Agriculture, Washington, D.C. 20250. Nelson L. Bills is an associate professor in the Department of Agricultural Economics, Cornell University, Ithaca, New York 14853.
- Copyright 1986 by the Soil and Water Conservation Society
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