Comment: ‘Bonus depreciation’ rules should extend to trees, vines
By Jeff Denham
Under current law, newly planted orchards or vineyards do not qualify for bonus depreciation tax provisions that apply to other long-term business investments. A bill in Congress would change that.
Americans have a vested interest in supporting risk-taking entrepreneurs, inventors and small business owners who invest an incredible amount of their own seed money to start and grow their businesses. This is the quintessential story of the American Dream that has catapulted America to the heights of economic success as a nation for decades.
Beginning farmers and ranchers are often a forgotten success story of the American Dream. They spend tremendous energy, time and money in starting their farms, hoping that harvest time will see a bounty to cover their costs, provide for their families and have a profit to invest in new technologies critical to their success.
Planting new trees and vines is a long-term investment because upfront costs are huge and will not see a return for many years. As an almond farmer myself, I've experienced firsthand the feeling of spending money on a new crop that may not bring me enough to break even, much less make a profit, any time soon. Businesses large and small across the country do the same thing—investing without an immediate profit. Luckily, these companies can deduct the value of their purchases on their taxes, encouraging them to think strategically, plan ahead and in turn hire more workers and expand their businesses for the future.
In 2002, President Bush signed a bill that put in place a policy known as "bonus depreciation." Bonus depreciation allows companies to deduct an additional 50 percent of the value of an investment in the first year on top of the regular depreciation schedule. Bonus depreciation has spurred great economic activity by allowing businesses to invest in the future, grow and hire more workers with the money that would otherwise go straight to the government bureaucracy. Bonus depreciation encourages job creation and economic growth.
Under current law, tree and vine farmers have not been able to benefit from this business-friendly tax policy. They must wait until a tree or vine produces a commercially viable crop to claim the depreciation value on their investment, eliminating the incentive to invest in future crops. Paying a large sum up front for the tree or vine without being able to claim bonus depreciation hinders farmers from purchasing new farm materials because it forces them to wait to see the financial benefit. This lag can be detrimental to their choice to invest in new property and grow new trees and vines.
As a member of the Agriculture Committee in the House, I've been pushing to make fruit-bearing trees and vines eligible for bonus depreciation for many years because of the benefit it will bring to the Central Valley agricultural community, encouraging them to invest in new, higher-value crops.
The actual price of a tree or vine is much more than the sticker price at the nursery. For each planted tree or vine, it costs the farmer labor to prepare the land, plant and grow the tree in the succeeding years before it produces marketable crops. Additionally, countless agricultural research dollars of private and public origin provide the newest technologies to the plants to make them drought-, pest- and weed-resistant.
I voted for a bill at the beginning of July that would permanently change this policy to extend the "bonus depreciation" provisions to fruit- and nut-bearing trees and vines. I continue to support the No. 1 job-creating industry in the valley—agriculture—by serving on the House Agriculture Committee, the 2014 Farm Bill conference committee, protecting Second Amendment rights to keep and bear arms, and supporting increased research and development, expanded trade, more water storage and a commonsense regulatory environment, so you can prosper on your private property and not live in fear of a government bureaucrat hindering you from creating jobs and providing for your family.
The policies that help American farmers grow their businesses mean reasonable food prices for Americans and more jobs created within our communities. Agriculture is the engine of our country and our agricultural community should be eligible to receive the same benefits that businesses large and small do each year. I'm proud to have pushed for and passed a bill to make bonus depreciation permanent. The Senate should take up this important legislation right away, so we can send it to the president, put it into law and grow our economy.
(Rep. Jeff Denham, R-Turlock, represents the 10th Congressional District in the Central Valley.)
Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.