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• HEALTH INSURANCE TAX DEDUCTION LEGISLATION INTRODUCED

• CA-BACKED "TERFF" AG TAX PACKAGE LEGISLATION REINTRODUCED

100 PERCENT HEALTH INSURANCE TAX DEDUCTION BILL INTRODUCED IN HOUSE; SENATE BILL WOULD EXPAND USE OF PARTIAL HEALTH INSURANCE TAX DEDUCTION

Florida Rep. Cliff Stearns, R, along with Representatives Lee Terry, R-Neb., and Ron Paul, R-Texas, have introduced H.R. 198, the "Health Care Tax Deduction Act of 2003".

The bill calls for allowing all individuals who pay for their own health insurance to receive a 100 percent deduction for their health insurance premiums, and for unreimbursed prescription drug expenses paid by the taxpayer. The bill calls for the deduction to be coordinated with the use of any deduction by self-employed people, or by employers, so that everyone in effect would be allowed a full tax deduction.

"Tax equity for health insurance costs has been a top priority goal for CA for years. We are pleased to see this legislation introduced," said CA President Wayne Nelson. "It is simply wrong that higher income employer health coverage is provided a full tax deduction, while people who work for employers that don't provide coverage and must purchase it all on their own re

ceive no deduction. We need tax fairness for health care." In the Senate, S. 637, the "Health Insurance Tax Relief Act" has been introduced by Sen. Barbara Boxer, D-Calif. The bill calls for allowing the first $2,000 of medical expenses paid by a taxpayer, spouse or dependents to be deductible from taxes, whether or not the taxpayer itemizes deductions.

GRASSLEY, FARM STATE SENATORS RE-INTRODUCE CA-BACKED "TERFF" AG TAX PACKAGE LEGISLATION

Senate Finance Committee Chairman Charles Grassley, R-Iowa, has reintroduced the Tax Empowerment and Relief for Farmers and Fishermen Act, more commonly known as the TERFF bill, or the Ag Tax Package.

CA has been among the strongest supporters of the Ag Tax Package and has been very involved in the development of several of its individual tax change provisions. The bipartisan bill was scheduled for committee consideration last year but failed to receive final approval before adjournment. It earlier had gained passage by Congress and was included in an omnibus tax bill that was vetoed by then President Clinton over other provisions of the extensive bill. So the bill has had strong support, particularly in the Senate. Once again, it will need to be attached to a major tax bill.

The legislation, S.665, is co-sponsored by Senate Finance Committee Ranking Minority Member Max Baucus, D-Mont.; and senators Sam Brownback, R-Kan., Conrad Burns, R-Mont., Larry Craig, R-Idaho, Michael Crapo, R-Idaho, Tom Daschle, D-S.D., Byron Dorgan, D-N.D., Peter Fitzgerald, R-Ill., Chuck Hagel, R-Neb., Tim Johnson, D-S.D., Blanche Lincoln, D-Ark., Zell Miller, D-Ga, and Pat Roberts, R-Kan.

Key provisions include:

• FARM, FISHING AND RANCH RISK MANAGEMENT ACCOUNTS -- FFARRM Accounts would enable farmer and ranchers to contribute up to 20 percent of their income, tax deferred, to a savings account to provide a safety net for low income years.

  The FFARRM Accounts proposal is similar to a proposal CA pioneered in the 1990s called Income Balancing Accounts, which also called for tax deferred rainy day savings accounts for farmers, who must contend with volatile incomes as a normal part of their business.
  

• AGGIE BOND CAP EXEMPTION - would exempt state beginning farmer and rancher tax-exempt bond financing programs from the overall state caps on use of tax-exempt bonds.

  CA, along with the National Council of State Agricultural Finance Programs which CA serves as a technical adviser, has been championing this issue on Capitol Hill to help expand state beginning farmer and rancher finance programs. Current IRS rules put these small tax-exempt bond programs that help beginning farmers get private financing at lower interest rates under the same limits for use of tax-exempt bonds that states must operate under for manufacturing, housing and other large tax-exempt bond development projects. This bill would enable more states to start Aggie Bond beginning farmers programs, and other existing programs to serve more eligible borrowers.
  

• CRP/FARM RENTAL INCOME TAX TREATMENT -- Reversing IRS decisions, which unfairly place self-employment taxes on farmers who receive payments under the Conservation Reserve Program and certain farm rental agreements.

  The IRS has taken the position that payments to farmers under certain rental agreements and under the Conservation Reserve Program, a federal land retirement conservation program, should be subject to both income taxes and self-employment taxes for Social Security and Medicare. This provision would treat this income like all other rental income making it subject to income taxes, but not self-employment taxes.
  

• INCOME AVERAGING -- Fixing inequities for producers using income averaging who are caught in the alternative minimum tax.
  
• FOOD DONATIONS -- Provide a tax deduction for farmers and restaurants who donate to food banks for the indigent, a proposal championed by Sen. Richard Lugar, R-Ill.
  
• FARMER COOPERATIVES -- Farmer co-op initiatives, including providing equitable tax treatment for small cooperative ethanol producers and organic farmer cooperatives.
  

"We are very hopeful that this entire tax proposal can gain final passage this year. A lot of work has gone into developing each of these provisions. CA has put in a good deal of legwork on this in Washington, and they have won wide support throughout the agriculture community," said Nelson.

CA's perspectives on the Ag Tax Package are to be included in an upcoming issue of "The Hill", an influential political and government news weekly distributed throughout Washington, D.C.

CA welcomes member comments, ideas and thoughts on these and other legislative issues. Email us back your reply. Or give us a call and ask for Wayne Nelson, President, or Bruce Abbe, Vice President of Public Affairs at (952) 851-7245.

Email your reply to: publicaffairs@cainc.org