On May 22, 2008, Congress enacted the Heartland, Habitat, Harvest, and Horticulture Act of 2008 over President Bush’s veto, as part of the Food, Conservation, and Energy Act of 2008, P.L. 110-234. The tax portions of the act provide tax breaks for farmers, fuel credits, relief for parts of Kansas affected by storms in 2007, and another change in corporate estimated tax payments for 2012.
After severe storms and tornadoes swept through Kansas on May 4, 2007, the president declared a “Kansas disaster area” comprising 24 counties in Kansas. The act provides several GO Zone–style provisions to provide relief to businesses in the disaster area. These provisions include bonus 50% first-year depreciation and AMT depreciation relief (Sec. 1400N(d)); increased Sec. 179 expensing dollar limits ($100,000 expense and $600,000 placed-in-service limit) (Sec. 1400N(e)); election to expense 50% of certain demolition and debris-removal costs (Sec. 1400N(f)); extension of the replacement period for certain involuntarily converted property from two to five years (Sec. 1033(a)(2)(B)); a five-year carryback period for certain net operating losses (NOLs) and AMT NOLs (Sec. 1400N(k)); suspension of the $100 floor and 10%-of-AGI thresholds on personal casualty losses (Sec. 1400S(b)); an employee-retention credit for employers (Sec. 1400R(a)); and certain retirement plan relief (Sec. 1400Q).
The act also contains a number of provisions affecting farmers and ranchers. The deduction for farm losses by taxpayers that are not C corporations is limited for tax years beginning after 2009 (Sec. 461(j)). The favorable tax treatment for capital gain property donated for qualified conservation is extended for contributions made in tax years beginning after 2007 and before 2010 (Sec. 170(b)(1)(E)(vi)). The rule allowing corporate ranchers and farmers to deduct qualified conservation deductions is also extended through 2009 (Sec. 170(b)(2)(B)(iii)).
A new deduction is allowed for endangered species recovery expenses paid or incurred by farmers after 2008 (Sec. 175). For exchanges completed after May 22, 2008, swaps of stock in certain farm-related entities (Sec. 501(c)(12)(A) mutual ditch, reservoir, or irrigation companies) are eligible for Sec. 1031 like-kind exchange treatment (Sec. 1031(i)).
The act contained a number of energy credit measures, including the addition of a new component to the Sec. 40 alcohol fuel credit for the production of cellulosic biofuel after December 31, 2008 (Sec. 40(a)(4)). The alcohol credit incentive for ethanol is reduced from 51 cents to 45 cents per gallon for 2009 and 2010 (Sec. 6426(b)(2)). The amount of allowable denaturants, for purposes of the alcohol fuels credit, is reduced from 5% to 2% of the volume of alcohol for fuel sold or used after December 31, 2008 (Sec. 40(d)(4)).
The act increases the (often-amended) third-quarter 2012 corporate estimated tax payment. This tax applies to corporations with assets of at least $1 billion. The factor (in Section 401(1)(B) of the Tax Increase Prevention and Reconciliation Act of 2005, P.L. 109-222, as amended) is increased by 7.75 percentage points.