A22-Lancaster Fanning, Saturday, March 8,1986
BY MARTHA J. GEHRINGER
LANCASTER Two goals that
the new tax law proposals at
tempted to achieve are, tax sim
plification and creating adverse
conditions for the hobby farmer.
Goal number two has been ac
complished, but it also adversely
affects the “real” farmer.
Larry Jenkins, Farm
Management Specialist, Penn
State, reported these findings to
the group at the annual Lancaster
County Dairy Days, day one,
March 4.
Presently two similar plans have
been developed, one of which will
be approved. These proposals
come from the Reagan Ad
ministration and the House Ways
and Means Committee.
Jenkins noted there are broad
provisions which apply to everyone
and provisions that are of greater
concern to the fanning com
munity. He went on to explain that
included in the broader grouping
are plans to reduce the rate
brackets from 14 to three or four.
There are also plans to reduce
the number of exemptions and
raise the deduction level a person
can claim.
In the entire package Jenkins
explained “There are four or five
areas that I think are of particular
concern to farmers.” One of these
areas is capital gains exclusion.
This important source of savings,
will be reduced from the current 60
percent exclusion level to a rate of
50 percent and will extend only to
capital assets and land.
Gain from the sale of property
used in the farm business will be
taxed as ordinary income. These
sales which will be fully taxed
include the sale of cull animals.
Jenkins reported this could in
crease taxes, depending on the tax
bracket of the individual, by as
much as $l,OOO yearly.
The second area of concern is the
depreciation deductions. Jenkins
commented that in this both
proposals will decrease the rate of
deductions and make each amount
smaller.
A difficult part of this
requirement is that a basis would
have to be calculated every year
involving four calculations instead
of one. Jenkins pointed out with the
additional calculations it would
cost more to get tax returns filed,
than under the current system.
Also the proposed tax changes
Jenkins explained would not allow
preproductive expenses. The
deductions would begin after the
production period begins.
Larry Jenkins explains
new tax law proposals.^
Lancaster County Dairy Day, Day 1 -
Managing the farm as a
These costs will have to be ac
cumulated and placed in a
separate account. This will then be
depreciated once the animal has
begun producing. This will
significantly increase the expense
and complexity of record keeping.
Under the current proposals,
Jenkins also noted that investment
tax credit will be eliminated. This
was done to dispel any tax shelters
hobby farmers may have been
using. However, “real” farmers
will be adversely effected.
Jenkins reported that the
general effect of this proposal will
be increasing federal taxes for all
types of farms.
Currently the proposal is in the
Senate Financing Committee. If it
becomes law it will not go into
effect until January 1,1987. It will
have no bearing on tax returns for
1986.
A farm panel discussion on
“How we manage our farm
business,” was also on the day’s
agenda. Included on this panel was
Donald Risser, Kenneth Rutt, and
Ralph McGregor.
Risser operates Meadow Vista
Farm with his two brothers. They
farm 375 acres near Bainbridge
and raise 155 cows.
Rutt farms on 425 acres and has
105 milk cows on his Edgefield
Farms. He also sells dairy related
equipment in Quarryville.
McGregor, from East Berlin, of
Mcßal Dairy Farm has 200 cows.
He farms 607 acres, 300 of which
are rented.
One important topic was time
management. Risser reported that
by always having a notepad and
pencil he is able to better utilize his
time. He pointed out that he is
always making notes on things that
need to be done or looked into. He
illustrated the importance of these
by stating “I’d sooner not have my
pocketknife, than not have paper
and pencil.”
Rutt said his family maps out a
schedule for each week. Goals for
the week are recorded and checked
off as accomplished. This also lets
family members see if they are on
the right path to gaining these
goals.
He went on to state, “Goals are
important in a business. You need
to know where you want to be five
or ten years and make ad
justments to progress. ”
McGregor finds it very helpful to
spend as much time as possible
reading to keep abreast of current
trends and broaden ones horizons
to new ideas.
When asked how they felt about
estate planning, all three panelists
agreed a need existed on every
farm for some planning of this
type. Among the benefits they
listed were the ability of the heir to
pay any debts through a life in
surance term policy, a partnership
agreement which allows the
remaining partners to buyout that
share in case of death, and a form
of protection for those who carry
on.
Risser responded to the topic of
how to keep a steady cash flow by
explaining that they usually have
something to sell, beef or crops. By
having a source it provides them
with an option by which he can
gain cash to work discounts or
other deals.
McGregor noted that while he
doesn’t do anything greatly dif
ferent to maintain a cash flow, by
having a steady cash flow he is
able to purchase commodities at a
good price after making phone
calls to find the best prices.
An approved credit line at a local
lending institution helps Rutt’s
cash flow. He is able to use this line
to maintain a level of liquidity
necessary to make purchases that
will result ii) a discount. He is also
able to maintain a cash flow
through good money management
and benefits from the flow of
money through his equipment
business.
Other speakers on the day’s
agenda included,H. Louis Moore,
Donald Shiflet,and David Galligan,
VMD.
H. Louis Moore, Agricultural
Economist, Penn-State, explained
how the nation’s economy has been
growing at a steady rate in recent
years while the agriculture
economy has not shared in this
general recovery.
Agriculture, Moore pointed, out
has been producing everything in
surplus. The current farm bill
attempts to correct this problem as
its goal is to make the U.S. more
competitive in the world market.
This will be achieved through
lower loan rates which have as
their goals: increased exports,
discouraging production increase
abroad, reduce U.S. surpluses,
reduce CCC costs, raise farm in
comes and return the U.S. to a free
market.
Donald Shifflet from the Farm
Credit office in Baltimore,
examined the money situation and
money management. He stated
that 10 percent of the nation’s
farmers are in a severe financial
strain and they have 23 percent of
the ag debt.
Shifflet noted that it is the family
Avian Flu Monitor
Avian flu successfully quelled
(Continued from Page Al)
has led to the destruction of birds
in four eastern states, the New
York Department of Agriculture’s
Dr. Bruce Widger issued two or
ders to all live bird markets in New
York City. First, the order
requires that all markets remove
birds and related debris from the
premises and clean and disinfect
the market weekly. This also
applies to all trucks and bird
hauling equipment. Second,
following the discovery of HSN2
virus at a market, all birds must be
destroyed and cleaning and
disinfecting must be completed
within 10 days,
According to USDA
veterinarian, Stephen Ellis,
department personnel are testing
for virus twice a week at some 44
New York live bird markets. Ellis,
who is one of three USDA
veterinarians working in a con
sulting capacity in Harrisburg,
hopes to be able to return home to
Maine within a week.
Although officials believe that
the virus has been eradicated, this
is no time for poultrymen to drop
their guard, cautioned Hoffman.
Accordingly, intensive sur
veillance will continue on about 250
Pennsylvania flocks. These flocks
include locations linked to any
previously infected flocks by
common integrators, as well as
any flocks visited by trucks
moving birds to the New York
markets.
Flocks involved in the intensive
surveillance program are being
tested once to two times a week,
said Ellis. This surveillance will
probably continue for about four to
six weeks after all infected
premises have been cleaned and
disinfected.
Hoffman noted that the State
business
The farmer panel at Lancaster County Dairy Day included,
left, Ralph McGregor, Donald Risser, Kenneth Rutt and
Glenn Shirk, moderator.
size commercial farm that is most
effected by the current financial
situation.
While Farm Credit has been
experiencing difficult times
throughout the country, Shifflet
pointed out that the Baltimore
district is in good shape. This is
due to the diverse nature of
agriculture in this area.
Shifflet urged the audience to
develop or sharpen good
management practices and in
general to be good businessmen.
Dr. David Galligan, VMD, New
Bolton Center, explained some
management considerations in
feeding cows economically.
Some of the management factors
he suggested the group consider
Department of Agriculture is
currently looking at the possibility
of licensing not only poultry
haulers, but anyone engaged in
transporting live animals. “If a
trucker has a license that can be
revoked, then he’s likely to give
more attention to the requirements
UEP recommends changes in
egg marketing order
LANCASTER According to
the United Egg Producers, a
majority of those testifying at
recent hearings favored the
proposed egg marketing order.
That message was relayed to
poultry producers at Poultry
Progress Day by Poultry
Federation executive director
John Hoffman.
Over the past two months, USDA
had scheduled five hearings across
the country, with the last hearing
held on Feb. 27. The current
version of the order calls for a
first-year total checkoff of one cent
per dozen, with tfe-cent earmarked
for promotion and the same
amount to go toward a surplus hen
removal program. All producers
would be required to participate,
and no refunds would be granted.
Based on controversy
surrounding the surplus removal
provision, UEP has recommended
that the following changes be made
in the order:
• The cost of the surplus removal
program should be limited to not
more than $l5 million.
• The surplus removal assessment
should be lowered from one-half to
one-quarter cent per dozen.
• The specific regulations
governing surplus removal should
be included in the marketing or
der. As the order is currently
written, details of the provision
were: methods of weighing feed,
dry matter checks, cattle
grouping, calibration of parlor
feeders, and bunk space.
He then went on to explain each
of these topics and suggested ways
to correct a problem or implement
improvements.
Consideration of the total
product report, positive and
negative should be considered
prior to incorporating a new
product, Galligan reported.
Lancaster is holding Dairy Days
on two consecutive weeks to give
the dairyman a better opportunity
to attend both session. Day two will
be held on March 11 and will focus
on production, cows and crops.
needed to protect the (poultry)
industry,” Hoffman said.
PDA is also considering the
establishment of minimum
sanitary standards for the poultry
industry, Hoffman said. “The
federal government and the state
cannot afford to continue to clean
up our mess,” he emphasized.
would not be available until
outlined by a 21-member
Marketing Order Board of
Directors. At the present time,
however, no board has been ap
pointed.
•Three nonproducer members
should be included on the board of
directors.
•After the marketing order is in
place for five years, a referendum
should be held to determine
whether or not to continue it.
•The board should be able set
policy on the basis of a 15-person
quorum.
•The USDA Secretary should be
required to act on all board
proposals within 48 hours.
USDA is now accepting written
comments from the industry until
Apr. 9. At that point the Secretary
of Agriculture will make his
recommendation, and written
comments from the industry will
again be requested. Following a
review of all recommendations
and testimony, the Secretary will
decide whether to halt the order or
to hold a nationwide referendum.
A recommendation from the
secretary is expected by May and
a final decision should be handed
down by September. If a
referendum is scheduled, voting
may begin in late November or
early December, according to
Hoffman.