IRS Tax Relief – Livestock Sold Due to Drought
The IRS has announced that certain farmers and ranchers who sold livestock early because of drought have one additional year to purchase replacement livestock and defer taxes on the gain. Under current law, farmers and ranchers can defer capital gains taxes on draft, breeding, or dairy animals that are marketed early because of weather-related conditions if replacements are purchased within four years. The IRS announced a one-year extension for farmers and ranchers located in areas where droughts have persisted more than three years, making it infeasible to purchase replacement animals. This extension immediately impacts drought sales that occurred during 2016 and some previous sales that had been granted extensions. For example, if a dairy farmer normally sold 15 cows a year but because of drought sold 25 animals, the tax on the gain of 10 cows could be deferred if the replacement are purchased within the timeframe. Producers in the following Nebraska counties qualify for this tax benefit: Adams, Arthur, Banner, Box Butte, Buffalo, Burt, Cass, Cheyenne, Clay, Colfax, Cuming, Dakota, Dawes, Deuel, Dodge, Douglas, Dundy, Garden, Grant, Hall, Hitchcock, Kearney, Keith, Kimball, Madison, Morrill, Perkins, Phelps, Pierce, Platte, Sarpy, Saunders, Scotts Bluff, Sheridan, Sioux, Stanton, Thurston, Washington, and Wayne
The IRS Extension Notice can be found here.
Conservation Reserve Program (CRP) Emergency Haying and Grazing
During drought conditions, Nebraska counties may be considered for Conservation Reserve Program (CRP) emergency haying and grazing. Counties must meet certain criteria for this program to be implemented, including all/part of a county reaching stage D2 Severe Drought on the UNL Drought Monitor or, if not in a D2 or greater status, a 40 percent loss of forage production in the county. County FSA Committees would be responsible for determining whether their county meets the 40 percent loss threshold. Producers interested in emergency haying or grazing of CRP must request FSA county office approval before starting any activities. If you believe your county should be considered for CRP emergency haying and grazing under the 40 percent forage production loss threshold, please contact your local FSA office. A map of counties approved for CRP Emergency Haying and Grazing can be found here.
Livestock Forage Program (LFP)
The Livestock Forage Disaster Program (LFP) is also available through USDA. LFP provides payments to eligible livestock owners and contract growers who have covered livestock and who are also producers of grazed forage crop acreage that have suffered a loss of grazed forage due to a qualifying drought during the normal grazing period for the county. While in-state conditions triggering the program (see below) have not yet been met, here is important background information.
To qualify for the program, counties would need to fall into the following categories via the UNL Drought Monitor:
- D2 (severe drought) intensity in any area of the county for at least eight consecutive weeks during the normal grazing period is eligible to receive assistance in an amount equal to one monthly payment;
- D3 (extreme drought) intensity in any area of the county at any time during the normal grazing period is eligible to receive assistance in an amount equal to three monthly payments;
- D3 (extreme drought) intensity in any area of the county for at least four weeks during the normal grazing period or is rated a D4 (exceptional drought) intensity at any time during the normal grazing period is eligible to receive assistance in an amount equal to four monthly payments; or
- D4 (exceptional drought) in a county for four weeks (not necessarily four consecutive weeks) during the normal grazing period is eligible to receive assistance in an amount equal to five monthly payments.
More specifics on this program can be found on this LFP Fact Sheet.
Nebraska Department of Agriculture/Roadside Haying Resources
The Nebraska Department of Agriculture has a website dedicated to providing Nebraska farmers and ranchers with a number of important drought related resources. For those interested in haying roadsides, the Nebraska Department of Transportation has put together this informational pamphlet.