At least two states – Arkansas and Missouri – are considering legislation to exempt federal farm disaster payments fro state income taxes. The Arkansas Cattlemen's Association and the Missouri Cattlemen's Association (MCA) are working together to ensure this legislation becomes law in both states.
The Arkansas House of Representatives, in a bipartisan vote, passed S.B. 341, which prohibits disaster payments in agriculture from being considered income. This legislation now moves to the governor's desk for final approval.
This legislation is similar to H.B. 771 and S.B. 374, currently introduced and heard in respective committees in the Missouri Legislature.
Federal farm disaster payments are subject to federal income taxes.
"We commend elected leaders in Arkansas and the Arkansas Cattlemen's Association for getting this important legislation passed through the General Assembly," said MCA President Janet Akers. "We are optimistic that MCA can take this legislation in Missouri to completion this year."
The legislation would no longer allow a disaster to be considered a taxable event at the state level. The Arkansas legislation was sponsored by Sen. Missy Irvin (R-18) and Rep. Brent Talley (D-3). The House sponsor in Missouri is Rep. Caleb Jones (R-50); Sen. Dave Schatz (R-26) is leading the legislation in the senate. MCA Executive Vice President Mike Deering said it's "appalling" that a disaster would be taxed as income.
"Disaster payments are extremely rare in our industry. In fact, disaster payments occur about once a decade," said Deering. These payments do not at all begin to cover the losses that occur during a drought or other disasters. We want cattlemen to be able to use these payments in their entirety. This helps local economies and will help farmers and ranchers stay afloat when a disaster occurs. To my knowledge, agricultural disaster programs are the only disaster assistance programs that are taxable as income."
"This is commonsense legislation. A disaster of any kind being taxable is ludicrous and defeats the purpose of disaster assistance," Deering concluded.