IRS Change Could Pay Off In More Citrus Plantings

Mike Sparks, Florida Citrus MutualThis may sound obvious, but the lifeblood of the Florida citrus industry is fruit. We must have trees in the ground producing enough fruit to support the industry’s infrastructure, which provides $10 billion in economic activity a year and 62,000 jobs. If we don’t grow sufficient amounts of fruit, the state’s processing plants and packinghouses don’t have anything to do and our industry will collapse.

Advertisement

This stark reality has been very apparent over the past decade as growers battled citrus greening and its debilitating effects. As of this posting, USDA’s 2014-2015 orange crop estimate sits below last year’s total output of 104 million boxes. Most folks believe the number will drop even more by the time the season ends.

Clearly, at this historically low production level, we need to plant new trees and replant old groves. The good news is there are a handful of incentive programs designed to increase production. As I wrote about in my last column, through the USDA’s Tree Assistance Program, eligible growers can cost share with the USDA for diseased tree removal, replanting including labor and nursery trees. In addition, both Minute Maid and Florida’s Natural are providing significant incentive programs to get growers to plant trees. Plus, Florida has world-class budwood and germplasm infrastructure to support the plantings.

Tax Returns

Florida Citrus Mutual hopes to add another tool in the toolbox for growers. The current federal tax code regarding citrus plantings — like most of our country’s tax policy — stands in the way of investment. Consequently, Florida Citrus Mutual (FCM) continues to push a proposal forward that will allow growers to directly write off new plantings. The idea is to stimulate investment in the industry by offering growers favorable tax treatment.

Top Articles
Equipment Updates Propel Davidian's Farm Market Into The Future

FCM organized several meetings attended by members of our Congressional delegation, accountants, and tax consultants to discuss the change.

This could be a real win for the industry. We need trees in the ground to sustain this industry and certainly a more streamlined tax code will help incentivize investment. The proposal is complicated and will continue to evolve as it moves forward. We are still in the discovery phase.

A likely tax vehicle may arise in 2015 and once again the citrus industry will rely on our champions in Congress to deliver the measure. Rep. Vern Buchanan, who sits on the Ways and Means Committee, is expected to play a key role. Reps. Rooney, Ross, Murphy, Castor, and Webster will lend support as well. Sen. Bill Nelson, who was vital in garnering $125 million in Farm Bill research dollars, will lead the charge in the Senate as a member of the Senate Finance Committee.

Under present law, citrus growers generally are required to capitalize the costs of developing a citrus grove prior to the close of the fourth year following the planting. After this pre-productive period, the grove may be depreciated over a 10-year period.

Holding Accountable

If the proposal is successful, growers will be able to elect to immediately expense the costs of acquiring, planting, cultivating, maintaining, and developing a citrus grove and the associated drainage, irrigation, and infrastructure costs for a temporary period of 10 years. The proposal would be effective for taxable years beginning after Dec. 31, 2014 and expire for taxable years beginning after Dec. 31, 2024.

Eligible costs in such an election will be deemed ordinary and necessary business expenses of the taxpayer. Both existing and newly acquired groves would be eligible for this treatment.

Tweaking the tax code could provide a real boost for growers who are on the fence about replanting or establishing a new grove. Growers want to grow citrus, it’s what they’ve done for generations. It would be quite a coup if we could actually get the Internal Revenue Service on the side of the Florida citrus industry in the fight against HLB.

0