[Congressional Record Volume 143, Number 5 (Wednesday, January 22, 1997)]
[Senate]
[Page S656]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                FARMERS AND THE ALTERNATIVE MINIMUM TAX

 Mrs. MURRAY. Mr. President, I am pleased to join over 50 of my 
colleagues today in cosponsoring legislation to solve an unfortunate 
tax problem drastically affecting farmers in Washington State and 
throughout the Nation. This bill will prevent the alternative minimum 
tax from being applied to deferred payment contracts.
  Farmers routinely use deferred payment contracts to assist their 
money management and farm operations. Wheat growers, potato growers, 
and other farmers in Washington State often enter into contracts 
requiring them to sell and deliver their crops on a specified date for 
a fixed amount. While these contracts may be entered into one year, the 
payments to the farmers agreed to in the contract, either in total or 
in part, often will not be received by the farmer until the following 
year. The Internal Revenue Service is now saying that farmers must pay 
taxes in the year of the contract, not the year of payment. I think it 
is wrong to require farmers to pay taxes on income they have not yet 
received. I believe most Americans would agree.
  Farmers are not trying to avoid paying taxes. They simply consider it 
unfair to be burdened with a tax liability prior to receiving payment. 
I am particularly concerned about the retroactive approach the Internal 
Revenue Service has taken with regard to this issue. While the 1986 Tax 
Act omitted the exemption from the AMT for farmers, the IRS failed to 
impose the alternative minimum tax for 8 years. Now, all of a sudden, 
the IRS is imposing the AMT. And not only for the current year, but for 
all years open to audit. This could well cost family farmers tens of 
thousands of dollars. We cannot afford to impose such an egregious 
obligation on our family farms. It is not right. This bill will correct 
the situation.
  This bill will make it clear that the alternative minimum tax shall 
not be applied to installment sales of farmers. It will insure that 
farmers pay taxes when they get paid, not before. It is that simple. 
While fancy terms like alternative minimum tax, deferred payment 
contracts, and installment sales of inventory property make the issue 
sound complex, it is really about simple tax fairness--paying taxes on 
income received, not on income expected.
  The IRS Commissioner has stated that the IRS will not oppose this 
legislation. In addition, the Department of the Treasury welcomes ``the 
opportunity to work with [Congress] to address this matter through 
corrective legislation''. With a majority of the Senate cosponsoring 
this bill, my colleagues from both sides of the aisle and all parts of 
the country, I look forward to its timely consideration.

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