[Congressional Record Volume 143, Number 10 (Thursday, January 30, 1997)]
[Senate]
[Pages S874-S876]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DASCHLE (for himself, Mr. Johnson, Mr. Conrad, Mr. Dorgan, 
        Mr. Baucus, Mr. Harkin and Mr. Kerrey):
  S. 239. A bill to amend the Internal Revenue Code of 1986 relating to 
the treatment of livestock sold on account of weather related 
conditions; to the Committee on Finance.


            INVOLUNTARY CONVERSION OF LIVESTOCK LEGISLATION

  Mr. DASCHLE. Mr. President, today I am reintroducing legislation to 
provide equitable treatment under the tax law for farmers and ranchers 
who are forced to sell their livestock prematurely due to extreme 
weather conditions. I am joined in this effort by Senators Johnson, 
Conrad, Dorgan, Baucus, and Harkin.
  The last few weeks have seen the most extreme winter weather of the 
century in the upper Midwest. Prolonged sub-zero temperatures and back-
to-back blizzards continue to devastate herds of cattle and other 
livestock. An estimated 50,000 cattle have died since the beginning of 
the year, and countless thousands of other head of livestock are under 
extreme stress. The President declared the region a national disaster 
area on January 10.
  A few summers ago, Midwestern States suffered severe floods, which 
devastated lives and property along these States' rivers and 
shorelines. President Clinton responded quickly by providing disaster 
assistance, $2.5 billion, including $1 billion for agriculture, in 
emergency aid to flooded areas in the Midwest.
  In addition to receiving disaster payments, many farmers were able to 
take advantage of provisions in the Internal Revenue Code designed 
primarily to spread out the impact of taxes on farmers in these 
situations. Ironically, however, while farmers who lose their

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crops due to floods are covered under these provisions, farmers who 
must involuntarily sell livestock due to flood and other extreme 
weather conditions, are not.
  Normally, a taxpayer who uses the cash method of accounting, as most 
farmers do, must report income in the year in which he or she actually 
receives the income. The Tax Code, however, outlines certain exceptions 
to this rule where disaster conditions generate income to the farmer 
that otherwise would not have been received at that time. For example, 
one exception allows farmers who receive insurance proceeds or disaster 
payments when crops are destroyed or damaged due to drought, flood, or 
any other natural disaster to include those proceeds in income in the 
year following the disaster, if that is when the income from the crops 
otherwise would have been received.
  Two other provisions deal with involuntary conversion of livestock. 
The first provision enables livestock producers who are forced to sell 
herds due to drought conditions to defer tax on any gain from these 
sales by reinvesting the proceeds in similar property within a 2-year 
period. The second provision allows livestock producers who choose not 
to reinvest in similar property to elect to include proceeds from the 
sale of the livestock in taxable income in the year following the sale.
  For no apparent reason, the two provisions dealing with livestock do 
not mention the situation where livestock is involuntarily sold due to 
flooding, blizzards, or other extreme conditions. Thus, these weather 
emergencies do not trigger the benefits of those provisions. Yet, many 
livestock producers are currently being compelled to sell livestock 
because they are under stress, just as they were forced to by the 
floods the other year to sell their animals because the crops necessary 
to feed the livestock and the fences for containing them had been 
washed out.
  Our proposal would expand the availability of the existing livestock 
tax provisions to include involuntary conversions of livestock due to 
flooding and other extreme, weather related conditions. This would 
conform the treatment of crops and livestock in this respect.
  Last Congress, I introduced this bill in the Senate as S. 109, and my 
colleague, Senator Johnson, introduced a companion measure in the 
House--H.R. 1588--when he was a Member of that body. Similar 
legislation was passed by Congress as part of the Revenue Act of 1992. 
Unfortunately, that legislation was subsequently vetoed for unrelated 
reasons. The Department of the Treasury testified in support of the 
change in the last Congress. In 1995, the Joint Committee on Taxation 
estimated the revenue loss from my bill to be $17 million over 6 years.
  Let me emphasize that the tax provisions we are dealing with here 
affect the timing of tax payments, not forgiveness of tax liability. 
The distinguished Governor of South Dakota, William Janklow, called me 
a few days ago and emphasized how important it would be for Congress to 
make this change as soon as possible. I hope my colleagues will agree 
that we should not shut out some farmers--livestock producers--from the 
disaster related provisions of the Tax Code simply because the natural 
disaster involved was severe winter conditions or a flood instead of a 
drought. That just doesn't make sense.
  The American Farm Bureau Federation and the National Farmers Union 
have endorsed the bill. I urge my colleagues to give it favorable and 
early consideration.
  Mr. President, I ask that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 239

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. TREATMENT OF LIVESTOCK SOLD ON ACCOUNT OF WEATHER-
                   RELATED CONDITIONS.

       (a) Deferral of Income Inclusion.--Subsection (e) of 
     section 451 of the Internal Revenue Code of 1986 (relating to 
     special rules of proceeds from livestock sold on account of 
     drought) is amended--
       (1) by striking ``drought conditions, and that these 
     drought conditions'' in paragraph (1) and inserting 
     ``drought, flood, or other weather-related conditions, and 
     that such conditions''; and
       (2) by inserting ``, Flood, or Other Weather-Related 
     Conditions'' after ``Drought'' in the subsection heading.
       (b) Involuntary Conversions.--Subsection (e) of section 
     1033 of such Code (relating to livestock sold on account of 
     drought) is amended--
       (1) by inserting ``, flood, or other weather-related 
     conditions'' before the period at the end thereof; and
       (2) by inserting ``, Flood, or Other Weather-Related 
     Conditions'' after ``Drought'' in the subsection heading.
       (c) Effective Date.--The amendments made by this section 
     shall apply to sales and exchanges after December 31, 1996.

  Mr. DORGAN. Mr. President, I'm pleased to join Senator Daschle and 
others in reintroducing legislation to bring much-needed tax relief to 
family farmers and ranchers whose businesses have suffered from unduly 
harsh weather conditions in the Upper Midwest this winter.
  Livestock producers in North Dakota and other States in the Northern 
Plains have been facing unusually extreme conditions during this 
winter. North Dakota has experienced at least a half-dozen blizzards, 
winds of up to 50 miles per hour, and wind chills of near 80 below 
zero.
  Our livestock producers have had great difficulty in moving snow and 
keeping paths open to both feed and livestock. Our interstate highways 
have been closed seven times this winter so it is easy to imagine the 
difficulties that our rural people have had in keeping township roads 
open and usable.
  Some are beginning to compare this winter to the infamous winter of 
1886 which nearly wiped out the cattle industry on the Northern Plains. 
That was the year in which Teddy Roosevelt lost his cattle herd on his 
ranch in the North Dakota badlands.
  When this winter is over, we will be able to make some judgments as 
to whether this winter will be another of those history-making times 
which will haunt the memories of another generation of farmers and 
ranchers in the Dakotas.
  But right now, we need to do everything possible to ease the burdens 
that our livestock producers are facing. The U.S. Department of 
Agriculture has been working very hard to get workable programs to help 
producers get to their livestock and feed. They have also been working 
on the longer range problem of helping ranchers and farmers with the 
extra feed supplies that are needed to get these cattle through the 
winter.
  While USDA has had some problems in getting those programs on the 
ground, we certainly appreciate the Department's efforts especially 
when we consider the limited tools that are currently available to 
them. It should be noted that the Emergency Livestock Feed Assistance 
program that would normally have been available for such a situation 
was suspended by the 1996 farm law. This has put USDA in a position of 
having very limited resources and authorities for this emergency.
  Compounding the problems of our livestock producers have been the 
very low cattle prices that have come from a combination of being at 
the bottom of a cattle pricing cycle together with record levels of 
concentration in the marketplace.
  Our producers have had a hard time maintaining their herds even 
without this winter emergency. That is why it is extremely important 
that we help them through this time period.
  Some of our producers are making the choice to either sell their 
cattle altogether or reduce the size of their herd, rather than to 
continue to maintain them at high costs and high risk.
  Unfortunately our current tax laws hinder such sales in the case of 
most weather-related disasters except for drought. If a farmer or 
rancher is forced to sell cattle or other livestock prematurely this 
winter, they will be burdened with a large tax bill. There is no 
provision at present for tax deferral of gains on involuntary 
conversions of livestock for severe winter conditions. The Tax Code 
allows for such deferrals only for drought conditions.
  In the last session of Congress, I cosponsored legislation with 
Senator Daschle that would have expanded this tax provision to respond 
to a variety of severe weather conditions.
  Our legislation would allow a farmer or rancher to defer paying taxes 
on the proceeds of an involuntary sale of livestock due to severe 
weather-related emergencies if he reinvests the proceeds in similar 
property down the

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road. A farmer or rancher who decides not to reinvest the proceeds 
under these circumstances may elect to report the proceeds from the 
sale on the next year's tax return. This legislation, which is 
supported by the Administration, builds upon similar provisions in the 
Tax Code which is provided in the case of forced livestock sales due to 
drought.
  Initial estimates following the January 10th blizzard across our 
State indicated that about 2,000 livestock producers were selling 
nearly 35,000 additional cattle as a result of that storm. The weekly 
reports from the North Dakota Agricultural Statistics Service indicate 
that cattle sales continue to be more than 20 percent above normal in 
the State.
  This legislation will give these producers an additional tool in 
managing their operations so that these involuntary conversions do not 
impose additional financial hardships upon them.
  Again I am pleased to once again cosponsor this legislation with 
Senator Daschle to help our producers meet the unusual conditions of 
this winter. I urge my colleagues to join us in this effort.
                                 ______