[Congressional Record (Bound Edition), Volume 149 (2003), Part 15]
[Senate]
[Pages 19962-19963]
[From the U.S. Government Publishing Office, www.gpo.gov]




      THE BEGINNING FARMERS AND RANCHERS TAX INCENTIVE ACT OF 2003

  Mr. DORGAN. Mr. President, I recently joined Senator Hagel of 
Nebraska in introducing legislation that is important to the survival 
of farm families and rural America. Our bipartisan legislation, called 
the Beginning Farmers and Ranchers Tax Incentive Act, provides 
significant capital gains tax breaks to encourage retiring farmers and 
ranchers to sell their farm property to others who will continue to use 
the property in the farming business. Identical legislation has been 
introduced in the House of Representatives.
  As many of our colleagues know, the economic well-being of many rural 
communities across the country is at a crossroad. Over the past several 
decades, jobs on family farms and in Main Street businesses in small 
towns have been disappearing from the Nation's Heartland. Rural 
communities are facing an out-migration crisis of epic proportions. 
Senator Hagel and I have been working at the Federal level to adopt 
fiscal policies that will give rural America the tools and funding it 
needs to reverse the out-migration problem. One of the challenges for 
stabilizing and revitalizing our rural communities is to ensure that 
the Federal Government backs strong farm policies that support this 
generation and the next generation of family farmers.
  A strong farm economy is critical to the survival of many rural 
communities over the long term. But the number of family farmers, who 
are the backbone of the agricultural sector, has been steadily 
declining over the course of the past century. In the 1930s, North 
Dakota had over 85,000 farms. That number has dwindled to just 30,000 
in 2002, the lowest number of farms in North Dakota's history.
  More and more of our young people are leaving rural communities in 
pursuit of jobs elsewhere and the remaining farmers are growing older. 
A recent report prepared by the Center for Rural Affairs found that 
almost half of the Nation's farmers are age 55 or older. The already 
small number of farmers and ranchers under age 25 (about 1 percent of 
farmers and ranchers) has dropped significantly in recent years. If we 
don't act quickly to address the aging of the farm sector, the 
prospects for many farm communities appear bleak.
  The Center's report found that one of the major impediments to 
individuals who want to start a farm or ranch is the cost of land and 
other farm property. The legislation that Senator Hagel and I have 
introduced speaks to this issue by providing substantial capital gains 
tax incentives for farmers and ranchers who are retiring or forced to 
get out of farming to sell their farm operations to beginning farmers 
and ranchers or others who will continue to use the property in 
farming. Because of the extra benefit the retiring farmer would receive 
for selling to a first-time farmer, for example, he or she could accept 
a lower price from such a buyer and still come out ahead economically 
as compared to a sale that would otherwise take the land out of 
agricultural use.
  Specifically, our legislation allows farmers and ranchers to exclude 
up to $500,000 in capital gains that are derived from the sale of 
qualifying farm or ranch property over their lifetime. The benefit of 
the capital gains tax exclusion provided by this legislation is greater 
for the sale of such property to first-time farmers and ranchers or to 
others who continue to use such property for farming purposes. To 
encourage farm sales to beginning farmers, this legislation provides a 
100-percent exclusion from gross income of the long-term capital gain 
from the sale of qualifying farm property to a first-time farmer who 
certifies that he or she will use the property for farm purposes for at 
least 10 years. Our bill also provides a 50-percent exclusion from 
gross income of the long-term capital gain from the sale of farm 
property to any other person who certifies that the property will be 
used for farm purposes for at least 10 years. Finally, this legislation 
provides a 25-percent exclusion

[[Page 19963]]

from gross income of long-term capital gain from the sale of such 
property to any other person for any other use.
  If anytime within 10 years after the sale, the property benefiting 
from the 100-percent or 50-percent capital gains exclusion is disposed 
of or ceases to be used as a farm for farming purposes, then a penalty 
shall be imposed as a proxy for recapturing the capital gains tax 
benefit. However, the penalty for disposition or cessation of the use 
of qualifying property as a farm for farming purposes may be waived by 
the Secretary of the Treasury in the case of hardship.
  Senator Hagel and I believe that if we are going to deal with the 
economic problems facing much of rural America that we must ensure that 
tax and other Federal policies are in place to encourage a new 
generation of young people to enter into farming and ranching. This 
legislation should help in this endeavor and we urge our colleagues to 
support our effort.

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