Andrea Joy Campbell: “Today my colleagues, Senators Chuck Grassley and Byron Dorgan, introduced legislation which will correct a tax problem…”

“Today my colleagues, Senators Chuck Grassley and Byron Dorgan, introduced legislation which will correct a tax problem facing many farmers across the country, including many in the State of Colorado. Along with over 40 of my Senate colleagues, I am pleased to join Senators Grassley and Dorgan as an original cosponsor to this bill. Farmers have typically used the deferred payment contract system as a means for managing their business income. It is common for a farmer to forward contract to sell a product. Under this type of contract, a farmer may deliver the product in a given tax year, and he may not receive one lump-sum payment at the time of delivery. In fact, the payments may be spread over 2 tax years. Up until recently, the farmer was taxed on this income only for the actual amount received in a given tax year. However, last October, the Internal Revenue Service issued a ruling which disallows this practice. Under the ruling, all payments received under a deferred payment contract are subject to the Alternative Minimum Tax. Now, regardless of whether the actual payments under the contract are spread out over a multiple year period, the payments will be taxable in the year the contract is made. Needless to say, this ruling requiring farm families to pay a tax on income they have not yet received places an unfair burden on those families.”