United States

Proposed bill would expand casualty loss expensing for citrus growers

Recent hurricanes have devastated southern crop growers


Recent hurricanes have inflicted significant damage upon the citrus industry. Certain members of the House of Representatives have put forth a bill (H.R. 112) that would expand the ability of citrus growers to expense the costs incurred in replanting their groves.

The internal revenue code has a requirement for a taxpayer to capitalize certain costs associated with plants having a preproductive period exceeding two years. An exception to this general rule exists for the costs a taxpayer incurs to replant its crops following a casualty event.

Under the current rule, this ability to expense replacement costs extends to costs paid or incurred by parties owning a minority equity interest in the crops, but only if that minority owner materially participates in the planting, maintenance, cultivation, or development of the crops during the taxable year.

H.R. 112, if passed, would, for citrus plants only, expand this minority-interest provision to allow expensing of costs paid or incurred by three additional classes of owners:

  1. Two Equal share owners,
  2. Owner-investors that do not materially participate in the farming activities,
  3. New owners who did not hold the crops when destroyed, but who fully acquired and replanted the land previously held by the destroyed-crop owners.  

These new categories will assist citrus growers who may not be able to afford to replant on their own.

According to the bill’s sponsor, House Rep. Vern Buchanan, H.R. 112 is set to be included in an aid package that will be considered by Congress sometime in October. Given the widespread impact of Hurricane Irma, this bill is likely to impact a large number of taxpayers if passed and is certainly one to watch in the coming month. This bill comes on the heels of numerous proposed hurricane relief measures, including employment/retention credits for impacted areas from hurricanes Harvey, Irma and Maria.

To determine how this bill could affect your particular tax position, contact your tax advisor.


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