Help Prevent SE tax on CRP Rents!
On June 19, we reported to you that CRP income may be subject to SE tax. The Tax Court ruled in the Morehouse case that CRP income (which the USDA calls “rent”) is subject to self-employment tax, even though the land owner has less involvement in the real estate activity than most commercial landlords. The Tax Court ignored its own precedent to find that the USDA wasn’t “renting” the property; it ignored that the CRP payments were constructed to match local county rental rates. (Side note: taxpayers receiving Social Security benefits are protected due to a change in the law in 2008.)
The Morehouse case needs be appealed because the case sets a bad precedent for all owners of CRP across the country. Anyone who fails to treat CRP as self-employment income is subject to penalty for underpayment of Federal tax.
However, appeals cost money, and the dollars at risk for Morehouse personally (only $6,000) just aren’t enough for him to justify paying for the appeal. It is important enough that I want to spread the word, and request my readers who have ground in CRP to share in the cost.
If you have ground in CRP, please consider helping out to protect your income from being subject to the 15.3% self-employment tax. If the Morehouse case is not appealed and reversed, approximately 15 cents of your CRP rent dollar will be diverted to yet more tax collected by the IRS.
The cost of the appeal is estimated at $25,000. If just 125 landowners contribute $200 each, sufficient funds will be raised. Spread across all of the CRP landlords, this is a small investment in protecting your rental income from additional taxes. Checks can be written to:
Halleland Habicht Client Trust Account—CRP Appeal Fund
33 South Sixth Street, Suite 3900
Minneapolis, MN 55402
In addition, those of you who are members of farm and/or conservancy associations: consider contacting your group to urge a contribution. Environmental groups are in favor of CRP to reduce wind and water erosion and to increase cover for habitat.
If an inadequate amount of funds are raised, or for whatever reason the appeal is not pursued, your funds will be returned.
Please consider contributing $200 (or more, but all contributions will be accepted) to protect CRP from additional taxes.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
[…] Neiffer, Help Prevent SE tax on CRP Rents! Paul wants CRP recipients to help fund an appeal of the recent Tax Court Morehouse case, holding […]