Washington, D.C. - U.S. Senator Russ Feingold has sent a letter to Internal Revenue Service (IRS) Commissioner Mark W. Everson, pressing him to stop seeking retroactive taxes from Conservation Reserve Program (CRP) farmers in Wisconsin and across the country. The CRP program provides financial incentives for improving and preserving environmentally sensitive land by taking it out of
production and enhancing its environmental benefit. The Sixth Circuit Court of Appeals ruled that farmers who take part in CRP should be subject to self-employment payroll taxes on CRP programs. Landowners who participate in CRP but do not farm are exempt from the tax because their payments are considered rental or real estate income. Spurred by this ruling, the IRS is currently considering going after farmers for taxes on their CRP land, all the way back to 1996.
"This ruling is simply unfair and the IRS needs to take another look at the direction they are headed," Feingold said. "Our farmers in Wisconsin and around the country cannot be subject to this unfair and unclear ruling by the courts. I urge the IRS not to seek retroactive taxes from active farmers in CRP."
The recent Sixth Circuit Court of Appeals decision overturned a 1998 Tax Court Ruling that CRP payments qualify as rental payments made by the government for taking environmentally sensitive land out of production. Since other rental payments are exempt from this additional tax, CRP payments were considered exempt as well.
"The CRP program increases water quality, wildlife habitat, and prevents soil erosion," Feingold said. "We should not punish farmers for taking part in it."
