Sour Grapes: Blueberries Lose Out On Bonus Depreciation in Tax Extenders

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By Marc Heller  

June 5 — Blueberries don't grow on trees—and that could make all the difference for growers trying to reap a popular tax benefit.

Bonus depreciation—the part of the U.S. tax code that allows businesses to write off up to half the cost of an investment in a single year—would be expanded to fruit and nut trees, as well as vine crops, under legislation the House Ways and Means Committee approved in May.

The committee's legislative language didn't mention bushes, however, and that is no small matter for blueberries, a top crop in Michigan, the home state of House Ways and Means Committee Chairman Dave Camp (R). The state produces as much as a third of the U.S. harvest annually, leading all other states, the Department of Agriculture said.

Bush crops such as blueberries wouldn't be eligible for the benefit and growers would have to recover planting costs over several years. An aide to a senior member of the committee told Bloomberg BNA the omission was an oversight that can be corrected as the legislation moves along.

Depreciation can be a key tax matter for fruit and nut growers who have to wait several years between planting and the first harvest. That delay is especially important right now in California, a congressional aide said, because severe drought could force growers to replant crops such as pistachios and almonds. Bonus depreciation allows growers to recover much of the cost as soon as they pick a first crop, enabling them to make up the initial investment expense faster.

Patricia Wolff, senior director of congressional relations for the American Farm Bureau Federation, called the proposed change “very positive,” though short of one goal her group has in mind: extending bonus depreciation to other costs of production, such as fertilizer and pruning.

“These costs can be significant when compared to planting costs,” Wolff told Bloomberg BNA.

Roots in California

The fruit and nut provision came from Rep. Devin Nunes (R-Calif.), a Ways and Means Committee member, whose district includes citrus groves and other affected crops.

While a wide variety of fruit and nuts grow on trees, and vines are synonymous with grapes, bush crops may be easy to overlook.

“There aren't very many of them, I suppose,” said Christopher Hesse, a CPA and partner in the federal tax resource group at CliftonLarsonAllen LLP in Minneapolis. “Blueberries are not vines. That's pretty clear.”

A maze of tax rules covers agriculture, shaped over the years by special interests within the industry.

Hesse said blueberries appear to be real property under Section 1245 of the tax code, without a specific class life, which translates to a seven-year cost recovery period.

Wolff said cranberries, as well as bulb crops such as asparagus, appear to have been forgotten, too.

Battered Berries

Blueberries have been battered by issues all their own. A glut in western Michigan in 2009 sent prices tumbling. Growers have seen increased competition from foreign producers such as South America. Producers battle virus diseases, and a stormy winter in 2013-2014 injured plants from road salt spread on nearby highways, the Michigan State University Extension Service said.

For decades, blueberry growers also didn't have access to federal crop insurance programs to cover losses—a shortcoming Congress reversed in the 2014 farm bill at the urging of Senate Agriculture, Nutrition & Forestry Committee Chairwoman Debbie Stabenow (D-Mich.), who also serves on the Finance Committee.

A maze of tax rules covers agriculture, shaped over the years by special interests within the industry, Hesse said.

The Ways and Means Committee voted to make bonus depreciation—an economic stimulus tool dating to President George W. Bush's administration—permanent so Congress doesn't have to renew it every few years. It expired at the end of 2013 and is one of more than 50 so-called tax extenders Congress is considering reviving.

Bonus depreciation is also one of the most expensive extenders in terms of revenue the government doesn't collect, costing some $263 billion over a decade, the congressional Joint Committee on Taxation said.

In the Senate, the Finance Committee agreed April 3 to extend bonus depreciation for two years, without adding the agricultural provision.

Lawmakers have said they will probably have to work out a final compromise after the November midterm elections.

Complex Rules

Agriculture appears to hold a singular place in the tax code's tangle of rules on cost recovery, with bonus depreciation being one example.

Cost recovery schedules vary widely by type of animal, allowing three years for hogs, five years for breeding sheep and three years for non-race horses 12 years old or older. Younger horses are depreciated over seven years unless they are race horses, which receive separate treatment.

And that is just under the Modified Accelerated Cost Recovery System. The Alternative Depreciation System has a different schedule, depreciating orchards over 20 years, for instance.

One loser in the bonus depreciation action so far has been the dairy cow. Sen. Charles E. Schumer (D-N.Y.), a senior member of the Finance Committee, proposed in 2013 to expand bonus depreciation for cows, allowing animals that are currently being milked and are sold from one farm to another to qualify for the benefit. That would encourage expansions and, in New York's case, boost production of Greek-style yogurt, Schumer said at the time.

Without that change, cows already in production would be considered “used” property and wouldn't qualify. He hasn't gained any co-sponsors on legislation (S. 494) to make the change.

And while blueberries may have slipped by Camp, the chairman hasn't missed a beat on horses. Camp, a Republican who is retiring this year, endorsed a quicker depreciation timeline for certain race horses, allowing active race horses two years old or younger to be depreciated over three years rather than seven. That provision is in Camp's draft for a tax overhaul, as well as in the tax extenders the Finance Committee approved.


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To contact the editor responsible for this story: Brett Ferguson at

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