In this column, Progressive Dairy summarizes issues in the news and attempts to describe how they might affect dairy farmers. Look for more extensive background, details and updates at www.progressivedairy.com
Items in this column are compiled from Progressive Dairy staff news sources. Send news items to Progressive Dairy Editor Dave Natzke.
Estate and gift taxes
In October, the Internal Revenue Service (IRS) announced the revised federal estate tax and gift tax limits for 2023. The federal estate tax limit rises from $12.06 million in 2022 to $12.92 million in 2023. The federal gift tax limit jumps from $16,000 in 2022 to $17,000 in 2023.
Farm families concerned about hitting top federal or state estate tax exemptions need to begin working on farm succession and estate plans to limit future potential tax liability. When developing an estate plan, state estate taxes, inheritance taxes or both should be considered by working with a qualified tax adviser who can assist you in creating a plan to limit tax liability at death.
A deceased person owes federal estate taxes on a taxable estate. The taxable estate is the gross estate minus allowable expenses and deductions.
Paul Goeringer, extension legal specialist at the University of Maryland, provides an example of a married farming couple with a taxable estate of $26 million both pass away in 2023. The couple’s heirs may be exempt up to $25.84 million from federal estate taxes and only owe federal estate taxes on $160,000. Since the federal estate tax rate is 40%, in this case, the heirs would owe $64,000 in federal estate taxes.
Goeringer offers another note on federal estate taxes: A surviving spouse has an unlimited marital deduction. The surviving spouse can include the predeceasing spouse’s unused federal estate tax limit in their federal estate tax limit. The surviving spouse can lose this “portability” upon remarrying. Note that several states allow for portability with state estate tax exemptions. Working with a tax adviser to preserve any unused federal or state estate tax exemptions is essential.
Federal tax law allows each taxpayer to gift up to $17,000 per year to one individual without incurring federal gift taxes. This exemption is tied to inflation and increases to the nearest $1,000 amount.
It is worth keeping in mind that a few states also impose estate taxes, and a few only have inheritance taxes, Goeringer said. These tax exemptions vary among the states and, in many cases, are less than the federal exemption.
WIC and dairy
U.S. dairy organizations expressed disappointment in proposed changes to the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), announced in late November by the USDA’s Food and Nutrition Service (FNS).
The USDA FNS is accepting feedback on the proposed changes until Feb. 21, 2023. The National Milk Producers Federation (NMPF) and the International Dairy Foods Association (IDFA) issued a joint statement pledging to work with the USDA to modernize the WIC food package for eligible families to access nutrient-dense milk, yogurt and cheese varieties.
A major piece of the proposal boosts support for fruit and vegetable consumption by increasing the amount provided and the varieties available for purchase. Other proposed changes expand whole grain options to include foods like quinoa, blue cornmeal and teff, and includes options for canned fish and beans.
Among specifics targeting dairy, the proposal reduces maximum monthly allowances for milk and permits only unflavored milk, while also requiring lactose-free milk to be offered. It calls for more non-dairy substitution options, such as soy-based yogurts and cheeses. The proposal also adds flexibility in the amount of infant formula made available.
The USDA received a formal proposal to amend inter-market transportation credits in the Appalachian and Southeast Federal Milk Marketing Orders (FMMOs), and adopt new provisions to establish distributing plant delivery credits in the Appalachian, Southeast and Florida FMMOs. The proposal and supporting documents may be viewed on the USDA Dairy Programs website.
The USDA is considering initiation of a rulemaking proceeding on the proposal. Additional proposals will be accepted until Dec. 19. Tentatively, a hearing could be held in late February.
The proposal was submitted on behalf of the Dairy Cooperative Marketing Agency (DCMA), which represents nine cooperatives supplying milk in the region. The proponents contend the three southeastern FMMO areas have a chronic milk deficit to meet the needs of population growth, creating challenging marketing conditions. Further, they contend that inter-market transportation credits in the Appalachian and Southeast orders and distributing plant delivery credits in the Appalachian, Southeast and Florida orders will incentivize more orderly movement of milk in the southeastern U.S.
According to the information supporting the petition, annual milk production in 11 states in the southeastern U.S. declined by nearly 4 billion pounds (32%) between 2006 and 2021. The number of dairy farms licensed to sell milk in the region declined by 2,739 (64%) over the same period.
With fewer producers and less milk, the petition cites longer distances and higher hauling costs from farm to plant, with higher costs primarily falling on the members of the DCMA cooperatives. The longer hauls have exacerbated the costs of balancing the needed supplies for Southeastern order distributing plants.
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INFANT FORMULA WAIVER
The head of the NMPF called on congressional committees to allow temporary steps to boost infant formula imports to expire at the end of the year. In a letter to leaders of the Senate Finance Committee and House Ways and Means Committee, Jim Mulhern, NMPF president and CEO, said continuation of import tariff waivers could discourage future domestic production of infant formula.
The U.S. faced a critical shortage of infant formula earlier in 2022 due to supply chain issues and the temporary shutdown of a major Michigan processing plant by the U.S. Food and Drug Administration, over bacterial contamination concerns. To address supply shortages, Congress approved the Infant Formula Act, in July, and the Bulk Infant Formula to Retail Shelves Act, in October. Signed into law by President Biden, both provided duty-free treatment on infant formula imports through Dec. 31, 2022.
Mulhern said NMPF would work with the Biden administration and Congress in the coming year to identify ways to improve the ability of U.S. manufacturers to produce more infant formula.
We’ve discussed in previous Progressive Dairy articles, but here’s a reminder: By June 2023, purchase of all over-the-counter (OTC), medically important, antimicrobial products administered to livestock will require a veterinarian’s prescription. Assess what that means for your farm.
To obtain a prescription, a veterinarian-client-patient relationship (VCPR) is required. Components of the VCPR include a written agreement, knowledge of the farm operation and animals, written treatment protocols and maintenance of treatment records covering specific time frames and use of those drugs. The product can then be purchased through the veterinarian or a distributor.
Stockpiling OTC antimicrobial products is not advised. They have expiration dates, and proper disposal is needed when they expire.