Sound tax policy for rural America

Fighting for Sound Tax Policy for Rural America

from the National Cattlemen’s Beef Association

Engrained in the fabric of the U.S. cattle industry is the desire to carry on the legacy of the generations before and give the next generation the opportunity to continue that same legacy for years to come. For beginning farmers and ranchers — and all those who are taking over the family business from another generation — the environment is challenging enough as it is. Undue tax liabilities should not be the deciding factor of the next generation’s ability to be successful.

“When it comes down to coming home, our biggest expense is taxes. If you don’t have a plan set and ready before the situation of the transition is going to happen, it can be very scary; to take 40 percent of your assets is just a scary number,” said David Schuler of Schuler Red Angus in Bridgeport, Neb. “How do you continue to farm or ranch after that?”

This sentiment is felt by many producers across the country. Efforts to eliminate currently available estate tax relief or the long-standing step-up in basis are in direct conflict with the desire to preserve and protect our nation’s family-owned farms and ranches. Farmers and ranchers deserve certainty in the tax code overall. Without it, transition planning for the next generation of producers is nearly impossible.

“With the average age of a farmer being 57 to 60, this issue is not just a heavy issue for the individual, but it’s going to be happening a lot for a lot of people across the United States, not just over time, but specifically in the next four to eight years,” Schuler said.

An estimated 2,000 acres of agricultural land is paved over, fragmented or converted to uses that compromise agriculture each day in the U.S. Therefore, more than 40 percent of farmland is expected to transition in the next two decades.

“There is going to be a huge change in how the inherited land goes to the next generation. This isn’t just an issue that’s been around for a while — this issue is going to balloon harder than it has for the last ten years, in the next 10 to 20,” said Schuler.

The current situation in agriculture is one that is immensely impacted by decisions being made thousands of miles away from farms and ranches—behind the desks of lawmakers in Washington, D.C. It is imperative that Congress prioritize policies that support land transfers to the next generation of farmers and ranchers.

In April, The Preserving Family Farms Act of 2021 was introduced by U.S. Representatives Jimmy Panetta (D-CA) and Jackie Walorski (R-IN). NCBA has long supported efforts to reduce undue tax burden on farmers and ranchers. This bipartisan legislation to expand IRS Code Section 2032A to modernize Special Use Valuations, would allow cattle producers to better protect their family-owned businesses from the devastating impact of the federal estate tax, commonly referred to as the Death Tax.

U.S. cattle producers, like Kevin Kester of Bear Valley Ranch in Parkfield, are particularly susceptible to the federal estate tax due to the unique nature of agricultural production, and cattle ranching in particular.

“In 1993, when my grandfather passed away, it created a taxable event with the IRS and we ended up owing estate taxes and interest, close to $2 million. At the time we just had cattle, so as you can imagine we were land rich and cash poor. It was really a struggle for more than ten years to find ways to pay off that estate tax burden,” said Kester.

Similarly to Bear Valley Ranch, the value of most cattle farms and ranches can be attributed to illiquid assets such as land, farm equipment and other real property. In fact, in the U.S. alone, cattle producers conserve over 680 million acres of land. All too often at the time of death, farm and ranch families are forced to take out loans or sell off their illiquid assets in order to meet their federal estate tax burden.

While the current 2032A reduction is 55 percent higher than the value established two decades ago, USDA estimates that cropland values have increased by 223 percent. Agricultural land values – including on-farm buildings – have also risen dramatically, increasing by 241 percent during this same period. Due to the rapid inflation of farmland values, the 2032A deduction is no longer aligned with the needs of modern agriculture – nor does it accomplish Congress’ intended goal of providing meaningful protection to those producers who are most vulnerable to the estate tax.

“There’s enough challenges to generational succession in farming and ranching, we just don’t need tax burdens being one of them,” Kester said.

The Preserving Family Farms Act increases the limitation on 2032A valuations from $750,000 to $11.7 million, thus reviving a critically important tool in the toolbox for farm and ranch families across the U.S. If enacted, this legislation will provide a permanent solution to an issue that has long plagued our nation’s cattle producers.

While NCBA recognizes the significance of this proposal, the team is aware that conversations that are blatantly out of touch with the needs of rural America are continuing to happen in D.C. There have been recommendations from lawmakers to overturn tax policies that benefit farm and ranch families across the U.S.—such as the step-up in basis, which allows for the readjustment of the value of an appreciated asset for tax purposes upon inheritance—a critical tool for managing tax liability when generational transfer occurs.

According to a study by EY, family-owned businesses and the local economies they support would be hit hardest by a repeal. To reveal the impact stepped-up basis repeal would have on family-owned farms and ranches, EY developed a case-study based on a theoretical family-owned cow-calf operation. In this scenario—one where the stepped-up basis is no longer a tool for family-owned business to utilize when generational transfer occurs — gains are taxed at death and would result in an immediate one-time tax liability equivalent to 280 percent of the farm’s annual income.

“The EY study sheds light on the facts that we at NCBA—among others in the agricultural community— have long known. Simply put, the repeal of stepped-up basis would have catastrophic impacts on the ability of farmers and ranchers to transfer their operations to the next generation,” said Danielle Beck, NCBA Senior. Executive Director, Government Affairs.

NCBA stands firm in fighting for increased opportunities for producer profitability and, with that, opportunities for the next generation of farmers and ranchers to be successful.

“NCBA continues to advocate for tax policy that allows the next generation of agricultural producers to have the economic tools to be successful. Repealing stepped-up basis would adversely impact farmers and ranchers across the country. In fact, while this provision has been identified as a potential revenue raiser for government spending—it would be irresponsible to place that burden on family-owned businesses, and multigenerational agricultural operations in particular,” Beck said.

Through continued efforts and conversations on both sides on the aisle, NCBA is committed to conveying to elected officials the importance of sound tax policy for rural America. However, it is those living and working in rural America that know all too well the situation at hand.

“We work so hard our entire lives; our parents and grandparents work so hard. We’re working 40 hours a week by Wednesday, and then we continue on the rest of the week. The backbone of America has a dire situation on our hands, if we are just allowed the opportunity to be capitalistic and hardworking — that’s all we ask, it really is,” said Schuler.

Absent full, permanent repeal of the Death Tax, Congress must preserve provisions in the tax code that ensure the viability of family-owned farms and ranches, as well as the vitality of the rural communities they support. It is imperative that producers continue to engage with elected officials on this issue. The most powerful lobbying tool is the story of farmers and ranchers.

Please join NCBA in our tax letter campaign. Share your story by visiting https://p2a.co/t8CgREN because the next generation depends on it!

Christy Mathis

Christy Mathis, a hard-nosed and hard-driving nurse-turned-rancher’s wife whose tough exterior belied the kind heart and graciousness that lay beneath, died suddenly at her home. She was 78. A mother of three and doting grandmother of five, Christy had an indefatigable work ethic. For many years, while managing the Mathis household and the family cattle business finances, she was a Girl Scout leader and active in 4-H. Christy also took great satisfaction from her involvement in the Hornitos Patrons Club, the Cathey’s Valley Garden Club and California CattleWomen.

At home, she churned out intricate personalized quilts for family members and friends, tended to her gardens and hosted and cooked dinners for her wide circle of friends.

“Everything Christy did, she did so well,” younger sister Judy Thibodeau said. “She’d make all these quilts and they would look like a professional production. She did everything with precision.”

For most of the last decade, Christy cared for husband Lewie, providing dialysis treatments at their home on a nightly basis. She continued even as she faced her own health challenges, only recently allowing caregivers to provide the demanding care.

“She was the rock. The glue that held this family together,” daughter Stephanie Hibbits said.

Christy passed away, gently, on May 1, while resting in a recliner in her living room on the family’s sprawling cattle ranch on the outskirts of Lompoc, in Santa Barbara County.

Christyn Marie Errecarte was born Aug. 10, 1942, in Southern California, the oldest of Joaquin and Emma Errecarte’s three children. Judy was born 18 months later and brother Jim arrived about four years after that. The family lived modestly in what was then the small beach town of San Juan Capistrano. Emma stayed home with the kids while Joaquin -- known to all by his nickname “Queen” -- ran a gas station, then became a carpenter and ended up the foreman of Rancho Mission Viejo. After work, he would labor in the family’s orange grove.

After high school Christy earned a nursing degree and worked as a registered nurse until marrying Lewie Mathis. They had met a few years earlier when she attended a postbranding barbecue at Rancho Mission Viejo.

Christy was very proud of her time as a nurse. Despite never returning to the profession, she continued to take continuing education classes to maintain her license for over 30 years.

Lewie and Christy married Sept. 10, 1964, They had three children – Todd, Jeff and Stephanie. Todd and Jeff followed their father into cattle ranching while Stephanie became an equine veterinarian.

As kids, the Mathis siblings were active in sports and other avocations. Christy got them wherever they needed to be.

Holidays were special. Christy made Halloween costumes for her children and baked pies and cooked an immense dinner for Thanksgiving. Christmas was a monthlong celebration, with Christy baking and putting up decorations throughout the home. The family always had a very tall Christmas tree thickly covered in lights and ornaments.

Stephanie said her mother loved to travel but ranch life didn’t allow her to do it as often as she would have liked. Still, there was a memorable mother-daughter trip to England and France where Christy served as a chaperone for a group of students. They also traveled together to Washington, D.C., and New York City.

The Mathis ranch in Hornitos was a favorite summertime destination for Judy’s and Jim’s children. Judy likened it to a dude ranch – Lewie, Todd, and Jeff always had the horses ready to ride and Christy “just took care of everything.” Her children loved their aunt’s chocolate waffles.

Christy took pleasure in helping her family and those outside it. Stephanie remembered that when she completed her surgery residency, her mother – without being asked – made equine-themed quilts for two of her mentors, as well as a third one for Stephanie to keep.

That thoughtfulness continued until the end.

The day after Christy’s death, her daughter-in-law, Stephanie Mathis, started sorting mail that had piled up. She found letters from the California Department of Agriculture’s division of brand registration.

Inside was confirmation that two longtime family brands had been transferred to Stephanie and Jeff’s sons, Lewie and Zane. Transferring brands is a complicated process involving letter-writing and dealing with bureaucrats. Christy had vowed to make sure her grandsons grew up with those brands officially attached to them and spent months cajoling the government.

Her sons, greatly saddened by their grandmother’s death, immediately brightened when told the news. “She could not have left a bigger spark for them to become cattlemen,” Stephanie Mathis said.

Christy is survived by husband Lewie of Lompoc; sons Todd and wife Jene of Washoe Valley, Nev., and Jeff and Stephanie of Lompoc; daughter Stephanie Hibbits and husband Gregg of Templeton; sister Judy Thibodeau and husband Peter of Aptos; brother Jim Errecarte and wife Kathy of Davis; and grandchildren Gage, Casey, Zane, Lewie and Ronan, as well as several nieces and TO SUBMIT YOUR FAMILY WEDDING nephews. NEWS, BIRTH ANNOUNCEMENTS

A private OR OBITUARIES, CONTACT THE CCA memorial gathering will be planned for OFFICE AT (916) 444-0845 OR E-MAIL: MAGAZINE@CALCATTLEMEN.ORG a later date.

Ernie Morris

Ernest “Ernie” (Albert) Morris County where they raised Blanche’s two children, Linda and died peacefully in his sleep on May Ralph. Ernie’s and Blanche’s marriage lasted more than 64 5, 2021, at his ranch near Templeton. years. They were an icon couple at numerous public events. He was 93 years old. Ernie’s art talents began to show at an early age, with Ernie was born Dec. 13, 1927, at special interests in the California Vaquero. Vaquero art the family home in the small rural was a hobby until 1964 when he took up art as a full-time community of Fellows in Kern occupation. In 1967 Ernie began placing a small hackamore County. He was the oldest of two beside his name on his drawings and paintings as a symbol children of Donald Morris and to connect his art and his rawhide work. Jessie (Wilkinson) Morris. He was a Ernie prided himself in creating authentic vaquero fifth-generation California cattleman on both his mother’s remembrances in all aspects – people, horses, equipment, and father’s side of the family tree, and he was a great- cattle, terrain, livestock situations, etc. He created vaquero grandson of the late Samuel S. Jobe, a Pony Express rider art with pen & ink, pencil, charcoal, watercolor, oils, acrylic, and stagecoach driver. bronze sculpting, wood carving, rawhide braiding, and horse

Ernie spent much of his youth on the family ranch hair mecates. His paintings and drawings provide a vivid and in Kings County. After the tragic accidental death of his colorful replay of his personal experiences while working father when Ernie was 12 years old, his family moved to on various ranches in his younger days, and the many stories the Paso Robles area of San Luis Obispo County to be told to him by “old-timer cowboys” he knew. His art, closer to other family members. During his high school rawhide work, and books have been featured in galleries, years, Ernie began working on some of the largest livestock museums, and private collections throughout the United ranches in the central coast where he worked with older States and many parts of the world. men who followed the California Vaquero horsemanship Ernie authored and illustrated seven popular books about and livestock handling style. There he found the beginning vaquero horsemanship and livestock handling. He also of a fascination that lasted throughout his life. His love illustrated several other books and publications, and he was for livestock and the ranching life knew no bounds. He published in numerous newspaper and magazine articles held very high regard for the daily working cowboys who regarding horse training methods, rawhide braiding, western practiced vaquero ways. art, etc.

Ernie especially credited his grandfather, Jesse Wilkinson, He was a one-of-a-kind traditionalist and an icon to the with teaching him many of the vaquero ways and techniques California Vaquero system and was an inspiration to many for making quality rawhide equipment. Jesse was well-known horsemen and cattlemen. in the central coast area as an excellent vaquero and a master Ernie was preceded in death by his father Donald Morris, rawhide worker. When Ernie asked his grandfather to teach his mother Jessie Simmons, his sister Clara Garrett, his him details of expert rawhide braiding, Jesse had only two wife Blanche Morris, and his daughter Linda Smith. He is requirements. He said “I’ll teach you the rawhide business survived by his son Ralph Pavey (Diane), four grandchildren from A to Z, if you’ll make me two promises. Never cheat Dawn Smith (John Elwood), Brian Pavey (Janelle), people in anything you do, and do what I tell you. If you Kenny Pavey (Shannon), Jeff Smith (Gena), seven greatcan’t get it I want you ‘barking at the hole’.” Ernie made that grandchildren, and one great, great-grandchild. promise, and the lessons began. Under Jesse’s tutelage, Ernie Ernie’s final resting place is in the Veterans section of the became an expert horseman, livestock man, and rawhide Paso Robles District Cemetery, beside his wife Blanche. braider, and a knowledge source and encouragement for aspiring horsemen and rawhide braiding aficionados. Ernie spoke with pride about the six years he spent in the Navy. wedding bells He served tours in the latter part Ramey & Patterson of WWII and the early part of the Lauren Ramey and Jared Patterson Nampa, Idaho. The groom, originally Korean War, in addition to other were married in a ceremony from Declo, Idaho, is employed by global commissions. surrounded by friends and family in the American Angus Association

Ernie and his wife Blanche were Caldwell, Idaho on May 22. where he represents the association married on March 10, 1954. They The bride was raised in the cattle as a regional manager in the Pacific eventually settled to their ranch industry and is from Ridgefield, Wash. Northwestern Territory. The couple near Templeton in San Luis Obispo She works as a labor and delivery nurse for St. Luke’s Medical Center in have made their first home in Caldwell, Idaho.