HOUSE BILL REPORT

HB 1696

BYRepresentatives Grant, Appelwick, Baugher, Nealey, Rayburn, Brooks and Kremen

Revising excise tax exemptions on agriculture.

House Committe on Ways & Means/Revenue

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (7)

      Signed by Representatives Appelwick, Chair; Basich, Dellwo, Holland, Schoon, Taylor and Winsley.

House Staff:Rick Wickman (786-7136)

AS REPORTED BY COMMITTEE ON WAYS & MEANS/REVENUE

JANUARY 28, 1988

BACKGROUND:

State law exempts excise taxes from persons growing or producing for sale commodities on their own lands.  Recently, a question was raised by farmers as to whether or not the exemption applied to CRP (conservation reserve program) lands which are held out of production as required under the Federal CRP program.  Farmers are paid an average of $50 per acre to take such lands out of production.

Farmers in the CRP program must maintain CRP lands while they are out of production according to certain standards.  Farmers purchase seeds, fertilizers, sprays and other materials to maintain CRP status.

SUMMARY:

SUBSTITUTE BILL: All income in the form of federal subsidies under the Federal CRP program are exempt from business and occupation taxation.  All materials such as seed, fertilizers, and sprays used to maintain lands under CRP are exempt from sales and use taxation.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  Clarified the Federal conversation reserve program or its successor as the program under which income and purchases are exempt from excise taxes.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Requested January 27, 1988.

House Committee ‑ Testified For:    Representative Bill Grant, Representative Alex McLean, Bill Wilkerson, Department of Revenue.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Subsidies provided under the Federal conversation reserve program (CRP) to qualifying farmers to not produce agricultural crops should be exempt from business and occupation taxation in the same manner as income received from producing agricultural commodities.  In addition, materials and supplies necessary to maintain erodable lands in CRP status should be exempt from sales and use taxation.

House Committee - Testimony Against:      None Presented.