Congress Still Has Time To Deal With Health
Care Reform Bill's 1099 Requirement

Friday, Lubbock, Texas                              By Shawn Wade

      According to a recent blog post from Dr. Darren Hudson, Larry Combest Chair in Agriculture Competitiveness at Texas Tech University, the "hidden" 1099 issue in the Obama Administration's recently passed health care reform bill is an issue that needs to be dealt with by Congress before it creates significant headaches for U.S. farmers and ranchers.

      Fortunately, the provision is NOT slated to go into effect until the 2012 tax year. That means producers won't have any new responsibilities in this regard in 2011, but would have to begin keeping track of the expenditures for purposes of issuing 1099's to any person or entity that they pay $600 or more for services rendered between January 1 and December 31, 2012.

      Hudson wrapped up his post by saying that the good news for producers, and other small businesses that would be similarly impacted, is that industry groups are already on the job and there are already efforts to get something through Congress that would repeal this onerous provision.

      Hudson also noted that even if Congress is unable to get a bill repealing the provision passed this fall, a new Congress, regardless of make-up, should have many opportunities to get the job done beginning in the spring of 2011.

      The cotton industry, acting through the National Cotton Council, has joined 25 state and national farm, livestock and commodity groups urging Congress to repeal the provisions before it is slated to go into effect.

      The NCC notes that the new provision differs from current law in that instead of a producer only having to issue 1099's to so-called "unincorporated" vendors with whom they spend $600, the new provision would expand that to any person or business with whom a grower spends at least $600.

      In a letter the groups sent to Senator Mike Johanns (R-Neb) and Representative Dan Lungren (R-CA) urging repeal of the provision the groups noted, "Virtually all business-to-business transactions will be covered, creating a new major paperwork burden for the farms, ranches and related agri-businesses. The business of producing food, fiber and fuel is a hands-on venture where productivity and competitiveness is compromised by government rules and regulations that turn producers into bookkeepers. Prompt action is needed by Congress to reverse this onerous tax-reporting requirement."

      According to Hudson, the new health care bill essentially mandates the generation of a 1099 statement to anyone a grower spends over $600 with during the year.

      Hudson explains the issue as follows, "What does the health care bill have to do with your purchases of parts at the John Deere house, you ask? Good question.

      "This is first and foremost about revenue. By inserting that provision in the bill, it was believed that it could generate $300 billion per year, according to the IRS. That goes a long way to covering the costs of the health care bill if it were possible...but, it is not. Revenue is only one side of the equation."

      Hudson further explained the impacts of the provision saying, "First, you have the direct costs of the administration of this provision (more IRS agents/workers to handle the flood of 1099s, etc.). And then you have the massive indirect costs on businesses that will damage the long-term competitiveness of firms. Can you imagine how many 1099s the average farm would have to issue? Insane..."

 

 

New Cottonseed Insurance Pilot
Headed For 2011 Introduction

Friday, Lubbock, Texas                              By Shawn Wade

      According to Lubbock-based Plains Cotton Growers (PCG) a new federal crop insurance pilot product giving cotton producers the opportunity to purchase additional yield-based coverage on the cottonseed they produce is making its way through the implementation process and appears to be on-track for a 2011-crop debut. The FCIC Board approved the new program for pilot status on July 30, 2009.

      Called the Cottonseed (Pilot) Endorsement (CPE), the innovative new product was developed by PCG with a two-fold purpose: (1) to provide growers the ability to insurance the value of the cottonseed they produce in a similar manner as they insure their cotton lint; and, (2) to provide growers another reason to include cotton in their crop mix since a greater portion of the value they derive from the crop can be covered by insurance.

      The idea of the new product has been well received, and strongly supported, by growers and cotton industry groups throughout the Cotton Belt.

      As a result of that support and the nature of the new product the Federal Crop Insurance Corporation Board of Directors and the USDA Risk Management Agency agreed to approve the product for sale throughout the Cotton Belt.

      The new CPE product will be an add-on endorsement available for purchase by growers who purchase a qualifying buy-up policy of insurance in 2011. The cottonseed endorsement can be purchased by growers who select either Yield or Revenue coverage policy of insurance under the new Combo Policy provisions that qualify as buy-up plans of insurance.
      As such the CPE premium is eligible for the full range of federal crop insurance premium subsidy just like the growers cotton lint policy.

      Growers who purchase catastrophic (CAT) or group risk (GRP or GRIP) policies of insurance will not be able to purchase the cottonseed endorsement add-on.

      Additional information about the endorsement will be distributed to Approved Insurance Providers (AIP) as they are apprised of 2011 insurance offering by the USDA Risk Management Agency over the next few months.

      Since it will be in pilot status for 2011, all AIP's that sell eligible federal crop insurance products to cotton producers will have the option of offering the Cottonseed Pilot Endorsement to their customers.

Understanding The Program

      Understanding of the new product and how it works should come quickly by both AIP's and producers since the program will require virtually no extra effort to purchase or service.

      In a nutshell, the Cottonseed Pilot Endorsement (CPE) utilizes a proxy approach to crop insurance, converting cotton lint production to cottonseed equivalent by a state-based seed-to-lint conversion factor to form the basis of insurance and to calculate indemnities.

      Premium rates will mirror the premium rates applicable for the underlying cotton lint insurance policy based on the direct correlation that exists between cotton lint and cottonseed yield.

      Extensive agronomic and statistical data support the CPE's use of a cottonseed factor as an actuarially sound method of providing an effective guarantee for producers without imposing an additional reporting or underwriting burden on producers and the program.

      Also, use of the state-based factor does not affect the probability of an individual loss because the same conversion factor is used to set the guarantee and to determine production to count.

      In simple terms a producer buying a qualifying buy-up policy of insurance product (MPCI, CRC, RA or their equivalent under the new Combo Policy Provisions – Yield Coverage and Revenue Coverage) that purchases the cottonseed endorsement will have a companion policy of insurance covering a percentage (equal to the coverage level selected for their cotton lint policy) of their cottonseed equivalent yield.

      The cottonseed equivalent yield will be calculated using the applicable state cottonseed factor multiplied by their current Actual Production History (APH) yield. The cottonseed equivalent yield will then be used to create the cottonseed guarantee. The cottonseed guarantee is calculated by multiplying the cottonseed equivalent yield times coverage level. Total dollars of coverage will then be figured using the cottonseed guarantee yield times the applicable cottonseed price established by the USDA Risk Management Agency.

      The CPE premium will be calculated using the applicable premium rate associated with the producers APH lint yield that is used to calculate premiums under the Combo policy of insurance. The CPE will also utilize the current federal crop insurance premium subsidy structure tables to calculate the amount of the actual producer paid premium.

      For additional information about the Cottonseed Pilot Endorsement contact Plains Cotton Growers at 806 -792-4904.

 

 

2010 High Plains Crop Tour &
Industry Field Day Event Calendar

Date:

Event:

 

September 21

Dawson County Harvest Aid

 

September 21

Briscoe County Crop Tour

 

September 21

Randall County Crop Tour

 

September 22

Lynn County Crop Tour

 

 

 

 

Industry Field Days:

 

All-Tex Seed Field Day – Levelland, TX
Tours 10:00am – 2:00pm; Lunch to be provided to all participants.

September 22

Monsanto Technology Showcase Field Day

Steve Chapman Farm, Lorenzo, TX, 9:00 am

 

September 22 - Consultant

September 23 - Producer

Americot/NexGen Field Day & Shrimp Boil:

Lamesa, Ladies Auxiliary Building, 9:00 amÉÉ.......
Seminole, Gaines County Park, 9:00 amÉÉ...ÉÉÉ
Ropesville, Ropes Community Center, 8:45 amÉ...
New Home, New Home Community Bldg, 9:00 am....
Idalou, Idalou Community Clubhouse, 9:00 amÉÉ...

 

 

September 27

September 28

September 29

September 30

October 1

Bayer CropScience Cotton Production Field Day

Idalou Breeding Station, 9:30 am each day

 

September 29 - Southern Producers

September 30 - Northern Producers