Congress recently passed a $3.4 trillion fiscal package that delivers a mix of tax cuts, farm support, and biofuel incentives. Signed into law by President Donald Trump on July 4, the ‘One Big Beautiful Bill Act’ makes permanent several key tax provisions for ag producers and small businesses, including deductions for equipment purchases and estate transfers.

It also allocates $68 billion over the next decade to strengthen farm safety nets, expand crop insurance, and enhance trade and dairy programs.

Additionally, the bill revamps biofuel tax credits to boost domestic production and demand for corn and soybeans.

Summary of Tax Provisions for Ag Businesses

“A key takeaway is the certainty this tax policy will give to producers, ultimately enabling them to make strategic decisions — whether it’s expanding operations, transitioning ownership, or investing in new technology,” said Beth Swanson, strategic tax advisor with Pinion.

“We expect that permanent tax provisions like bonus depreciation and the 199A deduction will give producers confidence to invest in equipment and infrastructure without worrying about shifting tax rules.”

The new tax guidelines include:

  • QBI Permanence: Makes 20% qualified business income deduction permanent.
  • Bonus Depreciation Extended: Permanently extends 100% bonus depreciation for equipment purchases.
  • Property Depreciation Added: Adds 100% depreciation for nonresidential production property, including manufacturing facilities and agricultural production facilities built before 2031.
  • Change to Qualified Farmland Property Sales: Under the new Section 1062 of the bill, sellers of “qualified farmland property” to “qualified farmers” would be allowed to pay the capital gains tax from the sale in four equal annual installments. This is a significant shift from the current requirement to pay the full tax in the year of sale.

“This is a meaningful tax deferral opportunity for farmers selling farmland to other farmers,” says Keaton Dugan, lead commodity crops advisor for Pinion.

“In simplified terms, if you meet the parameters you could elect to spread your capital gains tax liability over four years — creating an installment option that eases the financial burden of transitioning land ownership. We see this for a win in family or neighbor-to-neighbor transactions, ultimately helping to preserve farmland for future generations.”

  • Section 179 Deduction Raised: Raises Section 179 deduction to $2.5 million for equipment purchases up to $4 million.
  • Capital Gains Allowance: Allows capital gains from farmland sales to qualified farmers to be paid over four years, if land stays in agricultural use for 10 years before and after sale.
  • R&D Expensing Restored: Permanently restores immediate expensing for domestic research and development (R&D) expenses, with catch-up provisions for previously capitalized expenditures.
  • Raises Estate Tax Exemption: Permanently raises the estate-tax exemption to $15M for individuals and $30M for couples starting in 2026.
  • Increase SALT deduction limit and preserves PTET deductions: Increases the state and local tax deduction limit to $40,000 for 2025-2029, and preserves full Pass-Through Entity Tax (PTET) deductibility for all pass-through businesses.

Farm Bill Provisions

“This legislation corrects a long-standing inequity by allowing LLCs and S-Corps to be treated like partnerships for payment limits. It’s a meaningful win for smaller and mid-sized operations that were previously penalized simply because of how they were structured,” said Phil Newendyke, lead farm program services advisor at Pinion.

“Additionally, raising reference prices and expanding base acres based on recent planting history brings farm programs more in line with today’s realities. It’s a practical update that better reflects the crops producers are actually growing.”

Notable guidance for producers:

  • LLCs and S-corporations that are taxed as a partnership/qualified pass-through entity is treated the same as a joint venture/general partnership for payment limitation purposes – meaning “allowed multiple payment limitations for each qualifying partner/member”.
    • Under the old system, LLCs and other pass-through entities were limited to one farm payment while partnerships could be eligible for multiple farm payments. This penalized farms that were set up as LLCs (which included many smaller farm operations).
  • Raises reference prices under the Prices Loss Coverage program (PLC) and the Agricultural Risk Coverage (ARC) program.
  • Allows USDA to add up to 30 million new base acres tied to planting history from 2019-23. The bill does not allow producers to reallocate their current base acres.
  • Payment limits would increase from $125,000 to $155,000 for individuals and to $310,000 for married couples, with future increases tied to inflation adjustments.
  • The legislation also waives AGI limitations for operations that receive at least 75% of their income from farming. This will allow larger operations to participate in conservation and other farm bill programs.
  • Dairy Margin Coverage is increased to cover up to 6 million pounds of milk produced.
  • Increased funding for USDA trade promotion programs (funding will be doubled).
  • Increases crop insurance funding by $6.3B over 10 years.
  • Expands premium subsidies for area-based plans and other support improvements.
  • Provides 100% indemnity for livestock losses lost to predators and 75% for weather or disease losses, including unborn animals.
  • Places Inflation Reduction Act (IRA) conservation dollars in the farm bill baseline but removes the climate-smart guidelines.

 Overview of Biofuels Provisions

“Overall, the energy provisions in this tax bill are largely favorable for ethanol and biodiesel plants,” says Donna Funk, lead biofuels advisor. “Transferability was fully preserved, and credits have been largely retained – while some have increased.”

  • 45Z Credit extension: 45Z Clean Fuels Production Credit is extended and modified. (Extends 45Z tax credit to the end of 2029 but also cuts the top rate from $1.75 a gallon to $1 a gallon.)
  • Restricts qualifying feedstocks to the U.S., Canada and Mexico.
  • Restricts calculations for carbon score credits: Department of the Treasury prevented from calculating the impacts of indirect land use changes when establishing a carbon score for the credit.
  • Small Agri-Biodiesel Producer Credit is doubled from 10 cents a gallon to 20 cents a gallon.

Ongoing Challenges…

While there are significant wins for agriculture in the One Big Beautiful Bill Act, challenges could lie ahead.

Guidance Sunsets

First, it is important to note that while some of the tax provision extensions are permanent, others are only extended through 2028.

Issues Unresolved

Additionally, Senator Chuck Grassley (R-IA) had introduced an amendment that would have capped payments at the entity level, regardless of operation size or structure and redefine what it means to be “actively engaged” in farming, potentially disqualifying many legitimate operations.

While the amendment was ultimately withdrawn — following a commitment from Senate Agriculture Committee Chair John Boozman to revisit the issue later this year — this is not the end of the conversation. Senator Grassley has long pushed for tighter eligibility rules, and we expect renewed efforts in upcoming farm bill negotiations or other legislative vehicles.

Another issue that emerged was the changes made to the Supplemental Nutrition Assistance Program (SNAP). SNAP emerged as one of the most contentious elements of the recently passed fiscal package. Under the new law, lower-income individuals will face increased difficulty qualifying for both Medicaid and SNAP benefits. The legislation also shifts a portion of SNAP costs onto the states.

Takeaways

Brian Kuehl, director of Government & Public Affairs at Pinion, stresses the need to stay informed and involved:

“These developments have significant implications for future ag policy debates. Historically, the farm bill has relied on a broad, bipartisan coalition that includes both agricultural and nutritional advocates. By weakening SNAP and shifting its costs, this legislation risks fracturing that long-standing alliance. If the nutrition title becomes politically charged it could jeopardize the passage of future farm bills.”

“While this legislation includes many positive changes, it’s not the finish line. We need to stay engaged to ensure future farm bills and other future legislation continue to reflect the diversity and complexity of today’s agricultural operations,” adds Kuehl.

Reach out to a Pinion advisor with questions on tax eligibility and strategy, farm and conservation program guidance, or business planning and financial management.