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COOL Repeal, Tax Breaks Clear Congress, Leaving GMO Labeling for 2016

The country-of-origin labeling rules for beef and pork are about to become history, while a lucrative but expired tax break for farmers is about to become permanent under spending and tax legislation that easily cleared Congress. 

The legislation also will give the beleaguered cotton industry some relief from government payment limits and reinstate tax subsidies for biofuels and wind power. Expired tax incentives that subsidize biodiesel, cellulosic ethanol, and biofuel pumps are restored and extended through 2016.

Missing from the bill is any resolution to the fight over labeling biotech foods or a reauthorization of school nutrition programs. Senate Agriculture Committee Chairman Pat Roberts, R-Kan., said Friday that he would seek to move legislation on both issues in January, and also try to pass a reauthorization of the Commodity Futures Trading Commission. Although negotiations are continuing, Roberts says he has draft proposals ready on all three issues.

“There are three things we should do by the end of February. We can do this,” he told reporters. 

The spending and tax legislation combined an omnibus spending bill that will fund the government through September 30 and a sweeping tax package that extends dozens of lapsed tax incentives that are widely used by businesses and individuals. 

The tax breaks include the enhanced Section 179 expensing allowance used by farms to offset the cost of tractors, combines, and other new equipment. The bill would permanently allow a business to expense up to $500,000 - up from a limit of $25,000 - and the $500,000 limit would be indexed for inflation.

A bonus depreciation provision is extended at 50% for property placed in service during 2015, 2016, and 2017, and then lowered to 40% in 2018 and 30% in 2019.

The House approved the spending measure, 316 to 113, Friday morning and then combined the bill with the tax package that representatives had approved on Thursday. The two bills were combined and then sent to the Senate, where the consolidated bill was quickly approved, 65-33.

The combined legislation now goes to President Obama for his signature. 

The repeal of the country-of-origin labeling law was designed to avert more than $1 billion in retaliatory tariffs that the World Trade Organization authorized Canada and Mexico to levy against a variety of U.S. products because of COOL requirements.

“U.S. exporters can now breathe a sigh of relief,” said Roberts. “From the ranchers in Kansas to the jewelry makers on the East Coast, every state had something to lose from keeping mandatory COOL intact.”

The COOL rules were left intact for poultry, a small win for defenders of the law, which was enacted as part of the 2002 farm bill. 

“Today's elimination under orders by the WTO of consumer labels we all rely on in the grocery store makes clear that trade agreements can - and do - threaten even the most favored U.S. consumer protections,” said Lori Wallach, director of Public Citizen's Global Trade Watch.

In addition to repealing the COOL rules, the legislation also includes: 

  • At the request of the cotton industry, the bill would reinstate the use of commodity certificates, which provide a way around the $125,000-per-person limit on marketing loan gains and other forms of subsidies. The industry argues that the payment limit has created challenges for individual growers while threatening to disrupt cotton marketing.
  • The Food and Drug Administration would get a $104.5 million increase to implement a series of new rules required by the Food Safety Modernization Act (FSMA), including standards for growing and packing fresh produce.
  • Biotech salmon couldn't be sold until the FDA releases guidelines for labeling it. 
  • Because the school nutrition reauthorization is still pending, schools were given an extension of relief from federal nutrition standards. The provisions delay a further reduction in sodium limits and allow states to provide schools with waivers for USDA's whole grains requirement.
  • The Land and Water Conservation Fund is revived and extended for three years with some reforms sought by western Republicans. The fund is authorized to use $450 million annually in oil and gas royalties. 

Democrats successfully fought off Republican attempts to block implementation of the Obama administration's “waters of the United States” (WOTUS) rule, which redefines the jurisdiction of the Clean Water Act, and to delay penalties for farmers who are facing new conservation compliance provisions in order to obtain crop insurance. 

Some Senate Democrats also blocked Congress from acting on the GMO issue. The industry unsuccessfully lobbied to the final hours to get congressional leaders to include in the omnibus a two-year delay in state biotech labeling laws - the first such rule takes effect in Vermont in July. Opposition to (including the school nutrition authorization) came from a different source - House Speaker Paul Ryan's staff, Roberts said. Sen. John Hoeven, R-ND, said House members are seeking broader waiver provisions for schools.

Farm groups expressed relief at getting the Section 179 and bonus depreciation provisions. They were among the most popular of dozens of tax incentives that Congress has been extending a year or two at a time. They were restored for 2014 only last December and then allowed to lapse again. 

“These tax provisions allow farmers to reinvest in their operations - and that has a ripple effect across the entire agriculture industry and rural communities,” said Chip Bowling, president of the National Corn Growers Association.

Three of the presidential candidates used the vote to register their opposition to the spending and tax agreements. Republican Senators Ted Cruz of Texas and Rand Paul of Kentucky and Democratic presidential candidate Bernie Sanders of Vermont voted against the legislation. Sen. Lindsey Graham, R-SC, voted for it. Sen. Marco Rubio, R-FL, didn't vote.

Written by Philip Brasher for Agri-Pulse Communications.

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