Turns out there was a haystack for farmers to land on at the bottom of the "fiscal cliff."

In the liner notes of the 12th-hour plan to avert tax increases on most Americans, lawmakers included a nine-month extension to the 2008 farm bill and a fix for expiring estate tax terms.

The extension removes some uncertainly about U.S. agricultural policy as farmers edge toward spring planting. Federal farm programs, or the lack thereof in the case of an expired farm bill, have a profound effect on the business risks that farmers and their bankers are willing to take.

Farmers pushed for passage of a five-year farm bill but said Wednesday that they would settle for the extension and work toward a permanent bill by September’s end.

“A five-year bill, that was our goal. That’s what we stood by the whole way,” said Ryan McCormick, Montana Grain Growers president and a Hi-Line farmer. “But the extension, this is as good a scenario as we could expect.”

The extension means farmers will receive direct payments from the government, something producers had agreed to give up in the proposed 2012 farm bill. That bill stalled in the House of Representatives, where Republican leadership declined to bring it to the floor for a vote. The Senate passed a 2012 farm bill version last June. The House Agriculture Committee signed off on its version a month later. Those bills would cut at least $23 billion from current farm bill spending over the next decade, but still presented issues for House Speaker John Boehner, R-Ohio. Boehner objected to what he called a “Soviet style” milk subsidy program.

In the end, it was concerns about milk prices doubling as the dairy subsidies expired in early 2013 that forced passage of the extension.

The other major issue for farm country was the permanent setting of estate tax rules. Estate taxes have been adjusted downward at least six times since 2001, but always with the possibility of increasing as lawmakers continually placed sunset provisions on their cuts.

The next congressionally imposed end to estate taxes was to come Jan. 1, at which point the current a 35 percent tax on estates worth more than $5.12 million was to jump to 55 percent. And the value of the estate exempt from the tax was to drop to $1 million.

Farmers and ranchers said the rule changes on Jan. 1 would have made it impossible to pass family property to the next generation without selling off a significant portion to pay the tax man.

The terms agreed to in the fiscal-cliff package ensure that moving forward estate taxes won’t be collected on inheritances of $5 million or less. Husbands and wives can pair the individual exemptions to prevent estate taxes on inheritances as large as $10 million. The exemption is also indexed for inflation, meaning that by the end of the decade the individual exemption rises to $7.5 million.

“The certainly of the $5 million per person, the $10 million per couple is very significant. We wanted to keep the rate at 35 percent. It got bumped up to 40, but I think it’s a good trade-off,” said Erol Rice, Montana Stockgrowers Association executive vice president.

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Rice and McCormick credited U.S. Sen. Max Baucus, D-Mont., with setting the terms for the estate tax, which many Democrats in the Senate didn’t support.

“We’re ecstatic. That’s a victory for us for sure,” McCormick said. “We need to thank Sen. Baucus and his team."

Other taxpayers with large estates might find ways to avoid the estate tax by putting their property into trusts. But trusts are problematic for working farms and ranches because they cannot be borrowed against, McCormick said.

Baucus told The Billings Gazette on Wednesday that it wasn’t easy getting the estate tax language included in the fiscal-cliff deal, in part because rural farm and ranch estates are unfamiliar to urban lawmakers.

“I pushed very hard and a lot of Democratic leadership didn’t. But I stand up for my state,” Baucus said. “It means Montana farms and ranches will not have to pay more than they currently pay. Next, it’s permanent. It’s not a two-year bill or a five-year bill. It’s permanent.”

Baucus said many members of his own party also objected to indexing the estate tax exemption to inflation, but with Montana farm and ranch land values rising sharply, it the exemption had to rise through the decade to keep up.

“We got permanent law and permanent indexing. That’s a big win,” Baucus said. “We’re sure in a lot better position than we would have been if we didn’t address estate taxes at all in this fiscal-cliff situation.”

Speaking of the farm bill extension, Baucus said it was necessary to get another nine months to pass a farm bill. With the Senate already passing on a bipartisan vote and the House having approved a bill, he expected the work of 2012 to steer a farm bill to completion by September.

“It’s a good starting point,” Baucus said of the Senate version. “It passed by a large margin in the Senate.”

But Baucus said he would begin the year by working on a separate bill to address livestock disaster programs, which were left out of the extension. After the worst drought in a half-century, American ranches finished 2012 dry and looking for help, but the programs designed to assist had expired.

Agriculture funding is going to be battle this year, with lawmakers focused on trimming deficit spending.  

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