New tax provision allows growers to immediately deduct the costs of planting a new grove.
WINTER HAVEN, Fla. — While Florida citrus still has the fight of its life in trying to overcome the fatal citrus greening bacteria, growers got more ammunition for the battle from the federal income tax reform Congress passed last month.
Among the hundreds of items in the complex legislation was one provision little noticed outside the state’s citrus industry, but it represented the culmination of a three-year effort that could help growers rebound from their 13-year fight against the destructive disease.
Sponsored by U.S. Rep. Vern Buchanan, R-Longboat Key, the new provision allows growers to immediately deduct the costs of planting a new grove instead of waiting three to five years to write off the expense.
Until Hurricane Irma destroyed more than half the 2017-18 citrus crop, according to consensus industry estimates, the tax provision was the number one federal legislative priority for Bartow-based Florida Citrus Mutual, the growers’ trade group that lobbies Tallahassee and Washington on behalf of the industry.
Irma moved a $760 million financial aid package to the top of Citrus Mutual’s federal priorities, but the tax provision may be more significant in the long run.
“The law will help attract outside capital to Florida citrus as well as provide existing growers and grove owners with a strong incentive to invest in our future and plant more trees,” said Mike Sparks, Citrus Mutual’s chief executive who spent many weeks in Washington lobbying for the tax provision. “Expensing the costs of replanting up front instead of over a decade is a powerful tool and should spur badly needed growth. The industry had been working on this for more than three years, so this is a significant victory.”
In addition to Buchanan, Sparks mentioned Polk County’s two congressmen — U.S. Reps. Dennis Ross of Lakeland and Tom Rooney of Okeechobee, both Republicans — as instrumental in securing passage as well as Florida’s two U.S. senators, Democrat Bill Nelson and Republican Marco Rubio.
“This will help us continue to expand our grove holdings,” said Larry Black, general manager of the Peace River Packing Co. in Fort Meade, which has about 2,200 grove acres, almost entirely in Polk. “My hope is this will also get other growers off the sidelines. This is the carrot that will incentivize them to replant.”
The Florida citrus industry needs all the incentives it can get after more than a decade of contraction since greening surfaced in the state in 2005.
The commercial citrus tree population has declined from 98 million orange, grapefruit, tangerine and tangelo trees in 2004 to 62.2 million trees last year, according to data from the U.S. Department of Agriculture. Winds from Irma uprooted and destroyed tens of thousands of additional trees, according to industry estimates.
“After Irma, we probably need 30 million or more trees over the next 10 years,” Sparks said. “That’s why in addition to this significant tax bill, we need a federal relief/rebuild package so growers can be made as close to whole as possible and get back to producing Florida citrus.”
The decline came not only from the death of greening-infected trees but also because many growers decline to replant until scientists could come up with more effective strategies to grow citrus in a disease environment.
Many large growers with thousands of grove acres had the capital to replant, but small and medium-sized growers with 1,000 acres or less had difficulty finding the money.
That’s why speeding up the deduction of planting expenses can make a crucial difference, Black said.
Under the old law, a grower had to wait until the new grove produced a commercial harvest that generated income before the grower could write off planting expenses, he said. That takes no less than three years and sometimes five years, depending upon the variety and growing conditions.
That meant spending about $13,000 per acre to plant a new grove, then waiting several years to get any financial benefit from the expense, Black said. That’s a $1.3 million cost to plant a 100 acre grove.
The new tax law doesn’t change the cap on the 10-year period for depreciating the planting expense, but it changes the timing of the tax liability, he added. That means Uncle Sam gets the same amount of tax revenue over the long run, 13 to 15 years, but the grower realizes an immediate tax savings.
“You know what your tax liability is today. You don’t know your profit 13 years in the future,” Black said. “It really allows the grower to de-risk the investment.”
Moreover, a citrus grower with income from other businesses — often the case with small and medium growers — can take the write-off against that other business income, he added.
“Many citrus growers do have diversified interests, such as rental income or growing other commodities,” Black said. “This will help the industry, both large and small growers. We need everybody for a healthy industry.”
The faster tax break may spur replanting on abandoned grove properties in Florida, most of them owned by smaller growers who could not afford the rising costs of operating in the greening environment, citrus officials said. The USDA last counted more than 130,000 acres of abandoned groves in Florida in 2016.
Buchanan was a prime mover of the tax bill as a member of the U.S. House of Representatives Ways and Means Committee, where most tax legislation originates. Every member of Florida’s 29-member congressional delegation in both the House and Senate co-sponsored the bill.
“Immediate tax relief is crucial to help Florida citrus growers rebuild and get back on their feet,” Buchanan said in a press statement following the successful congressional vote on the tax package. “I’m pleased that my bill to help farmers recover from Hurricane Irma has been included in this key legislation.”
Kevin Bouffard is a reporter for The Lakeland (Fla.) Ledger.