In today’s Beef Buzz, senior farm and ranch broadcaster Ron Hays spoke with Kent Bacus of the National Cattlemen’s Beef Association about tax rules that could affect cattle producers, particularly smaller operations that experience multiple years of losses. Bacus explains why keeping accurate records and understanding IRS guidelines are important for protecting family ranches, while also discussing new tax provisions designed to support the next generation of cattle producers.
When Is a Ranch Considered a Business or a Hobby?
Bacus says NCBA’s tax and credit leadership has been examining the IRS hobby loss rules and what they could mean for cattle producers, especially those operating smaller herds. “We have so many of our producers have herds of less than 50 head,” Bacus said.
Under existing IRS guidelines, a cattle operation that reports a loss in three out of five consecutive tax years could face additional scrutiny over whether the activity is a business or a hobby. Horse operations have a different threshold, with a profit in two out of seven years generally used as a presumption of business activity.
Bacus emphasized that the rules are not new, but changes to tax deductions and other provisions have made it important for producers to understand how the IRS evaluates their operations. “This is about having the right documentation and having all of your affairs in order, so that you and your family and your business are not vulnerable for further issues with the IRS,” Bacus said.
Documentation Could Help Protect Family Ranches
Bacus said the IRS considers nine criteria when evaluating whether an operation is run as a business or a hobby. Those considerations include a producer’s business plan, financial records, expertise and the amount of work invested in the operation. “Honestly, they’re looking at the whole picture, and it’s important that you understand all of those criteria that they are considering,” Bacus said.
He added that some recent court decisions have involved significant penalties, affecting both smaller and larger operations.
NCBA plans to work with state affiliates over the next year to share information and help producers understand the rules. Bacus said the goal is to make sure cattle producers have the knowledge they need to protect their operations and avoid unnecessary tax complications.
The association also encourages producers to discuss their business plans and tax situations with their tax preparers and families to determine the best approach for their individual operations.
New Tax Provisions Offer Opportunities for Cattle Producers
Beyond the hobby loss rules, Bacus said the Working Families Tax Cuts Act, also known as the One Big Beautiful Bill, provides greater clarity on several tax issues important to agriculture.
He pointed to provisions involving estate taxes, bonus depreciation and Section 199A, which affects qualified business income deductions for eligible pass-through businesses and certain cooperatives.
Bacus said greater certainty surrounding estate taxes is particularly important for families planning to transfer their operations to the next generation. “The issue of succession is the pressing issue for so many families that’s out there,” Bacus said. “And now that we have more stability, we have more clarity of what the estate tax looks like, what the death tax looks like.”
He said these tax provisions can help families plan for the future, encourage younger generations to return to agriculture and strengthen rural economies.
Building Long-Term Stability in Rural America
Bacus said tax policy is one piece of the larger effort to keep family-owned cattle operations viable for generations. He emphasized that lasting success depends on building sustainable businesses and creating economic opportunities in rural communities. “At the end of the day, you need a strong rural economy. You need strong economic incentives, and government can’t subsidize that or hand out enough money to get people to do that,” Bacus said.
He added that NCBA will continue working to defend the tax provisions as Congress changes in future years.
“We’re excited about this. We’ve worked very hard to help secure these tax benefits,” Bacus said. “But really, we just encourage producers to take advantage of this, take advantage of the opportunities ahead of you, and build a business plan that’s good for you and your family.”
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR above for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
