The Conservation Reserve Program (CRP) is designed to protect environmentally sensitive land. Landowners who enroll get yearly rental payment from the government.
The Eight Circuit court of appeals is seeing if CRP payments should be considered self-employment in the ongoing legal battle of Morehouse-v-Commissioner of Internal Revenue. The IRS argues that tax should apply if a land owner signs on intending to profit.
Senator Chuck Grassley disagrees, he views CRP payments as a form of stock. “You ought to see cash rent as return on investment and not subject to the self employment tax. Now the courts may disagree, if they disagree we’ll have to rewrite the code.
Grassley says this is something that’s been disputed among district court judges and IRS districts. “It’s not really going to be settled by the Eight Circuit court of appeals. It’s probably going to be appealed to the U.S. Supreme Court.”
The self-employment tax is an additional 15.3 percent on top of normal income tax.
A decision for the case is expected later this year.