2015 Pork Management Conference

June 18, 2015

New Orleans, Louisiana

Income & Estate Tax Update

• Income Tax Legislation – 2015 and Beyond

• Estate Tax Update

• Budget and Tax Reform Proposals

• Other Noteworthy Items

Legislative Focus – Past Year

• Extension of Expired Tax Credits• Retroactive Extenders Package for one year (2014)

• ABLE Act – Achieving Better LifeExperience Act•Focus on Retirement Saving Incentives

•Continued Discussion of Comprehensive Tax Reform

Tax Increase Prevention Act of 2014

• Signed by President Obama on 12.19.2014

• No Permanent Extension of any credits Nor typical 2 Year Extension

• Provisions all expired 12 days after bill was passed, but impact was Retroactive.

Tax Increase Prevention Act of 2014 – Business Impact

• Increased Section 179 Expensing• 50% Bonus Depreciation• Tax Credit Extension

• Research & Development Tax Credit• Work Opportunity Tax Credit• New Markets Tax Credit

Tax Increase Prevention Act of 2014 Business Impact

• Reduced S-Corp Built-In Gains Recognition

Period

• 100% Gain Exclusion on Qualified Small Business Stock – Acq before

1.1.2015

• Numerous other 1 Year Retroactive Extensions

Tax Increase Prevention Act of 2014 Individual Impact

• State & Local Sales Tax Deduction

• Higher Education Deduction

• Mortgage Insurance Premium Deduction

• Charitable Distributions from IRA’s

American Taxpayer Relief Act

Estate Tax Review

• $5mm Indexed Exemption - Permanent• Top Rate for 2013 and Beyond – 40%• Permanent Unification of Estate, Gift & GST Taxes• Permanent Extension of Portability

Estate Taxes:Post-American Taxpayer Relief Act

Calendar Year Applicable Lifetime Exclusion Amount

Top Rate

2012 $5,120,000 35%

2013 $5,250,000 40%

2014 $5,340,000 40%

2015 $5,430,000 40%

*Annual Gift Exclusion – Remains at 14,000 per Recipient for 2015

President Unveils 2016 Budget Proposals – $3.99 Trillion

• Continued curbing of tax preferences for high income individuals & emphasis on low/middle class tax reform

• Expansion of tax incentives for families• Consolidation of education tax breaks• New retirement saving incentives • Tax increases for higher income taxpayers

• Potential reduction of corporate tax rate but with base broadening measures.

• FY 2016 $2 Billion increase to IRS Budget

President Unveils 2016 Budget – $3.99 Trillion

• Individual Proposals:

• Increase from 20% to 24.2% LT Cap Gains/Dividends• Will top out at 28% including the NIIT

• Limitation of Itemized Deductions to 28% for High Income Taxpayers / Buffett Rule – Minimum 30% Tax Rate for High Income Taxpayers

President Unveils 2016 Budget – $3.99 Trillion

• Business Specific Proposals:

• Reduction in Corporate Tax Rate to 28% w/ a 25% effective rate for domestic manufacturing

• Section 179 Expensing• 2015 - $500k Expensing Lmt / $2mm Investment Lmt• 2016 - $1mm Expensing Lmt / $2mm Investment

Lmt

• Permanent R&D Credit

President Unveils 2016 Budget – $3.99 Trillion

• Estate Tax Proposals:

• General treatment of gifts of appreciated property as “realization events” triggering tax liability and a “Stepped Up Basis”

• Reinstatement of 2009 Estate and Gift Tax Rates and Exclusions

• Top Rate of 45%• $3.5mm Exclusion• $1mm Exclusion for Lifetime Gifts

Focus on Tax Reform

• Both President Obama and Congressional Republicans are in favor of finding common ground with regards to Comprehensive Tax Reform

• Key Question – Must a Tax Reform Package encompass both Individual & Business Tax or can the two components move separately?

• Comprehensive Individual reform is not likely to happen until after the 2016 Presidential Election.

• Comprehensive Business reform will likely take shape sooner as Presidential Candidates take sides in 2015.

Top Tax Issues for the Remainder of 2015

1. Timing and Extent of Extenders Pkg2. Affordable Care Act3. International Tax Compliance4. Repair Regulations5. IRS Operations6. Net Investment Income Tax7. Retirement Planning8. Identity Theft 9. Preparer Oversight10. Tax Reform

IRS Audit Statistics - 2014

• Audit Coverage – All Business Types - 0.57% Down from 0.71% (2012) & 0.61% (2013)

•Audits of Large Corporations – Steepest Decline

•0.9% of Individuals Audited in 2014 Lowest in 6 Years 2.2% Audit Rate for AGI’s between $220k-$1mm

•Audit Focus on Foreign based Taxpayers on the Rise

Pork Industry - Notable Items

• 1231 Capital Gain on Breeding Stock

•Farmer Income Averaging

•Cash Basis Accounting

•Domestic Production Activities Deduction (DPAD)

•Estimated Tax Requirements

•5 Year NOL Carryback Provisions

2015 Pork Management Conference

Thank You

Rob Gunther, CPArgunther@frostpllc.com

Frost, PLLC(800) 766-9241

Direct: (501) 975-0112