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March 05, 2007

The Des Moines Register has a piece about the controversy stirred by the IRS proposed revenue ruling that would impose self-employment tax on Conservation Reserve Program payments:

Should landowners who have farms enrolled in the CRP pay the 15.3 percent self-employment tax on their government payments if they don't take an active part in running the farm?

No, says two Iowa State University professors and experts on agricultural law, Neil Harl and Roger McEowen.

"I think the IRS is trying to make law here," Harl said. "I don't think they are following the law."

This will be an interesting case study in how politics can affect tax administration. The proposed ruling appears to be based on the IRS reading of case law. Whether the IRS will read the cases in a different light after pressure from farm-state senators like Charles Grassley remains to be seen.

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