WASHINGTON, D.C. — The Senate passed the One Big Beautiful Bill Act, (OBBBA) on July 1 with the tie-breaking vote of the Vice President. This is the version that was passed by the House of Representatives in a narrow margin on July 3 and signed by the President on July 4.

This budget reconciliation package had some differences from the first version that originally passed in the House in June, but the main ‘heavy lifting’ pieces of the farm bill, such as the SNAP and other nutrition programs, are included. This makes the rest of the “skinny farm bill” — that is tied more to policy than funding — a lighter load aimed for passage this fall.

On the farm side, the OBBBA provides additional investments in ag support programs and certainty for farmers and ranchers in terms of their tax bills. It invests nearly $66 billion in the farm safety net, overall, which is $9 billion more than the first House version contained.

It strengthens the farm safety net by updating key commodity risk management programs, increases crop reference prices for the first time in nearly two decades, and increases commodity loan rates.

Also increased are the income caps for farm payment eligibility to $155,000 for individuals while also adjusting for inflation thereafter, and it removes these caps for those receiving 75% or more of their income from farming.

For dairy farmers, the Dairy Margin Coverage (DMC) program is extended through 2031 offering a 25% discount on cost premiums for locking-in the DMC coverage for all five years. Enrollees will also be able to update their DMC annual production history to be based on the highest production year of 2021, 2022, or 2023.

Also related to dairy, the final OBBBA provides mandatory funding for USDA to conduct mandatory dairy processing cost surveys every two years to provide better data to inform future make allowance deliberations.

(As of June 1, the Federal Milk Marketing Order (FMMO) final rule raised these make allowances by 5 to 7 cents per pound, which translates to embedded debits of 50 cents to $1.00 on the milk side. Make allowances are processor credits deducted from the prices of the four base commodities — 40-pound cheddar blocks, dry whey, salted butter, and nonfat dry milk — before these product prices are fed into the class and component pricing formulas.)

The OBBBA also provides new trade promotion funding and increases funding for animal health programs that help prevent, control, and eradicate animal diseases, such as the outbreak of H5N1 in dairy cattle and the New World Screwworm threat south of the border.

Also accomplished was the folding-in of the $16 billion from the Inflation Reduction Act (IRA) now part of the 10-year budgets for USDA’s main conservation programs that are popular with farmers and over-subscribed, such as the Environmental Quality Incentives Program (EQIP).

Policy updates to the Conservation Title will be handled in what House Ag Committee Chairman Glenn ‘GT’ Thompson is calling “the skinny farm bill” he hopes to have passed out of the House this fall.

Similarly, many farm bill programs that were excluded from the OBBBA reconciliation package had policy trappings and were not deemed strictly budgetary. Such updates and extensions will be handled in the ‘skinny’ farm bill. This includes suspending the permanent price supports so the updated crop reference prices can be implemented.

This step is required to replace individual commodity support programs from the 1930s and 40s with the updated budgetary aspects of the reconciliation package. The linked policy language that accomplishes this was thrown out of the package by the Senate Parliamentarian as non-compliant to the straight budgetary parameters that allow for the simple majority vote instead of requiring 60 votes for Senate passage. These linkages must be addressed when the rest of the farm bill moves through Congress so that the new commodity program prices and the cover crops that do not have their own program, can become permanent law.

On taxes, the bill extends and makes permanent the estate tax exemption, while increasing it from $10 million to $15 million and linking future increases to an inflation index. The gift tax exemption is also increased.

Important for dairy cooperatives and farm and rural businesses structured as “pass throughs” (such as LLCs), the OBBBA makes permanent the tax relief through the Section 199A provision. This ensures farmers, ranchers, cooperatives, and rural businesses continue to receive tax parity to their corporate counterparts. The Section 199A deduction remains at 20% with an added minimum deduction of $400 (indexed for inflation) for any pass-through with over $1000 of qualified income.

The bill extends the 45Z Clean Fuel Production Tax Credit through 2029 but cuts the top payment rate, while ensuring that only biofuel feedstocks from North America can qualify. Provisions also enable renewable natural gas (RNG) from dairy digesters to more broadly benefit.

Another tax benefit for farmers is a provision for capital gains from the sale of farmland to be paid in four equal yearly installments instead of all at once — if the land is sold to a farmer who commits to keeping the land in farming for at least 10 years after sale, and provided it was farmed in the 10 years prior to sale.

Under general tax provisions, the OBBBA increases the standard deduction to $15,750 and makes permanent the full bonus depreciation option.