WASHINGTON, Feb. 3, 2016 - Embedded in the monstrous budget bill Congress hammered out late last year is a tweak in tax laws that few noticed but is surely a big hit among agricultural scientists and those who fund them.
Called the Charitable Agricultural Research Act (CARA), it defines an “agricultural research organization” (ARO) as a public charity and approves a 50 percent tax deduction for donations that support them.
Though Congress has hiked agricultural research funding for 2016, the increases in public funding have slowed substantially through several decades. One long-term study says the increase in total U.S. private and public spending for agricultural research, which averaged 3.8 percent a year from 1953 to 1970, for example, tumbled to just 1.2 percent annually from 1990 to through 2009, the latest years reported.
Meanwhile, state funding of state agricultural experiment stations (SAES) has plunged, too: from 69 percent of their total support in 1970 to just 38 percent in 2009. (Note, however, that SAES funding from industry, self-generated and miscellaneous sources has risen over the decades – to 23.7 percent of the total in 2009.)
“We really do understand, not only from our own researchers, but also from many of our peer institutions, the struggle that they have with public funding,” said Steve Rhines, vice president and general counsel for the Samuel Roberts Noble Foundation and a key ramrod for securing the tax change. The CARA provisions are closely modeled after a tax break Congress created in the 1950s for medical research organizations (MROs).
Like the MROs, a newly permitted ARO is likely to be established with a big bequest from a family or other entity wanting to support agricultural research. There is now a scarcity of such institutions that receive public support for ag research, Rhines says. They include the link Boyce Thomson Institute, linked to Cornell University in New York, for example, and the Donald Danforth Plant Science Center in Missouri.
Securing Internal Revenue Service approval as an ARO starts with three qualifiers: First, it must itself conduct agricultural research; spend minimum portions of its funding for research as a four-year annual average; and collaborate on its research work with a land grant university or other agricultural college.
About 200 MROs have sprung up since Congress approved their tax break. The U.S. won’t soon host such a big number of AROs, Rhines said, but just a handful of new AROs in the years ahead could contribute immensely to critical research.
Rhines said an ARO is intended to give potential donors one new avenue for contributing. Alumni of agricultural colleges are the most typical supporters of ag research, and they usually give to their own alma maters. But “there are all different types of donors,” he said. “There are private foundations who like to define a challenge… then turn to a research entity to tackle it.” Or, for example, others, “who not only want to define the problem, but define how it is tackled.”
R. Thomas Van Arsdall, executive director for the National Coalition for Food and Agricultural Research, agrees with that outlook on donors. “I’d assume that the AROs would have quite a bit of autonomy,” so a donor can match up priorities with the research focus of an ARO. He thinks that CARA, which is projected by the Congressional Budget Office to cost the U.S. Treasury about $2 million to $4 million a year in lost revenue, may generate tens of millions of dollars for agricultural research.
The timeline for gaining IRS’ OK on new AROs or contributing to them is not clear. Rhines notes that Congress declared the provisions in force when the law was passed in December. Also, Congress told the IRS to write rules for AROs much as it has for MROs, so the agency will not have new legal ground to plow in writing ARO guidance into tax rules. So it’s possible IRS rules could appear this year or next. He said anyone could start putting together an ARO now and apply to IRS for approval, but it’s not likely that many will do that.
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