In the aftermath of recent wildfires in northeastern Montana, farmers and ranchers are picking up the pieces and rebuilding. During this process, it is important to remember to keep records of losses and expenses, including receipts, pictures, and logs to substantiate losses that may be eligible for disaster assistance programs, as well as to report tax losses on state and federal returns. A number of relief and assistance resources are available to those affected by fires and drought conditions throughout Montana. The Department of Revenue and the Farm Service Agency of the United States Department of Agriculture offer a variety of assistance programs and tax relief opportunities for individuals affected by the disasters.
Verifiable evidence of losses and expenses incurred due to a disaster must be documented to qualify for assistance programs and to provide support for tax return preparation.
Documentation should include but is not limited to:
- Inventory supported by calving/birth books or purchase receipts
- Livestock death losses, including the number, average weight, and type
- Picture or video evidence to support ownership, damage, and loss
- Substantiation of eligible losses from sources such as the USDA disaster declarations
- Feed purchased to replace destroyed grazing pasture
- Number of gallons of water transported to livestock due to water shortages
- Equipment and supplies purchased to repair damaged property
- Insurance proceeds received
- Basis of damaged property
Farm Service Agency
The FSA website is a great resource for disaster designation information, including:
- USDA disaster declarations
- Disaster area maps and tables
- Disaster assistance program fact sheets
Disaster assistance programs include:
- ELAP – Emergency Assistance for Livestock, Honey Bees, and Farm-raised Fish
- EFRP – Emergency Forest Restoration Program
- LFP – Livestock Forage Program
- LIP – Livestock Indemnity Program
- NAP – Noninsured Crop Disaster Assistance Program
- TAP – Tree Assistance Program
Producers must notify their local FSA office within 30 calendar days from when the loss is apparent. Program and specific requirement information is available online or at local FSA offices. To locate the nearest FSA office, visit http://offices.usda.gov.
Montana Department of Revenue
The Montana Department of Revenue offers tax relief and assistance to Montana residents whose business equipment or property has been lost or damaged due to natural disasters such as flooding, wildfires, and drought. Eligible property must be deemed unsuitable for its previous use, and the relief value will be prorated for the number of days the property was rendered unsuitable for its previous use. To receive tax relief, an income tax filing extension, Form AB-25, Natural Disaster Application, must be completed by the taxpayer and submitted to the Montana Department of Revenue. More information is available at https://revenue.mt.gov/home/businesses/taxrelief_naturaldisaster#Overview.
Federal Income Tax Deduction
Casualty losses of property may also be eligible to be deducted on federal personal or business tax returns based on the difference between the adjusted basis and the decrease in the fair market value of the property after the disaster. Deductible losses may be subject to limits and adjustments for insurance proceeds received for damages.
In addition, income deferral options are available to defer gains on the excess number of livestock sold due to drought conditions over the number normally sold in a business year. Income deferrals allow producers to replace livestock in future years to reduce the amount of the gain recognized.
Montana Department of Agriculture
The state of Montana has temporarily suspended and waived some of the permit, fee, and transportation requirements. Brand inspection permit and fee regulations requiring inspection prior to transport of livestock have been suspended temporarily by the governor. However, permits prior to transport and point-of-destination brand inspections are still required. In addition, the Montana Department of Transportation has waived several interstate requirements for trucks transporting supplies to areas affected by Montana wildfires. Visit the Montana Department of Agriculture’s website for more information: http://agr.mt.gov/Fire-Drought-Assistance-2017.
Please feel free to contact your Wipfli relationship executive or one of our Wipfli offices with any questions or for assistance. We will be happy to help you.