Wednesday, February 20, 2008

FFA/4-H Tax Exemption Gets Committee Approval

Contact: State Rep. Joe Dorman
Capitol: (405) 557-7305

FFA/4-H Tax Exemption Gets Committee Approval

OKLAHOMA CITY (February 19, 2008) – Legislation declaring FFA and 4-H livestock awards to be tax-free cleared a House subcommittee on Tuesday.

House Bill 3081, by state Rep. Joe Dorman, provides that "any payment received by a person as an award for participation in a competitive livestock show event" will not be considered taxable income under Oklahoma law. Under the legislation, those payments will instead be treated as scholarship awards.

"Students don’t make money on the animals they show," said Dorman, D-Rush Springs. "This is truly an educational opportunity given to these kids and it’s ridiculous to require some 16-year-old 4-Her or FFA student to file taxes on a prize."

The checks received by students involved in competitive livestock shows can range from a few hundred dollars at local events to tens of thousands at national events.

However, Dorman noted that the cost of breeding, caring and showing the animals "usually far exceeds the amount of prize money the kids may win, if they do win."

Carolyn Doyle, FFA Sentinel for the Elgin FFA, told state lawmakers the bill would allow students to make their dollars stretch further.

"Most of the kids in our FFA chapter pay for their animals and feed, and any money we make at a show is usually the only income generated to pay for our projects," Doyle said. "If we have to pay income tax on those awards, we won’t be able to do as much. FFA students are not getting rich off our projects and we want to be able to do more with our limited resources."

By declaring the prize money will be treated as a scholarship and therefore tax exempt under state law, legislators will indirectly exempt the prizes from federal taxation as well because of an existing federal tax exemption for scholarships and awards (Code Sec 117 Reg. 1.117-1).

"The federal tax code clearly exempts scholarships and awards," Dorman said. "House Bill 3081 will dictate that these livestock show prizes will be classified as Scholarships and Awards and, therefore, nontaxable at both the state and federal level. That doubles the benefit for Oklahoma’s FFA and 4-H students."

Dorman filed House Bill 3081 at the request of Elgin FFA instructor Jerry Renshaw and Mike Doyle, a CPA and father of two students who show animals in Elgin.

House Bill 3081 passed out of the House Revenue and Taxation Subcommittee on a unanimous vote. It now advances to the full House Appropriations & Budget Committee.

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