2015 Pork Management Conference June 18, 2015 New Orleans, Louisiana

Income & Estate Tax Update Income Tax Legislation – 2015 and Beyond Estate Tax Update Budget and Tax Reform Proposals Other Noteworthy Items

Legislative Focus – Past Year Extension of Expired Tax Credits Retroactive Extenders Package for one year (2014) ABLE Act – Achieving Better Life Experience Act Focus on Retirement Saving Incentives Continued Discussion of Comprehensive Tax Reform

Tax Increase Prevention Act of 2014 Signed by President Obama on No Permanent Extension of any credits Nor typical 2 Year Extension Provisions all expired 12 days after bill was passed, but impact was Retroactive.

Tax Increase Prevention Act of 2014 – Business Impact Increased Section 179 Expensing 50% Bonus Depreciation Tax Credit Extension Research & Development Tax Credit Work Opportunity Tax Credit New Markets Tax Credit

Tax Increase Prevention Act of 2014 Business Impact Reduced S-Corp Built-In Gains Recognition Period 100% Gain Exclusion on Qualified Small Business Stock – Acq before Numerous other 1 Year Retroactive Extensions

Tax Increase Prevention Act of 2014 Individual Impact State & Local Sales Tax Deduction Higher Education Deduction Mortgage Insurance Premium Deduction Charitable Distributions from IRA’s

American Taxpayer Relief Act Estate Tax Review $5mm Indexed Exemption - Permanent Top Rate for 2013 and Beyond – 40% Permanent Unification of Estate, Gift & GST Taxes Permanent Extension of Portability

Estate Taxes: Post-American Taxpayer Relief Act Calendar YearApplicable Lifetime Exclusion Amount Top Rate 2012$5,120,00035% 2013$5,250,00040% 2014$5,340,00040% 2015$5,430,00040% *Annual Gift Exclusion – Remains at 14,000 per Recipient for 2015

President Unveils 2016 Budget Proposals – $3.99 Trillion Continued curbing of tax preferences for high income individuals & emphasis on low/middle class tax reform Expansion of tax incentives for families Consolidation of education tax breaks New retirement saving incentives Tax increases for higher income taxpayers Potential reduction of corporate tax rate but with base broadening measures. FY 2016 $2 Billion increase to IRS Budget

President Unveils 2016 Budget – $3.99 Trillion Individual Proposals: Increase from 20% to 24.2% LT Cap Gains/Dividends Will top out at 28% including the NIIT Limitation of Itemized Deductions to 28% for High Income Taxpayers / Buffett Rule – Minimum 30% Tax Rate for High Income Taxpayers

President Unveils 2016 Budget – $3.99 Trillion Business Specific Proposals: Reduction in Corporate Tax Rate to 28% w/ a 25% effective rate for domestic manufacturing Section 179 Expensing $500k Expensing Lmt / $2mm Investment Lmt $1mm Expensing Lmt / $2mm Investment Lmt Permanent R&D Credit

President Unveils 2016 Budget – $3.99 Trillion Estate Tax Proposals: General treatment of gifts of appreciated property as “realization events” triggering tax liability and a “Stepped Up Basis” Reinstatement of 2009 Estate and Gift Tax Rates and Exclusions Top Rate of 45% $3.5mm Exclusion $1mm Exclusion for Lifetime Gifts

Focus on Tax Reform Both President Obama and Congressional Republicans are in favor of finding common ground with regards to Comprehensive Tax Reform Key Question – Must a Tax Reform Package encompass both Individual & Business Tax or can the two components move separately? Comprehensive Individual reform is not likely to happen until after the 2016 Presidential Election. Comprehensive Business reform will likely take shape sooner as Presidential Candidates take sides in 2015.

Top Tax Issues for the Remainder of Timing and Extent of Extenders Pkg 2. Affordable Care Act 3. International Tax Compliance 4. Repair Regulations 5. IRS Operations 6. Net Investment Income Tax 7. Retirement Planning 8. Identity Theft 9. Preparer Oversight 10. Tax Reform

IRS Audit Statistics Audit Coverage – All Business Types %  Down from 0.71% (2012) & 0.61% (2013) Audits of Large Corporations – Steepest Decline 0.9% of Individuals Audited in 2014  Lowest in 6 Years  2.2% Audit Rate for AGI’s between $220k-$1mm Audit Focus on Foreign based Taxpayers on the Rise

Pork Industry - Notable Items 1231 Capital Gain on Breeding Stock Farmer Income Averaging Cash Basis Accounting Domestic Production Activities Deduction (DPAD) Estimated Tax Requirements 5 Year NOL Carryback Provisions

2015 Pork Management Conference Thank You Rob Gunther, CPA Frost, PLLC (800) Direct: (501)