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Earlier today the University of Florida’s Institute of Food and Agricultural Sciences (IFAS) announced that its researchers have developed genetically modified citrus trees that show enhanced resistance to citrus greening. These citrus trees may also have the potential to resist canker and black spot. IFAS noted that the commercial viability of these new citrus trees is several years away as additional steps are needed, including transferring the genes into additional commercial varieties and rootstocks that are commonly grown in Florida.
Many growers have lost their groves over the last decade to freezes, hurricanes, citrus canker, and most recently, citrus greening. Infected groves are either unprofitable or fallow and growers had difficulty justifying the costs of replanting in light of the ever growing citrus greening threat. If the new trees prove to be commercially viable, then growers can replant their groves with a greater degree of confidence.
Generally, the costs of planting a citrus grove are capitalized under §263A of the Internal Revenue Code. In certain cases however, replanting costs can be expensed if the original trees were lost or damaged “by reason of freezing temperatures, disease, drought, pests, or casualty.” There is no time limit as to when the replanting must occur. In those cases, the general rule of §263A does not apply to any costs of replanting bearing the same type of crop, whether on the same parts of land which damage occurred or any other land of the same acreage in the United States. However, the grower can reinvest among different varieties of the same crop (i.e. switch out oranges for grapefruit) and replant with higher density on the same amount of land.
There are significant planning opportunities for replanting under §263A. Not only can the grower take advantage of this opportunity, but new partners can as well, creating an incentive for investor money in replanting efforts so long as the grower maintains a greater than 50% equity interest in replanted property and the minority investors materially participate in the replanting, cultivating, maintaining, or developing of replacement plants. Recently, Florida’s delegation to Congress introduced HR 3957, the Emergency Citrus Disease Response Act, to expand the exception of §263A to new growers who acquired a grove from a grower who lost their grove due to disease.
Since it may be several years before a grower can replant their groves, we recommend that growers begin taking steps today to develop a plan to replant. Such measures would include adopting a written plan to replant along with building up reserves or readying their land for the trees. We will discuss developing plans for replanting and several options in a follow up post.
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