Qualifying Areas Include 49 States, The District of Columbia, Puerto Rico
(UCBJ) – Farmers and ranchers in most states, including Tennessee, have additional time to replace livestock sold because of drought under new tax relief guidance from the Internal Revenue Service.
The IRS issued Notice 2026-54 Sept. 15, extending the replacement period for eligible farmers and ranchers who sold or exchanged livestock because of drought. The relief also allows qualifying producers to defer tax on gains from forced sales or exchanges.
“Large swaths of the United States continue to experience drought conditions, distressing hard-working American farmers and ranchers,” said IRS Chief Executive Officer Frank J. Bisignano. “By extending relief for those who sell or exchange livestock, the IRS is providing much needed support to those who feed our nation.”
The qualifying areas include 49 states, the District of Columbia, Puerto Rico and other jurisdictions that experienced exceptional, extreme or severe drought during the 12-month period ending Aug. 31, 2026.
The relief generally applies to livestock held for draft, dairy or breeding purposes. Livestock raised for slaughter or sporting purposes, as well as poultry, do not qualify. Eligible farmers and ranchers must show that drought prompted the sale or exchange and that the area received a federal drought designation.
Generally, livestock must be replaced within four years instead of the usual two-year period. Those whose replacement period was scheduled to expire at the end of 2026 will have until the end of their next tax year following the first drought-free year to replace the livestock.
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