Lawmakers Plan Section 199A Fix

January 29, 2018 03:17 PM

Among other hot-button issues in Congress, lawmakers are under pressure to make fixes to a tax reform provision that proponents say gives an advantage to farmer-owned cooperatives. Section 199A is a provision of the new tax code that was designed to replace the previous section 199 and continue to allow dairy and sugar beet farmers the tax deduction that helps them offset income from cooperative sales, explained Paul Neiffer, CPA and principal at CliftonLarsenAllen. Unfortunately, the provision was added at the very last minute and comes with unintended consequences.

“It really wasn’t vetted as well as it maybe should have been,” Neiffer told Tyne Morgan on AgDay. “What’s happening is farmers that sell to a cooperative actually potentially get a much larger deduction than what they sell to the privates.”

Because of that disadvantage, private grain buying companies like Cargill and Bunge have lobbied Senators to come up with a fix. Sen. John Hoeven (R – N.D.) is working on altering the measure but it’s far from complete, according to ProFarmer’s Washington policy analyst Jim Wiesemeyer.

Farmers and cooperatives alike want to know if the changes will be retroactive to Jan. 1. Wiesemeyer said private tax experts assume that timeline, but the final decisions has not been made yet.

“Some farmers have said they have marketed some grain via cooperatives in hopes that their marketing actions will be based on tax law at the time the 199A provisions were in effect,” he said.

How did a loophole this large find its way into a final tax bill?

“It’s just the law of unintended consequences,” Neiffer said.

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