USDA Wants Fix to Tax Bill Preference for Co-ops

January 12, 2018 10:36 AM
USDA is calling on Congress to fix the unintended consequences of the new tax reform law.

“The federal tax code should not pick winners and losers in the marketplace.” The statement was part of a release today from USDA Under Secretary for Marketing and Regulatory Programs Greg Ibach, but that is exactly what changes to Section 199A in the new tax law do, creating a significant tax advantage for co-ops.

Under the Section 199A change, farmers can deduct 20% of gross sales to a co-op while they are limited to only 20% of net income from sales to non co-ops. Senators John Thune (R-SD) and John Hoeven (R-ND) are working on a legislative fix.

In a statement, Ibach urged Congress to level the playing field. “The aim of the Tax Cuts and Jobs Act was to spur economic growth across the entire American economy, including in the agricultural sector,” he said. “While the goal was to preserve benefits in Section 199A for cooperatives and their patrons, the unintended consequences of the current language disadvantage the independent operators in the same industry. We applaud Congress for acknowledging and moving to correct the disparity, and our expectation is that a solution is forthcoming.”

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Spell Check

Western, NE
1/15/2018 10:40 AM

  I'm surprised the multi-national grain companies are crying foul. They're already a large part of the problem with the farmer's price structure anyway. For those of us that are stuck with our coops, that small advantage is nothing more than a drop in the overall bucket! Maybe the multi-nationals will just have to get more creative in what they offer farmers for their products. The small mom and pop elevators and smaller ethanol plants may suffer, but maybe not...

Sherry Leonard
Sublette, KS
1/15/2018 10:06 PM

  The solution for changing 199 A should include all the businesses involved with grain, whether feedlots, coops, other grain elevators, or ethanol plants with farmers deducting 20% gross sales.