Not everyone was pleased with the new tax reform bill in agriculture. Ethanol producers and private grain companies are now saying the elimination of the Section 199 deduction is nudging them out of competition with farmer owned cooperatives.
Under the new tax law, farmers and ranchers can claim a 20 percent deduction on all payments received on sales to cooperatives.
The U.S. Department of Agriculture’s (USDA) Under Secretary for Marketing and Regulatory Programs Greg Ibach today issued the following statement regarding efforts to address concerns with recent changes to Section 199A of the federal tax code. Some agriculture stakeholders have raised questions about potential market effects on cooperatives and independent grain-related businesses.
“The aim of the Tax Cuts and Jobs Act was to spur economic growth across the entire American economy, including in the agricultural sector. 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,” Ibach said. “The federal tax code should not pick winners and losers in the marketplace. We applaud Congress for acknowledging and moving to correct the disparity, and our expectation is that a solution is forthcoming. USDA stands ready to assist in any way necessary.”
An aide to Senator John Thune of South Dakota, who led the charge to add the for the Section 199 deduction elimination, told Politico that “is aware of the potential unintended effects” and is working with colleagues and those affected to find “a reasonable solution.”
Chuck Conner, president & CEO, National Council of Farmer Cooperatives (NCFC) and Randy Gordon, president & CEO, National Grain and Feed Association (NGFA) had this to say regarding the matter:
“We are aware of questions and concerns raised about the potential marketplace effects of the new section 199A of the Tax Cuts and Jobs Act as it relates to producers and agribusinesses. Congress’s intent in including this provision was to replicate the tax treatment previously available to co-op farmer-members, consistent with the bill’s overarching goal of creating jobs and economic growth including in rural America.
“We are working intensively with stakeholders, including cooperatives, non-cooperative-owned agribusinesses and Senate offices, including Senators Hoeven, Thune, and Roberts. The goal of these discussions is to arrive at an equitable solution that preserves the benefits that cooperatives and their farmer patrons previously enjoyed under Section 199 of the tax code, while addressing any unforeseen impacts on producers’ marketing decisions. NCFC, NGFA, and our stakeholders are committed to reaching a solution in a thoughtful and expeditious manner, and to working with Congress to address this issue promptly.”