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Tax Law Concerns
January 15, 2018

USDA Under Secretary for Marketing and Regulatory Programs Greg Ibach has 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.
Ibach’s statement is as follows:

“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. 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.”

According to Roach Ag Marketing, CliftonLarsonAllen, principal and CPA, Paul Neiffer, says it could be worth up to 25 cents per bushel for high income farmers.

Paul also said, “In order to get this new deduction, you must both sell to the co-op AND be a patron of the co-op. If you are not a patron, you do not receive the extra co-op Section 199A deduction.”

Reuters reported, “The new U.S. tax law is poised to drive more control over the nation's grain supply to farmer-owned cooperatives, provoking concern among ethanol producers and privately run grain handlers that they could be squeezed out of the competition to buy crops.” 

U.S. Sen. Mike Rounds (R-S.D.) today made the following statement regarding ongoing efforts to address concerns related to Section 199A of the tax code: 
“The inclusion of Section 199A in the tax law was always to maintain the status quo for the agricultural sector. It has come to our attention that some producers are concerned that the law, as written in the new tax code, gives an unfair advantage to cooperatives over independent operators. This was never the intent and I am pleased there is widespread support among producers and Congress to address this concern. We have been working with our colleagues and stakeholders from both sides on a legislative fix. Those conversations have been productive and we look forward to finding a solution in a timely manner.”


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