Reuters is reporting that U.S. lawmakers have reached an agreement to revise a portion of the tax code changed in the December 2017 tax law that gave farmers a tax break for selling to cooperatives.
The tax bill provision known as Section 199A gave farmers a 20% deduction on payments for sales of crops to cooperatives, but not private or investor-owned grain handlers.
USDA Under Secretary for Marketing and Regulatory Programs Greg Ibach said the provision “caused disparate treatment among independent operators and cooperatives.”
“Federal tax policy should not be picking winners and losers in the marketplace,” Ibach said in a media statement. “We applaud Congress and stakeholders for coming together and agreeing to a solution for the good of all agriculture. At USDA, we will provide whatever information is necessary to support Congress in their efforts to have the proposal included in the omnibus appropriations bill.”
The American Farm Bureau Federation supports changing the provision.
“The proposed solution restores the balance of competition within the marketplace and provides fairness in the tax treatment of farm and ranch businesses,” said AFBF President Zippy Duvall in a letter to congressional leaders. “The need for swift passage is critical to provide certainty to farmers and ranchers as they sell stored commodities and make marketing decisions for this year’s crop.”
National Farmers Union said the tax break for cooperatives was meant to level the playing field between cooperatives and corporations. The organization is urging Congress to seek a balance that doesn’t weaken the tax break for family farmers who sell to cooperatives.
“To repeal parts of this important tax break would be to strike at the single most important benefit family farmers received from tax reform,” said NFU President Roger Johnson. “Not only would corporations be better off, but farmers would be disadvantaged by working with their cooperatives. Wage limits contained in this proposal will discriminate against family farms that don’t hire outside workers, especially if they work with small cooperatives who also have a limited wage base. Farmers could alternatively see the 20% deduction on taxable income reduced to 11%, if they do business with a co-op. Under this new proposed language, farmers could sell to a private company and lock in the 20% deduction, or they can sell to a co-op and receive an 11% deduction.”
Source: USDA, NFU