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Still awaiting fix to ag co-op tax break
Story Date: 2/7/2018
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Source: POLITICO'S MORNING AGRICULTURE, 2/6/18
House Ways and Means Chairman Kevin Brady said Monday that it was not certain if a temporary government funding package that Congress must pass this week would include a fix to the co-op deduction in the new tax code, Pro Ag's Catherine Boudreau reports.
Lawmakers worked on negotiating how to revise that provision in the new tax law, H.R. 1 (115), during the GOP retreat in West Virginia over the weekend, Brady said.
A look back at what happened: The House version of the tax bill eliminated the Section 199 deduction for U.S. manufacturers, including agricultural co-ops, which often passed those benefits to their farmer-members. In the end, Republicans on the Senate side crafted a new deduction for co-ops that ended up in the conference version that was signed into law.
But shortly after the law went into effect, news reports explained the huge incentives farmers could get for selling to co-ops over other types of companies. As written, farmers can deduct 20 percent of their gross sales to co-ops, but only 20 percent of their net income if they sell to other companies.
The difference is big enough that farmers who sell to co-ops could have zero taxable income. It could also drive away business from local grain companies and multinational commodity traders like Cargill and ADM.
"Clearly, the language in the final conference has a serious flaw, so it needs to be corrected soon," Brady said. "I think the House version was the right approach, but we are trying to find a solution."
Roberts working on it: Sen. Pat Roberts (R-Kan.) is discussing the issue with Senate Finance Chairman Orrin Hatch (R-Utah). "We hope to get a resolution," Roberts told Pro Tax's Aaron Lorenzo, adding that he hoped a fix would make it into the continuing resolution this week.
Stopgap bill introduced: House Republican leaders introduced a spending bill late Monday night to fund the Defense Department through September while funding the rest of the government for six weeks, Pro Budget's Sarah Ferris reports. Some GOP leaders expect that the Senate will to strip out the extra defense money and send it back to the House for a vote before funding runs out on Thursday.
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