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Key farm groups like co-op tax fix
Story Date: 3/15/2018
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Source: POLITICO'S MORNING AGRICULTURE, 3/14/18
The National Council of Farmer Cooperatives and National Grain and Feed Association are backing a legislative proposal to fix an unintended consequence of the Republican tax overhaul that created huge tax breaks to farmers who sell their goods to cooperatives over other types of businesses, Catherine reports.
Republican congressional leaders want the fix to be included in the fiscal 2018 omnibus spending package, which must pass by March 23, but it's unclear whether Democrats are willing to allow any tax provision to be included. "Over 100" contentious riders on the spending bill are "still in play" as Democrats push for a "clean" omnibus package, Pro Budget's Sarah Ferris writes.
What's the change? As expected, the co-op fix would repeal the tax law change that gave farmers a 20 percent deduction off their gross sales by selling to co-ops. And it would restore the tax benefits co-ops and their farmer members enjoyed under the old tax code, known as the Section 199 deduction for manufacturers, which Republicans repealed in the new tax law.
The proposal - which would be retroactive to Jan. 1 in order to negate any perceived gains as a result of what Republican lawmakers acknowledged is an error - would allow farmers selling to co-ops to claim a 20 percent deduction on net business income, with limits set on those with high incomes or capital gains.
The deduction would be reduced by the lesser of the following amounts: 9 percent of the farmer's income from sales to the cooperative, or 50 percent of wages attributed to those sales. In addition to this tax break, a farmer would be able to claim the pass-through deduction from the co-op, if any. A producer who sells to both cooperatives and private industry would allocate income and wages between the two types of entities.
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