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Ag companies push for 'grain glitch' fix, but NFU opposed
Story Date: 3/16/2018
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Source: POLITICO'S MORNING AGRICULTURE, 3/15/18
Archer Daniels Midland, Bunge, Tyson Foods and 74 other agribusinesses are urging Congress to use the fiscal 2018 omnibus spending bill expected to pass this month to roll back part of the new tax law that offers lucrative tax breaks to farmers who sell their products to cooperatives, Pro Tax's Bernie Becker reports.
The letter to House and Senate leadership said that leaving the Section 199A deduction as-is will create many problems for independent businesses, including "costly restructuring, selling to rivals, or going out of business," by pushing farmers to favor co-ops as their buyer.
Other backers: The Senate Finance Committee posted on Tuesday a summary of the legislation that Republican lawmakers and two key lobbying organizations - the National Council of Farmer Cooperatives and National Grain and Feed Association - agreed on to replace Section 199A of the tax law. The deal is intended to restore similar tax benefits that ag co-ops and their farmer members received under the old tax code, known as the Domestic Production Activities Deduction for manufacturers.
The deal would repeal the part of the new law that allows farmers to deduct 20 percent of their gross sales to co-ops, which gave them an edge over other types of businesses. Instead, farmers would be able to claim a 20 percent deduction on their net business income from sales to co-ops, subject to either the wage or capital limits.
Another view: National Farmers Union President Roger Johnson said on Wednesday that Congress should reject the draft language as it stands because of the wage limitations. Johnson argued that family farms that don't hire outside workers would be disadvantaged, particularly if they work with small co-ops that also have a limited wage base.
"Farmers could alternatively see the 20 percent deduction on taxable income reduced to 11 percent, if they do business with a co-op," He said. "Under this new proposed language, farmers could sell to a private company and lock in the 20 percent deduction, or they can sell to a coop and receive an 11 percent deduction."
USDA endorsement: Greg Ibach, USDA undersecretary for marketing and regulatory programs, said the tax code should not be picking winners and losers in the marketplace and that the department will provide the necessary information to congressional leaders as they try to include the proposal in the upcoming spending package.
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