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'Grain glitch' fix among omnibus obstacles
Story Date: 3/21/2018
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Source: POLITICO'S MORNING AGRICULTURE, 3/20/18
House Republicans held up releasing a $1.3 trillion omnibus spending bill on Monday because of multiple disagreements over legislative riders, including a provision to fix the so-called "grain-glitch" in the tax overhaul that gives farmers and ranchers lucrative incentives to sell their products to agricultural cooperatives over other types of businesses. House Ways and Means Chairman Kevin Brady told reporters Monday evening that addressing the issue, along with extending funding for the Federal Aviation Administration, is among his highest priorities.
But several sources familiar with the negotiations said that some Senate Democrats won't support including the fix to a provision of the GOP tax overhaul unless the omnibus also expands a low-income housing tax credit - something Brady refuses to do. And Rep. Collin Peterson (D-Minn.), ranking member of the House Agriculture Committee, told reporters Monday that he isn't convinced the proposed change to the Section 199A deduction "works," but declined to explain further, suggesting only a Certified Public Accountant would understand.
The details. The new Section 199A deduction was designed to give pass-through entities (how many farms are structured) similar benefits to corporations that saw their tax rate slashed to 21 percent, as well as to preserve a prior tax break for co-ops. Soon after being enacted, however, an unintended consequence surfaced: Co-ops had gotten an edge over the competition because farmers could deduct 20 percent of their gross sales, whereas they could only deduct 20 percent of their net business income if they sold to other companies, ranging from conglomerates like Cargill to smaller, independent purchasers.
Last week, two key farm groups involved in the negotiations - the National Council of Farmer Cooperatives and National Grain and Feed Association - as well as top lawmakers on the Senate Finance and House Ways and Means committees, endorsed a legislative proposal to fix the problem. The most significant fix would be repealing the gross sales deduction. A summary of the proposal is here.
Late-night lobbying push. NGFA on Monday sent an e-mail to the staff of the nearly 90 lawmakers who signed onto a letter asking House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell to correct Section 199A. The e-mail, obtained by POLITICO, said that a failure to act would do "real damage to rural America and force independent grain elevators to spend the time and money to re-organize as a cooperative just so they can compete," and urged staff to talk to House leadership about ensuring the fix makes it in the omnibus.
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