ARLINGTON, Va., March 22, 2018 — The National Grain and Feed Association (NGFA) today urged Congress to enact stakeholder-driven provisions included in the omnibus fiscal year 2018 appropriations bill that would correct the unintended consequences of Section 199A of the Tax Cuts and Jobs Act of 2017.
The House is to vote on the omnibus legislation (H.R. 1625) this afternoon, with the Senate scheduled to act prior to midnight on March 23 to prevent another shutdown of the federal government.
The NGFA and National Council of Farmer Cooperatives had issued a joint statement on March 13 supporting prompt enactment of the legislative language, which was developed by the tax-writing committees of Congress after months of collaboration and extensive analysis among and with stakeholders in an effort to replicate to the greatest extent possible the tax benefits accorded to farmer-owned cooperatives and their farmer-patrons under the previous Section 199 (also known as the Domestic Production Activities Deduction, or DPAD), while also restoring the competitive landscape of the marketplace as it existed in December 2017 so that the tax code does not provide an incentive for farmers to do business with a company solely because it is organized as a cooperative or private/independent firm.
NGFA said it had verified that the final language to correct Section 199A included in the omnibus legislation filed last night had accurately reflected the concepts developed by NGFA and NCFC.
NGFA’s membership consists of an almost equal number of grain, feed, grain-processing and export businesses organized as cooperatives or private/independent companies.
“There is a huge sense of urgency in getting this issue resolved, as producers continue to make marketing decisions, particularly given the welcome rally in corn and soybean prices in recent weeks,” said NGFA President and Chief Executive Officer Randy Gordon in an initial statement issued March 21. “Thousands of grain elevators and other agribusinesses, most of them small businesses that provide economic vitality to rural communities, will be making costly decisions on whether to reorganize their business to be able to compete or even whether to remain open for business during coming weeks. NGFA is confident Congress understands the calamity that will result unless the current Section 199A is corrected, and we will be working tirelessly until it is. The inclusion of these provisions in the omnibus bill is a huge step in the right direction to preserve competitive choices for producers when marketing their agricultural products.”
The legislative provisions would amend Section 199A as it exists in current law, under which producers can deduct up to 20 percent of gross payments received on sales of agricultural cooperatives, without certain limitations based on income. Meanwhile, farmers selling to private/independent companies are restricted to deducting 20 percent of net business income, a considerably smaller deduction.
Gordon also noted the urgency and necessity of correcting the current Section 199A is compounded by the fact that the skewed tax benefits are not limited to agricultural cooperatives, but conceivably to any business or group of citizens that might want to form a cooperative. “The implications of this spreading well beyond agricultural businesses could be devastating to the generation of tax revenues to the federal treasury,” he said.
The NGFA had noted previously that great care was taken by stakeholders to develop a concept that provides tax relief to farmers, as envisioned in the tax-reform law, while restoring to the maximum extent possible the competitive balance of the marketplace.