Jacob Bunge reported yesterday at The Wall Street Journal Online that, “Farmers and ranchers are pushing back on an aspect of the proposed U.S. tax overhaul that could eliminate a widely used deduction when much of the U.S. agriculture sector is struggling.
“The tax bills passed by the Senate and the House of Representatives both eliminated a provision in the U.S. tax code that allows members of agricultural cooperatives to reduce their taxable income by deducting some co-op costs.
“In some cases, the deductions can be substantial. For U.S. dairy farmers, who milk an average 210 cows each, the deduction worked out to about $100 per cow, according to Dave Buck, president of the Minnesota Milk Producers Association, who raises dairy cows near Goodhue, Minn.”
The Journal article indicated that, “If that deduction disappears, ‘effectively, it’s going to raise our taxes,’ Mr. Buck said.”
Mr. Bunge explained that, “Now some farmers and co-ops are pinning their hopes on language in the recently passed Senate version that provides farm cooperative members with a 23% deduction on profits that are distributed to members. Yet some cooperative officials say that approach wouldn’t measure up to the current deduction structure.
“Agriculture groups and cooperative members had called on lawmakers to preserve the Domestic Production Activities Deduction, also known as Section 199. Farm groups estimate the deduction amounts to almost $2 billion a year total.
“The Section 199 deduction has been critical for farm cooperatives, organizations owned by groups of farmers and ranchers who market their crops and goods through them. The co-ops sell products and services like fertilizer and pesticides to members and disperse profits back to members according to how much business they do with the co-op.”
Yesterday’s article added that, “Farm groups have warned that eliminating the deduction will siphon money out of rural areas.
“‘We understand the need for changes to the tax code,’ said John Reifsteck, chairman of farm cooperative Growmark Inc., who raises grain in Champaign County, in Illinois. ‘But we really do not think that we as farmers, cooperatives, should pay significantly more taxes on the same earnings we’ve had in the past.'”
