2018 Spring Farm

Page 8 March 22, 2018 2018 Logan County Farm Outlook Magazine LINCOLN DAILY NEWS S ome analysts say that the changes to section 199 were an unintended mistake, while others are saying that the advantages given to coops in the Tax Cuts and Jobs Act (TCJA) were intentional. Whether intentional or not, 199a has been described as “a seismic shift 5 .” President Donald Trump signed the Republican tax overhaul into law in December that allows farmers a 20 percent tax deduction on payments for sales of crops to co-ops, but not for sales to private or investor-owned grains handlers 1 . Some lawmakers have said they made a mistake by including the new language in last- minute changes to the bill 1 . The last minute addition to the tax bill passed late last year was supposed to continue an existing tax break that benefited cooperatives 2 , not make this significant change. Rob Holcomb, a University of Minnesota Extension educator and tax expert, says farmers can gain thousands of dollars in tax breaks by selling their grain to a co-op. Here’s how it works: If a farmer sells grain to a privately owned grain elevator, they can claim a 20 percent deduction on the net proceeds, or profit, from the sale. But if they sell to a cooperative they can claim the 20 percent deduction on the gross, or total amount of the sale. Holcomb used a simplistic example. A farmer sells $500,000 worth of grain and makes $100,000 in profit. Selling to a co-op would result in a $100,000 tax benefit, while selling to a private company limits the tax benefit to $20,000 2 . The impact of 199a might mean that some producers would be able to wipe out all their federal tax liability On Wednesday February 14, Republican U.S. Senator Orrin Hatch said he and other senators were working toward “a solution to this issue that does not choose winners and losers 1 .” There are, though, some state organizations that feel enthusiastic about maintaining it. The ‘Tax Bill 199a’ boost to coop elevators, raises local concerns Continue 8