Tax Issues

ASA Positions

ASA supports the following provisions that were included in the recently enacted Tax Cuts & Jobs Act of 2017:

  • 20% deduction for pass through entities
  • Interest deductions & cash accounting maintained for entities under $25 million
  • Step-up basis maintained; estate tax exemption doubled to $22 million for married couples
  • Full/immediate expensing and increases to the Section 179 expensing limits
  • Like-kind exchanges maintained for real estate
  • Continued full deductibility of state/local/property taxes on agricultural land
  • Two year carry-back losses allowed for farmers

In the wake of the changes made in the Tax Cuts and Jobs Act of 2017:

  • ASA supports the need to secure clarification of Section 199A regarding sales to cooperatives.
  • Additionally, ASA supports a process for consideration of technical corrections and other issues, such as tax rates for C Corporations under certain income levels and restrictions on 1031 Like-Kind exchanges. As the new tax laws are implemented, ASA will share with Congress any additional issues and impacts that arise.
Issues Background

Section 199A

In the Tax Cuts and Jobs Act of 2017 enacted into law in December, the Domestic Production Activities Deduction (Section 199) that benefits cooperatives was repealed and replaced with a new provision (Section 199A) that provides:

  • Farmers with a 20% deduction on all payments from a farmer cooperative, including per-unit retains (also known as PURPIMs). The deduction is limited to the lesser of (1) 20% of cooperative payments for the year, or (2) taxable income minus net capital gains. There is no wage limitation.
  • The cooperative with a 20% deduction on gross income less payments to patrons, limited to the greater of 50% of wages, or 25% of wages plus 2.5% of the cooperative’s investment in property.

Strong concerns have been raised that the provision will distort competition in grain markets. The Senate sponsors of the provision have indicated it was not the intent to impact competition among grain companies and cooperatives and have indicated a desire to clarify or correct the provision. Leading stakeholders, such as the National Grain & Feed Association and the National Council of Farmer Cooperatives (NCFC) were working with Congress to find agreement on a legislative fix, however no resolution has yet been enacted, leaving significant uncertainty for farmers and agricultural businesses.

 

Download ASA Position Paper on Tax Issues
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