It looks like Congress has a possible fix to the Section 199A cooperative deduction in the recently passed tax bill. However, the fix is being stalled in the Senate.
The law as written and passed along party lines inadvertently handed massive tax breaks to co-ops of any kind, leading tax advisors to encourage co-ops be established for any profession – from doctors to tax advisors. The “cost” to the government in lost tax revenue would quickly break the system.
The proposed fix takes a number of steps to balance the playing field again between co-ops and private purchasers of grain and essentially recreates the way that co-ops used to use a tax deduction that was repealed by the tax law. All farmers not organized as C corporations would still get a 20 percent deduction on net farm income.
While the fix looks good on paper, it is currently being held up by Senate Minority Leader Chuck Schumer (D-NY) who is looking for Republicans to open the tax law to other fixes his caucus is seeking.
While the National Council of Farmer Cooperatives and the National Grain and Feed Association helped negotiate the fix, earlier today, the National Farmers Union came out against the compromise saying they wanted the special tax break to stay exactly as written.
These battle lines are being drawn against the backdrop of the expiration of the current temporary government spending bill that runs out on Friday, March 23 at midnight.