With the passage of the Tax Cut & Jobs Act in December, Congress and the administration promised historic tax relief. Unfortunately, it looks as if a lot of farmers won’t receive tax relief, given the current situation with Sec. 199, a tax deduction that is essential for farmers and farmer-owned cooperatives.
In the rush to pass tax legislation, Sec. 199 – the Domestic Production Activities Deduction – was eliminated. Realizing the situation before the law was passed, Sen. John Hoeven included a new provision, Sec. 199a, which proved to be a more generous deduction than the original Sec. 199. The law now allows a 20 percent deduction of qualified business income and 20 percent deduction -- for qualified cooperative dividends. This provision prevented the negative treatment of cooperatives under the new law.
Now, corporate grain companies are lobbying Congress for the elimination of Sec. 199a.
Cooperatives are central to North Dakota’s economy, generating roughly $3.5 billion in gross business sales. These member-owned businesses pay tax on income kept within the cooperative for investment purposes and as a reserve, while surplus revenues from the cooperative are returned to the members, who pay tax on that income.
Apparently, it was not enough for corporate interests to win the largest concessions of all from tax reform. They received a 40 percent reduction in taxes owed, they can repatriate overseas earnings at still lower rates, and their provisions are permanent.
We urge our congressional delegation to continue the important work they started in protecting our state’s farmer-owned cooperatives. We not only support Hoeven’s 199a provision, but believe it should be made permanent so cooperatives are one step closer to a level playing field with corporations.
Strong co-ops ensure strong local communities, and in turn, a solid foundation and support system for North Dakota family farmers and ranchers.
Mark Watne, Jamestown