United States Congress Passes Modification to Section 199A Tax Provisions

The recent Omnibus Appropriations bill passed by Congress and signed by President Donald Trump on March 23, 2018 included modifications to the Section 199A tax provisions.  Under the Tax Cuts and Jobs Act of 2017, producers could deduct up to 20% of total sales to cooperatives.  However, the specifics of this new provision, replacing the old Section 199 deduction with 199A, led to an unintended windfall for cooperatives that led to an unequal playing field in the marketplace.

Once the tax bill was passed, commenters noticed what came to be known as a “grain glitch,” which many construed as an unfair advantage to the cooperative system.  A number of agribusinesses expressed their viewpoints from many different directions and a compromise became necessary between the main lobbying bodies in the industry, the National Council of Farmers Cooperatives and the National Grain and Feed Association.  Both groups lent their support to the new language attached to the Omnibus bill.  As such, the modification of Section 199A essentially returns the deduction to the levels and standards under the old system prior to the passage of the Tax Cuts and Jobs Act of 2017.