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NMPF Works with Congress, Ag Stakeholders to Preserve Benefits of New Section 199A Provision

February 9, 2018

NMPF has been working with federal legislators and other agricultural stakeholders in recent weeks to address concerns by some agricultural interests regarding a new tax deduction for cooperatives that was passed by Congress before Christmas.

The Tax Cuts and Jobs Act replaced the old Domestic Production Activities Deduction (Section 199) with a new provision, Section 199A, that allows cooperative members to claim a 20-percent deduction on gross sales to a farmer cooperative, a deduction not provided to non-cooperative shippers.

Because the new tax law provides benefits for farmers marketing their commodities through a cooperative, some private companies are concerned they may lose business with farmers who may decide in the future to instead sell their commodities to cooperatives. The members of Congress who crafted the Section 199A tax provision are seeking to change the new law and are reviewing options to deal with this potential inequity.

NMPF is collaborating the National Council of Farmer Cooperatives (NCFC) and others in agriculture to address the competitive implications created by this new provision, while emphasizing the need to preserve the tax benefits of the new tax law for dairy cooperatives and their farmer members. A grassroots farmer effort, led by Select Milk Producers farmer-leader Mike McCloskey, has urged that the issue be addressed by providing the Section 199 deduction to all farmers, rather than simply seeking to reduce the deduction for cooperative patrons. NCFC and the National Grain & Feed Association, representing both cooperative and private grain interests, have been negotiating on potential changes to the new law.