Congress recently passed and the President signed a bill changing the tax code. A provision of this new tax bill replaces the Section 199 also known as the DPAD with Section 199A and applies to grain sold by producers to a cooperative. The new 199A will alow a producer to deduct 20% of gross grain sales made to a cooperative from their earned income.
One of the objectives the writers of this part of the tax code had was to retain the DPAD incentive that Cooperatives had. Work is underway to modify this part of the new tax code as it does seem to give an unfair advantage to Cooperatives versus private grain elevators. Three questions will need to be addressed in regards to this change. 1. Can congress get it passed? 2. What will the change be? 3. Will the change be retroactive?
I would suggest all producers consult with your financial advisor and/or tax professional to evaluate the impact upon your individual farming operation that the tax code as currently written may have as there are some restrictions to how and what type of business does qualify (It is my understanding that if your farming operation files as a C Corporation, you are not eligible to take advantage of this) etc. If you have any questions, please feel free to give me a call.
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