November 15, 2017
More than 180 agricultural organizations, cooperatives and other agribusinesses sent a letter to House Speaker Paul Ryan and House Minority Leader Nancy Pelosi opposing repeal of the Domestic Production Activities Deduction, also known as Section 199. H.R. 1, the House tax reform legislation, would eliminate Section 199.
“Ending the Section 199 deduction for agriculture would result in many individual farmers paying more in taxes, as most do not pay under the corporate code and the current proposal will not overcome the loss of the deduction,” the groups write. “In many cases farmers will see a double-digit increase in their tax bill under the proposed plan.”
Passed as part of the “American Jobs Creation Act of 2004,” Section 199 recognizes the unique challenges presented within the cooperative business model by allowing cooperatives to deduct the proceeds earned from products that are manufactured, produced, grown, or extracted and pass those deductions directly back to their farmer-members.
Farmer cooperatives pass 95% of the benefit—nearly $2 billion nationally—directly back to farmers across rural America. Farmers can then deduct their share of the Section 199 benefit from their farms’ tax burden.
The letter emphasizes that with most of agriculture facing the fourth consecutive year of stagnant prices, now is not the time to raise the tax burden on farmers, ranchers and growers.
“Section 199 should be preserved in order to protect the good paying jobs and the economic return generated by the presence of farmer-owned cooperatives in rural communities. We encourage you to preserve Section 199 for agriculture as part of any tax reform efforts,” the letter concludes. “As a matter of basic fairness, we need you to consider tax reform that will lower rates on businesses broadly but does not raise taxes on farmers.”
Source: National Council of Farmer Cooperatives
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