Tax Reform Measure Eliminates Deduction for Co-ops

Donnelle Eller reported last week at The Des Moines Register Online that, “Iowa farmers could lose a key tax deduction that has helped grain elevators, growers and rural communities stay afloat during a lingering ag downturn under proposed U.S. House and Senate tax bills.

“Congressional leaders are moving quickly on bills that would cut tax rates that businesses and families pay, while removing many special breaks that have helped taxpayers shrink their tax bills.

“One tax break being eliminated — the domestic manufacturing deduction — allows grain elevators and other cooperatives to deduct some costs of production in Iowa and the U.S.

Co-ops can use the deduction themselves or pass it on to farmer-members.”

The Register article stated that, “Last year, it totaled $250 million in Iowa and more than $2 billion nationally.

“‘We’ve seen a lot co-ops merge, but they would have been merging at a much faster clip … without this deduction,’ Gardiner Thomsen, an accounting firm with offices in Iowa, South Dakota and Nebraska.”

Ms. Eller explained that, “The proposed tax changes for Iowa cooperatives hurts Iowa communities, said Tom Hauschel, CEO of Heartland Cooperative, which has about 70 locations across Iowa.

“Cooperatives and other U.S. businesses can deduct 9 percent of production expenses from their net income — or up to half of qualifying workers’ wages.

“It’s designed to encourage domestic production.”

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