Some Agricultural Companies Revamping Operations to Avoid Being Stung by New U.S. Tax Law

Jacob Bunge and Richard Rubin reported today at The Wall Street Journal Online that, “Some agricultural companies are revamping operations to avoid being stung by the new U.S. tax law.

Ethanol makers and family-owned grain companies are setting up new agricultural cooperatives to benefit from a provision in the law that gives farmers larger tax savings for selling crops to that kind of business. Executives say that if Congress doesn’t change the law or they can’t get their companies recognized as farmer-backed cooperatives, processing plants could run short of crops and small grain elevators could be driven out of business.

“Green Plains Inc., the world’s second-largest ethanol producer by capacity, registered part of its business as a cooperative in January after studying the new tax law. ‘We jumped on this right away as a backup plan,’ said Todd Becker, chief executive of the Omaha-based company, which buys more than 2,000 truckloads of corn every day. Scoular Co., another major grain company based in Omaha, is also forming a cooperative in response to the law, a spokeswoman said.”

The Journal writers noted that, “In Turon, Kan., Colten Katz said he has filled out the paperwork to set up a cooperative for his grain business, Turon Mill & Elevator Inc. If he doesn’t act, Mr. Katz said, local farmers will sell to nearby co-ops instead of to him, potentially bankrupting a company that has been in business since 1892.”

Today’s article added that, “Lawmakers, including the provision’s authors, say they’re working to change it, but they haven’t reached a deal yet. Sen. Orrin Hatch, chairman of the Senate Finance Committee, said Wednesday he was committed to ‘develop a solution to this issue that does not choose winners and losers and is fair to everyone involved.’

“A spokeswoman for Cargill said the Minnesota-based agriculture conglomerate ‘will continue planning for ways to remain competitive in the U.S. market’ under the new tax law, though Cargill hopes for Congress to resolve the matter.”

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