Co-ops Encouraged by Treasury Secretary’s Commitment to Fixing ‘Grain Glitch’

DTN Ag Policy Editor Chris Clayton reported last week that, “Leaders of the National Council of Farmer Cooperatives are optimistic IRS officials will adjust Section 199A(g) tax breaks after testimony this week from Treasury Secretary Steve Mnuchin.

“Farmer cooperatives have been trying for more than two years to reestablish a tax deduction comparable to what they received before the 2017 tax law was passed. Last summer, the Treasury Department proposed rules that limited the Section 199A(g) deductions to patronage income, but the Treasury rule would eliminate cooperatives’ ability to combine ‘non-patronage income’ as part of the deduction calculation.

“The tax complication came out of what was dubbed the ‘grain glitch‘ in early 2018 after it initially appeared the 2017 tax law made it much more lucrative for farmers to sell grain to farmer cooperatives than to private grain companies. Congress fixed the provision, but Treasury has been mired since then, trying to complete a rule to go along with the tax fix.”

Mr. Clayton noted that, “Mnuchin commented during a congressional hearing on Tuesday that he is committed to working with members of the House Ways and Means Committee, as well as the Senate Finance Committee.

Chuck Conner, president and CEO of NCFC, stated that the farmer cooperatives’ group appreciates Mnuchin’s commitment to fix the grain glitch.

“‘Importantly, his statement that ‘Our job is to implement the law; our job is not to make policy’ is especially notable,’ Conner said. ‘It is clear that Congress intended Section 199A(g) to recreate the way that the Section 199 deduction worked under the old tax code. The current proposal from the Internal Revenue Service (IRS) fails to meet that standard in several important areas.'”

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