Elimination of Section 199 proposed in tax reform

first_imgShare Facebook Twitter Google + LinkedIn Pinterest While a myriad of details are currently being hashed out in Congress regarding the tax reform measures that are a priority for the Trump Administration, there are some concerns in rural America concerning the debate. Language in the House version of the tax cuts includes eliminating the Section 199 deduction. The Section 199 deduction (or Domestic Production Activities Deduction) was enacted in 2004 as a part of the American Jobs Creation Act. The deduction applies to proceeds from agricultural products that are manufactured or marketed through cooperatives. The majority of co-ops pass the benefit through directly to their farmer members.The House has passed H.R. 1 that includes the repeal.“The deduction returns nearly $2 billion annually to rural areas across the country, so it has been good for agriculture and for rural America,” said Chris Henney, president and CEO of the Ohio AgriBusiness Association. “In its current form, H.R. 1 repeals Section 199 with the assumption that cooperatives and their members would benefit from the proposed reduction in corporate and individual tax rates. We believe that the tax cuts they are talking about would not compensate for the repeal of Section 199. The House Tax Cut and Jobs Act (H.R. 1) is intended to drive economic growth by lowering business taxes, but there have been concerns with the repeal of Section 199. Overall this tax reform is a good thing, there is just this piece that is of concern to the cooperative community, and rightly so.”Now that the Senate has taken up the tax reform discussion, Section 199 is being considered there as well.“A lot can still change with this but as of now the repeal of Section 199 is still in there and it could be very damaging for cooperatives in the state,” Henney said. “The cooperative world has certainly taken notice and they are reaching out to their delegation in the Senate across the country.”Back in October a letter was sent to Congress pointing out the potential ramifications of a 199 repeal for rural America. The letter was signed by United Producers, Inc., Ohio Dairy Producers Association, American Farm Bureau and National Farmers Union, among many others.“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 letter said. “In many cases farmers will see a double-digit increase in their tax bill under the proposed plan.”In addition, the National Council of Farmer Cooperatives (NCFC) expressed strong opposition to the proposed 199 repeal.“In a time of continued low commodity prices, those hardworking Americans who grow our food can ill afford for Congress to pass a law that will raise their taxes,” said Chuck Conner, president and CEO of NCFC. “It would be a strange irony indeed if a Republican Congress and a Republican president pass a law that increases taxes on America’s farmers.”last_img

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