Resolution nears as 199A deal struck, focus shifts to Congress

The US Congress could later this month close a loophole that has since January provided a tax advantage to farmer co-operatives over agribusinesses when they buy agricultural goods from farmers, according to two DC-based lobby groups.

The National Council of Farmer Cooperatives (NCFC) and the National Grain and Feed Association (NGFA) said in a statement Tuesday that legislative language will be added to an appropriation bill due to be passed later this month.

The appropriation bill, which needs to be passed before April to avoid a federal government shut down, will be backdated to January 1, 2018, to ensure a level playing field.

The tax break, known as Section 199A, was introduced erroneously as part of President Trump’s flagship $1.5-trillion tax reform bill in December and gave farmers a financial incentive to trade with cooperatives over major agribusinesses such as Cargill and ADM.

The new resolution addresses the issue by effectively treating both agribusinesses and farmers the same when it comes to tax breaks.

NGFA President and CEO Randy Gordon acknowledged that “no legislation will ever be perfect,” but said the language had been analysed and reanalysed in “excruciating detail”.

“We believe the solution merits enactment so that competitive choices remain available... and the marketplace – not the tax code – determines with whom they do business,” Gordon said in the statement.

The wording agrees two key aims, firstly of replicating and protecting the tax arrangements of the original 199 clause for farmers and cooperatives.

Secondly, it also restores the competitive domestic landscape “so that the tax code does not provide an incentive for farmers to do business with a company purely because it is organized as a cooperative or private/independent firm,” the joint statement said.

Click here to see a summary of the proposal’s wording.