SDSU Extension Publishes Study on Ag Cooperative Impact in SD, ND and MN

South Dakota State University Extension has published a study on the economic impact of agricultural cooperatives in the Upper Midwest. 

The study examines the economic consequences if the Section 199A tax deduction expires. Section 199A provides tax relief to agricultural cooperatives, aiming to boost rural communities. The deduction, introduced as part of the Tax Cuts and Jobs Act of 2017, is scheduled to expire at the end of 2025. 

By looking at three years of data, the study determined that the tax relief can lead to substantial economic activity from spending by cooperative members. Matthew Elliott, SDSU Extension Agribusiness Specialist and associate professor in the SDSU Ness School of Management and Economics, said that could be through reinvesting in the business, cutting costs for customers or boosting employee wages.

Elliott and Frayne Olson, a professor and director of the Quentin Burdick Center of Cooperatives at North Dakota State University, surveyed 19 cooperatives across South Dakota, North Dakota and Minnesota. He said this survey focused on just three states to provide accurate data for South Dakotans, North Dakotans and Minnesotans. 

Because agriculture is South Dakota’s number one economic driver, the survey helped pinpoint the role that the Section 199A tax deduction plays. The survey found that the cooperatives generated $1.25 billion in economic impact in 2022, $255.4 million of that in South Dakota from dollars reported as 199A.

“A lot of the sales dollars and jobs in our local communities are really dominated by activity at the local cooperative,” he said. “Policies like 199A g allow more dollars to remain in rural areas, which can help stimulate rural economic activity.” 

For more information, read the full study, “Evaluating the Economic Consequences of Possible Section 199A(g) Expiration of Agricultural Cooperatives in the Upper Midwest” or contact Matthew Elliott, SDSU Extension Agribusiness Specialist.