The Give and Take of Tax Reform

 

The tax reform bill likely to be approved by Congress this week will repeal Section 199, the Domestic Production Activities Deduction, which allowed farmers to deduct proceeds from ag products marketed through agricultural cooperatives. The Section 199 provision equates to nearly $2 billion nationally.

 

Some estimates had placed the loss of this deduction for dairy farmers at $100 per cow. But revisions to the tax package will now allow cooperative members to claim a new 20% deduction on payments from cooperatives, says Jim Mulhern, president and CEO of the National Milk Producers Federation. In addition, cooperatives will also be able to claim a 20% deduction on gross income less payments to patrons, though this deduction is limited to the greater of 50% of wages or 25% of wages plus 2.5% of the cooperative’s investment in property.