Fixing the "grain glitch" in the tax bill (Section 199A)

The two largest general farm organizations have a different take on what should happen with the Section 199A tax provision, but 77 separate businesses in 28 states also have written a letter to Congress calling on lawmakers to fix the problems created by the "grain glitch." The letter includes companies as small as a local grain elevator on up to grain-trading giants such as Archer Daniels Midlands Co., Bunge North America, Cargill Inc., Tyson Foods and even Anheuser-Busch. The companies, writing to the four main leaders in the House and Senate, stated, "We are concerned that language in the Tax Cuts and Jobs Act has fundamentally disrupted the agricultural economy by giving farmers, ranchers and dairy producers a substantial tax incentive not to sell their products to thousands of independent companies across the American heartland." The tax language would eliminate a 20% deduction on all gross sales to farmer cooperatives that was included in the Tax Cuts and Jobs Act. No sooner was the tax bill signed than the grain industry determined it was leading to "unintended consequences" in the sale of farmer commodities. Lawmakers said they did not intend to distort the commodity markets when they drafted the tax break. The American Farm Bureau Federation also wrote a brief letter to congressional leaders supporting the tax change and supporting its inclusion in the 2018 omnibus spending bill, which could be approved by Congress next week. Farm Bureau noted the benefits farmers receive in the Tax Cuts and Jobs Act, but added, "Unfortunately, Section 199A had the unintended consequence of distorting commodity markets and treating farm and ranch businesses differently depending on where they sold their commodities." Farm Bureau added in its letter, "The proposed solution restores the balance of competition within the marketplace and provides fairness in the tax treatment of farm and ranch businesses. The need for swift passage is critical to provide certainty to farmers and ranchers as they sell stored commodities and make marketing decisions for this year's crop." Countering Farm Bureau, and much of the agricultural industry, the National Farmers Union is asking Congress not to repeal the tax break and to reject the new draft language released earlier this week. NFU passed a "special order of business" defending the Section 199A deduction "due to its value in improving the livelihood of farm families and in strengthening rural communities."...more