Lawmakers seek change to tax reform that could hurt private ag producers

Broadly, the change included in the tax act increased the benefits already in place to farmers selling to co-operatives.   File photo

Lawmakers are pushing for an early change to a provision in the recently passed tax reform act that they claim unfairly provides advantages to farmers selling to cooperatives, which could be detrimental to private companies.

The lawmakers argue the provision contained in the Tax Cuts and Jobs Act was inadvertently included in the conference report that reconciled the House and Senate versions of the bill.

Eighty-six Republicans, all representing largely rural districts, signed on to a letter sent to House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. asking that this claimed tax advantage be "immediately addressed."

The issue relates to the Domestic Production Activities Deduction, Section 199A. Broadly, the change included in the tax act increased the benefits already in place to farmers selling to co-operatives. These benefits would not accrue when selling to private entities.

U.S. Rep. Pete Sessions (R-Texas)  

U.S. Rep. Pete Sessions (R-Texas) has signaled his strong support for an early change to the provision.

“The government should not pick winners and losers," Sessions told Texas Business Daily. "Section 199A gives producers an incentive to sell to co-ops, thereby disadvantaging non co-ops, and we need to fix this uneven playing field.”

The lawmakers wrote that they have heard from many agricultural constituents complaining of the "inintentional inequity" contained in the tax act, which was passed in December.

"While not intended,this senate-sponsored provision has resulted in a dramatic competitive imbalance impacting numerous agricultural value chain stake holders including grain handlers, feed mills, seed companies, ag retailers, biofuel producers, banks, livestock marketers and dairy producers," the representatives wrote.

Sen. Chuck Grassley (R-Iowa) is leading the charge to the introduce the amendment in the senate. He has stated there is agreement on changing it back to what was previously in place and that it may be included in an appropriations bill to be due to be discussed later this month.

But there is an issue over whether the advantage enjoyed since the start of the year will be retroactively reversed.

“I think it’s reached the point where, if there isn’t a complete agreement, there’s enough agreement within the Congress that if we can do what we originally intended to do — maintaining the status quo for co-ops — we’re going to go ahead and do it, even if the co-ops aren’t completely satisfied with what we’re doing,” Grassley told Farm Week magazine.

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