Prior to passage of the Tax Cuts and Jobs Act on December 22, 2017, a tax provision called Section 199 provided businesses, including farmers and agricultural cooperatives, with a deduction based on the business income from domestic production activities. The new tax law significantly altered the tax code and Section 199 along with it. A new Section 199A was included in the Tax Cuts and Jobs Act to continue providing this type of benefit to cooperatives and their members, but the provision created an imbalance in the agriculture marketplace, including the marketplace for milk and dairy products.
“IDFA applauds the leaders in Congress who care about the state of the U.S. agricultural economy and worked tirelessly to find a solution that will allow farmers to sell their agricultural products to their buyers of choice without being unduly influenced by tax code considerations,” said Michael Dykes, D.V.M., IDFA president and CEO.
“We commend the many members of Congress who crafted a fix to address the unintended consequences of Section 199A, especially House Ways and Means Chairman Kevin Brady (R-TX), Senate Finance Chairman Orrin Hatch (R-UT), Senator John Hoeven (R-ND), Senator John Thune (R-SD), Senate Agriculture Chairman Pat Roberts (R-KS) and House Agriculture Chairman Mike Conaway (R-TX),” said Dave Carlin, IDFA senior vice president of legislative affairs and economic policy. “The proposed solution is good for all of agriculture and would restore a competitive marketplace for all buyers and sellers.
“IDFA fully supports this modified Section 199A proposal for farmer and cooperative deductions and urges members of Congress to include this fix in the fiscal year 2018 omnibus,” Carlin added.
The modified Section 199A proposal will accomplish the following:
- Cooperatives will be permitted to determine their deductions based on rules similar to those under the former Section 199.
- Farmers selling their agricultural products to independent buyers will continue to determine their deductions according to the current law in Section 199A.
- Farmers selling their agricultural products to their agricultural cooperatives will be able to claim deductions on agricultural products sold to their cooperatives and to receive a pass-through deduction from their cooperatives, although the deductions will be limited to ensure a competitive balance in the agricultural marketplace.
The current authorization for government funding runs out March 23, and Congress is working to pass an omnibus appropriations bill before that deadline to fund the government for the remainder of fiscal year 2018. IDFA and other stakeholders believe that the omnibus bill would be the best vehicle for fixing Section 199A.
The International Dairy Foods Association (IDFA), Washington, D.C., represents the nation’s dairy manufacturing and marketing industry, which employs nearly 1 million skilled individuals, generates more than $39 billion in direct wages and has an overall economic impact of more than $200 billion. IDFA is the umbrella organization for the Milk Industry Foundation (MIF), the National Cheese Institute (NCI) and the International Ice Cream Association (IICA).
Our members range from large multinational organizations to single-plant companies. Together they represent more than 85 percent of the milk, cultured products, cheese, ice cream and frozen desserts produced and marketed in the United States and sold throughout the world. Our diverse membership includes numerous food retailers, suppliers and companies that offer infant formula and a wide variety of milk ingredients. IDFA can be found at www.idfa.org.