Pub. 12 2017-2018 Issue 6

WWW.NEBANKERS.ORG 20 H OP E F UL LY, A N UN I N T E NDE D consequence of the major tax legislation enacted in Decem- ber will be the triggering of a fundamental review of the taxation of the Farm Credit System (FCS) and agricul- tural co-ops relative to banks and other investor-owned businesses. The intent of this review should be to eliminate differ- ences in the tax treatment of ag-related businesses due solely to their form of ownership. What should trigger this re- view is the tax legislation’s addition of a new Section 199A to the Internal Revenue Code. As a January 9, 2018, Wall Street Journal (WSJ) article reported, this new provision “allows farmers to deduct up to 20 percent of their total sales to co- operatives, letting some farmers reduce their taxable income to zero.” Read the article at http://on.wsj.com/2Gb7MV6. According to the WSJ article, this provi- sion could sting large agribusinesses such as Cargill and Archer Daniels Midland, in addition to smaller private operations as farmers increase their grain sales to ag co-ops to capture the tax savings offered by Section 199A. A subsequent February 15, 2018, WSJ article reported that while investor-owned grain companies are try- ing to get Section 199Amodified to reduce its negative impact on them, they may set up their own co-ops in order to remain Shedding Light on the Farm Credit System, America’s Least Known GSE © 2018 Bert Ely BERT ELY’S FARM CREDIT WATCH® TIME TO RETHINK TAXATION OF FCS & AG CO-OPS