Holbrook & Manter is committed to keeping our clients informed of changes that are taking place that could touch their financial dealings. A recent signing of a bill by the President prompted us to reach out to our agribusiness and farming clients. I wanted to share that communication with our blog readers as well, not only to explain what this bill means for those working in the agribusiness industry- but also to display our commitment to on-going communication with our clients. Please reach out to us with any questions or concerns you may have after reading the following. We are always here to help:
As we strive to fulfill our important role as your partner and advocate for tax planning, we want to reach out to you and share that the President signed a $1.3 trillion spending bill last Friday. Among many other things, this Appropriations Act, provides a “grain glitch fix” to the provision in the Tax Bill that was passed in late 2017 that gave an unintended advantage to sell grain to a cooperative. Please see below as we have included only a small portion of the official language in the Act…………………..but as only the government can, this is a rather complex fix. We are still getting our minds around it and will have more to share this Spring/Summer but for now please accept this email as initial information for your planning. And if you have any questions please let us know.
Issue. The provision in Code Sec. 199A that provided farmers with a tax advantage for selling crops to farmer-owned cooperatives, but not for sales to private or investor-owned grain handlers, was, according to lawmakers, a mistake—the so-called “grain glitch”.
Glitch fix. The Appropriations Act makes significant changes to Code Sec. 199A(g)
Transition rules. The TCJA had repealed Code Sec. 199 for tax years beginning after 2017. However, the Appropriations Act clarifies that the repeal of Code Sec. 199 for tax years beginning after Dec. 31, 2017, does not apply to a qualified payment received by a patron from a specified agricultural or horticultural cooperative in a tax year beginning after December 31, 2017, to the extent such qualified payment is attributable to QPAI with respect to which a deduction is allowable to the cooperative under former Code Sec. 199 for a tax year of the cooperative beginning before Jan. 1, 2018. Such qualified payment remains subject to former Code Sec. 199, and any former Code Sec. 199 deduction allocated by the cooperative to its patrons related to such qualified payment is allowed to be deducted by such patrons in accordance with former Code Sec. 199. In addition, no deduction is allowed under Code Sec. 199A for such qualified payments. (Appropriations Act Sec. 101(c)(2), Division T)
Effective date. The changes under the Appropriations Act, except for those provided in the transition rules above, are effective for tax years beginning after Dec. 31, 2017. (Appropriations Act Sec. 101(c)(1), Division T)