Section 199A Fix in House Omnibus Bill

House Coalition Pressed to Include 199A Fix in Spending Bill

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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The U.S. House of Representatives this week plans to fix a farmers cooperatives grain sales provision in tax law. (DTN file photo)

Editor's note: The original version of this article was posted at 11:49 a.m. CDT on Wednesday, March 21. It was reposted with additional information at 3:30 p.m. CDT on Wednesday, March 21.

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OMAHA (DTN) -- A Section 199A fix will be included in a version of a spending bill currently being drafted in the U.S. House of Representatives, a source familiar with the negotiations told DTN.

Back in February, 85 House members asked leadership to include a fix on the upcoming omnibus bill. A source who spoke to DTN on background, said the final bill is expected to include the 199A fix.

This week, a coalition of House Republicans pushed House leadership to include the 199A fix in the omnibus. That resulted in about 20 House members pressing leadership to make sure the fix was a priority in the omnibus.

Though the exact language in the bill was yet to be released at the time this article was posted Wednesday afternoon, an industry source familiar with the legislation told DTN the language is unchanged from a draft released last week.

The whole omnibus package needs to be signed off on by President Donald Trump, who reportedly is meeting with congressional leaders.

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.

A number of agribusinesses in recent weeks told congressional leaders that they support the language change in the tax code backed by farmer cooperatives and businesses that would provide farmers with a deduction similar to what they received under the old Section 199.

Sen. Charles Grassley, R-Iowa, said during a news conference on Tuesday that as of Monday night a Section 199A fix was not part of the Senate omnibus bill, saying the provision "absolutely has got to be fixed."

Chuck Conner, president of the National Council of Farmer Cooperatives, said in a statement to DTN that the provisions in the omnibus bill will prevent a "tax increase on farmers" by keeping the domestic production activities deduction, or DPAD.

"DPAD will largely be recreated in this bill, which also preserves the competitive position of co-ops in the marketplace," Conner said. "In fact, by combining the individual-level business deductions that farmers can claim and the recreated DPAD pass-through from their co-ops, farmers selling to cooperatives have the opportunity to see more of a tax deduction than farmers selling to non-cooperatives. This action fits in line with Congress's long history of public policy in support of co-ops and shows an appreciation of the unique relationship that co-ops have to their farmer-owners. It is a recognition that for many farmers, their co-op isn't simply some business that they buy from or sell to, it's an integral part, an extension of their operations."

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley