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PLR: Grain cooperative’s grain payments made to members

PLR: Grain cooperative’s grain payments made to members

The IRS today publicly released a private letter ruling* that addresses the tax treatment of a grain cooperative’s proposals with respect to grain payments made to its members. PLR 201750003 (released December 15, 2017, and dated August 30, 2017).

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*Private letter rulings are taxpayer-specific rulings furnished by the IRS Office of Chief Counsel in response to requests made by taxpayers and can only be relied upon by the taxpayer to whom issued. Pursuant to section 6110(k)(3), written determinations such as private letter rulings are not intended to be relied upon by third parties and may not be cited as precedent. These written determinations may, however, offer an indication of the IRS’s position on the issues addressed.

Read PLR 201750003 [PDF 55 KB]

The IRS agreed that when the taxpayer would assume the grain origination function from a limited liability company (of which the taxpayer is a member), the grain payments made to the cooperative members would constitute “per-unit retain allocations paid in money” as defined by section 1382(b). 

The IRS also ruled that under section 199, the taxpayer would be treated as having manufactured, produced, grown, or extracted, in whole or in significant part, the grain purchased from its members (that is, those members having so manufactured, produced, grown, or extracted) and that the taxpayer’s qualified production activities income (QPAI) and taxable income would be computed without regard to any deduction for the grain payments made to the cooperative members. 

 

For more information, contact KPMG’s National Director of Cooperative Tax Services:

David Antoni | +1 (267) 256-1627 | dantoni@kpmg.com

 

Or Associate National Director of KPMG’s Cooperative Tax Services:

Brett Huston | +1 (916) 554-1654 | bhuston@kpmg.com

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