The Consolidated Appropriations Act, 2018 (Pub. L. No. 115-141) that the president signed into law on Friday, March 23, 2018, includes changes to section 199A regarding the application of the new deduction for certain cooperatives and grain companies.
As enacted in Pub. L. No. 115-97 (December 22, 2017), section 199A generally provides a deduction for qualifying income of certain noncorporate owners of some pass-through entities and sole proprietorships.
The provision in the Consolidated Appropriations Act attempts to address certain concerns raised within the agricultural industry that farmers selling their farm commodities to cooperatives were significantly tax-advantaged over similarly situated farmers selling to non-cooperatives. Section 199A(a)(2), as initially enacted, had provided for a 20% gross deduction for “qualified cooperative dividends,” and this term was defined as including per-unit retain allocations paid in money (essentially the sales price of the commodities delivered for marketing to a cooperative).
The new provisions are effective retroactively from January 1, 2018.
With enactment of the new measures, section 199A:
Under the new law, for farmers who enter into transactions with a cooperative:
Taxpayers, including patrons of cooperatives structured as C corporations, are not eligible for the 199A deduction including the pass-through deduction under section 199A(g) from specified agricultural and horticultural cooperatives.
Special rules are provided for cooperatives with oil-related qualified production activities income.
For more information, contact KPMG’s National Director of Cooperative Tax Services:
David Antoni | +1 (267) 256-1627 | firstname.lastname@example.org
Or Associate National Director of KPMG’s Cooperative Tax Services:
Brett Huston | +1 (916) 554-1654 | email@example.com
<p>© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.</p> <p>KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.</p>
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.