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Professor explains 199A “fix” summary

The details of the GOP “fix” to the section 199A deduction for farmers in the new tax law have not been released but have been explained to farmers at the FAPRI-MU conference in Missouri based on one-paragraph in the summary. Iowa State tax professor Kristine Tidgren says, “If you sell to a co-op you’re going to calculate your qualified business income deduction exactly like you would if you did not sell to a co-op; 20% of your net income from the sale of that grain. And then, you have to limit that to 20% of your taxable income, minus capital gain.” Tidgren says whatever is the lesser is what the farmer gets to take. Then, she says, “They have to subtract out 9% of the sale, then add the amount the co-op passes through to them. That is limited by 20% of farmers’ taxable income but they won’t have to subtract the capital gain.”

Tidgren says she hopes the statutory language is released this week. If the fix does not pass in the omnibus budget bill Congress must vote on this Friday in order to keep the government running, she says the current language will stand for the next year.

The new language reportedly has bipartisan support. It is supported by the National Council of Farmer Cooperatives and National Grain and Feed Association but opposed by the National Farmers Union.