199A Tax Glitch Fixed?
Last Friday President Trump signed into law the Consolidated Appropriations Act 2018. In the 2,232 page legislation Congress included a section to "fix" the "grain glitch." Remember just before Christmas President Trump signed the Tax Cuts and Jobs Act that had in it what came to be know as the 199A tax glitch. In the past Cooperative elevators could pass along to farmers a minor tax advantage by selling grain to the Coop.
When the Tax Cuts and Jobs Act was written it was intended to leave this minor tax break unchanged. However, additional wording was added that turned it into a huge tax advantage if a farmer sold grain to a Coop Elevator over a private elevator. In fact, one Farm Business Management instructor told me very few farmers would every have to pay any Federal taxes! They would still have to pay Minnesota State taxes, Social Security and Medicare taxes.
The 199A "glitch" allowed farmers who sold grain to a Coop a 20 percent deduction based on GROSS sales! Well, the private grain elevators were not pleased about this and wanted it fixed. It was fixed and is retroactive to January 1, 2018. However, the fix is 17 pages long and is extremely complicated. I was reading an analysis trying to figure out what it meant for me. I sell my beans to a Coop but the corn I haul to a private elevator and feed mill a half a mile from my farm.
After reading a couple paragraphs I was totally lost. I had no idea what it meant for me. I guess this is what happens when tax lawyers and accountants write a law. Apparently this is why farmers have CPA's that specialize in farm taxes. I am sure mine can explain it to me using terms I can understand!