199A Tax Glitch Not Fixed Yet

Remember Congress passed and President Trump signed the new tax bill just before Christmas? For many years there was a small tax benefit called 199 where Coop elevators could pass through profits to farmers that sold grain to the Coop. This was not in the new tax bill. At the last minute it was put back into the tax bill and turned into a huge tax break for farmers that sold grain to a coop instead of a privately owned elevator. It was called 199A.

It depends on your tax situation but I have read this tax break could mean like an extra 10 to 20 cents a bushel of corn sold to a Coop elevator compared to a privately owned elevator. Bob Zelenka is the Executive Director of the Minnesota Grain and Feed Association. Bob said about half of the elevators his organization represents are Coops and the other half privately owned. He said the 199A was a classic case of unintended consequences.

Most in the elevator industry were convinced that the 199A tax glitch fix would be put into the "must pass" Continuing Resolution (CR) that was passed and signed by President Trump last week. I called Bob and was very surprised to find out it was not in the CR! Apparently there were some differences that were not worked out yet. The next opportunity is the spending bill that must be passed by March 23, 2018.

The 199A has caused a lot of turmoil in the grain elevator industry. I have heard some private elevators are looking into forming a Coop to "even the playing field." All are convinced it will be fixed but when is the real question. Most also assume that the fix will be retroactive to January 1, 2018. However, "it is never over until it is over." In the mean time experts are advising not to alter your grain marketing plans because of the 199A tax glitch!