199A Tax Advantage for Coop Elevators

There is a lot of questions about a "glitch" in the tax bill signed by President Trump around Christmas. It is called 199A that has turned into a major tax advantage for farmers that sell grain to a coop compared to a privately owned elevator. I called Bob Zelenka  who is the Executive Director of the Minnesota Grain and Feed Association. Zelenka said about half of the members he represents are privately owned elevators and the other half coops. So, he is following the issue very closely.

I talked with a CPA today. He said if you were a farmer in the 24 percent tax bracket, selling corn to a coop elevator instead of a private elevator would be worth around 15 cents a bushel more when you consider the tax advantages. How did this get in the tax bill? Zelenka said for a number of years there was a small tax advantage coop elevators could pass on to their farmers called 199. It was not in the new tax bill. Late the night before the bill was voted on in Congress it was added back into the new tax bill.

The "glitch" occurred when a couple lines were added by those who did not understand what they were doing. Even the authors of the tax bill said they did not intend to give a huge advantage to coop elevators over privately owned elevators. Zelenka said the process is underway to fix this error and attach it to a funding or Continuing Resolution bill. In the mean time it is the law until it is changed.

Does that mean farmers should hurry up and sell grain to a coop elevator to get the tax advantages before the law is changed? Of course you should discuss this with your accountant or tax preparer. Zelenka said he was quite certain the law would be changed. The question is when? In addition it would very likely be retroactive to January 1, 2018. However, there are a lot of details we will not know until the "glitch" is actually passed by the House, Senate and signed by President Trump!