In this file:

 

·         POLITICO: A tax law boon to farm co-ops

… An aide to Thune said the senator “is aware of the potential unintended effects” and is working with colleagues and those affected to find “a reasonable solution.” But GOP lawmakers are going to have trouble making fixes, because any changes will likely need 60 votes in the Senate — and not a single Democrat supported the Republican-driven bill…

 

·         What the new tax law means for agriculture

Farm Credit East tax experts explain 17 ag implications of the new tax reform law.

 

 ·         New tax law could harm U.S. grain companies

… The new tax law allows farmers and ranchers to claim a 20% deduction on all payments received on sales to cooperatives…

 

 

A tax law boon to farm co-ops

 

By Christine Haughney, POLITICO

01/10/2018

 

With Helena Bottemiller Evich, Catherine Boudreau, John Lauinger and Maya Parthasarathy

 

TAX LAW BOOSTS CO-OPS, HURTS PRIVATE BUYERS: A provision in the new tax law gives growers a better deal at tax time if they sell their agricultural products to co-ops rather than other types of companies, The Wall Street Journal reported on Tuesday. The new deduction, inserted by Senate Ag member John Hoeven (R-N.D.) and other lawmakers after the tax bill was revamped shortly before passage, could have far-reaching consequences for the industry, especially in the grains sector.

 

How it works: Farmers are now permitted to deduct up to 20 percent of total sales made to co-ops. For some farmers, the result could be every taxpayer’s wish: zero taxable income. If farmers sell to privately held or investor-owned companies, the deduction isn’t quite so yuge — roughly 20 percent of income. The provision does have a time limit: It will expire at the end of 2025.

 

The Journal piece has a good summary of how this will play out once accountants get involved…

 

How the provision arose…

 

Where farmers will go…

 

Tough luck for some, but a tougher fix: The potential hit to independent operators is an example of the type of unforeseen consequences that many tax experts worried about prior to the law’s passage, because of the speed with which the GOP moved the bill and the limited time that members were given to dissect the text after the revision.

 

An aide to Thune said the senator “is aware of the potential unintended effects” and is working with colleagues and those affected to find “a reasonable solution.” But GOP lawmakers are going to have trouble making fixes, because any changes will likely need 60 votes in the Senate — and not a single Democrat supported the Republican-driven bill.

 

Hoeven will also work to remedy the issue. "We're working on this adjustment, but there will undoubtedly be others," Capener said."That's why you usually have a technical corrections bill after a tax relief bill."

 

The National Council of Farmer Cooperatives, in a statement to POLITICO, noted that the elimination of the Section 199 deduction without an offset “would have resulted in a tax increase on farmers across the country.” The group’s president, Chuck Conner, added: “Policy makers ultimately decided that they preferred to replace it with a deduction that fit under the new structures they created in the tax bill.”

 

more

https://www.politico.com/newsletters/morning-agriculture/2018/01/10/a-tax-law-boon-to-farm-co-ops-069726

 

 

What the new tax law means for agriculture

Farm Credit East tax experts explain 17 ag implications of the new tax reform law.

 

Source: Farm Credit East

via American Agriculturist - Jan 04, 2018

 

Farm Credit East tax experts have reviewed the 2017 Tax Cuts and Jobs Act — the largest overhaul of the U.S. tax code in 30 years. “Overall, the new tax provisions will provide significant benefits to Northeast farmers,” says Dario Arezzo, Farm Credit East senior tax consultant. “However, certain provisions will unfortunately limit the value for some producers.” Here’s a quick look:

 

• Tax bracket changes. While the total number of brackets remains at seven, the top rate will fall from 39.6% to 37%. And, the amount of income covered by the lower brackets has been adjusted upward.

 

• Standard deductions. The standard deduction for individuals increases to $12,000 for single filers and $24,000 for joint filers.

 

• Alternative minimum tax. The AMT still remains for individuals, but exemption amounts are significantly increased and will be indexed for inflation.

 

• State and local tax deductions. SALT deductions for state and local property plus income or sales taxes are limited to $10,000 annually.

 

• Section 179. Beginning with the 2018 tax year, farmers will be allowed to immediately write off capital purchases such as breeding livestock, farm equipment and single-purpose structures (such as milking parlors) up to $1 million. The phase out on this expensing provision doesn’t kick in until a farm reaches $2.5 million in purchases.

 

• Bonus depreciation. Farmers will be able to write off 100% of qualified property purchased after Sept. 27, 2017 through 2022 (at which point a phase-down occurs). The new law expands bonus depreciation to include new and used property purchased or constructed, and to plants bearing fruits and nuts.

 

Keep in mind that many states don’t conform exactly to the federal bonus and 179 depreciation provisions. In most cases, depreciation taken at the state level is different. For example, a farmer expensing 100% of a $3 million capital purchase with bonus depreciation may not receive that $3 million deduction at the state level. Rather, the state deduction will incorporate depreciation on those assets over their normal recovery lives and methods.

 

• Farm equipment. Machinery and equipment (other than any grain bin, fence or other land improvement structure) will be able to be depreciated over five years, as long as the original use of the asset begins with the taxpayer.

 

• Like-kind exchanges. They’re limited to real property. For example, farmers can still swap land for other land tax free, but equipment trade-ins will no longer be a tax-free event.

 

• $25-million interest deduction limitation ...

 

• Carry interest forward ...

 

• Corporate tax rate ...

 

• Cash accounting remains ...

 

• Net operating losses ...

 

• Section 199 repealed, replaced. The Domestic Production Activities Deduction has been repealed. As a result, many cooperatives accelerated that pass-through deduction to patrons before the end of 2017.

 

Ag and horticultural cooperatives will have a new 20% deduction. It’ll be beneficial for reducing cooperative income. However, unlike the DPAD, this is taken at the cooperative levels and isn’t directly passed on to patrons.

 

• Estate tax ...

 

• Non-corporate taxpayers ...

 

• Breweries, distilleries and wineries ...

 

more

http://www.americanagriculturist.com/farm-policy/what-new-tax-law-means-agriculture

 

 

New tax law could harm U.S. grain companies

 

by Arvin Donley, World-Grain.com

January 10, 2018

 

CHICAGO, ILLINOIS, U.S. — A new U.S. tax law will give farmer-owned cooperatives an advantage over privately-run and publicly traded grain companies in sourcing grain, according to a report from Reuters.

 

The provision in the tax law, which was passed in December, gives farmers a large tax deduction for selling their crops to agriculture cooperatives. The new tax law allows farmers and ranchers to claim a 20% deduction on all payments received on sales to cooperatives.

 

According to Reuters, the law could make it more difficult for the United States’ biggest grain traders such as Archer Daniels Midland Co. (ADM), Bunge Ltd., and Cargill to source grains and oilseeds.

 

Cargill, which is privately held, told Reuters it was surprised the provision was added to the bill at the last minute and is evaluating its potential impact. ADM, a publicly traded company, said it was looking for “various potential solutions” to the provision.

 

Reuters said…

 

more

http://www.world-grain.com/articles/news_home/World_Grain_News/2018/01/New_tax_law_could_harm_US_grai.aspx?ID=%7B40D03F3A-4B51-499D-90B2-D2D8317758CE%7D&cck=1