Senate Republicans may reveal within days a deal to smooth out the tax treatment of grain sales to agricultural cooperatives and other suppliers that could be included in an upcoming budget bill Congress must consider by March 23.
Though he wouldn’t release specific details, Sen. John Hoeven, R-N.D., said March 6 that he’s getting the final approval on an agreement between representatives of grain cooperatives and other companies to undo an error in the Tax Cuts and Jobs Act (P.L. 115-97).
The new law gives a larger tax benefit to farmers who sell to cooperative grain suppliers than to other companies under the section 199A passthrough business income deduction. Critics say it could also open the door to abuses of the tax code by high-income individuals.
“We’re trying to get to something where they all agree, where the passthrough groups have the 20 percent discount, where the C corps have the rate reduction, and we have 199 for the co-ops,” Hoeven told Tax Analysts, adding that he would release more information the week of March 5.
“For cooperatives that don’t benefit from the 199, then they would get some passthrough deduction,” Hoeven said, adding that the agreement could win Senate approval as part of a fiscal 2018 omnibus spending bill lawmakers hope to pass before the government runs out of funding March 23, or attached to a measure to reauthorize the Federal Aviation Administration.
Hoeven has been working on solving the grain glitch with Treasury Secretary Steven Mnuchin and House Speaker Paul D. Ryan, R-Wis., according to Senate Finance Committee member Pat Roberts, R-Kan., who hadn’t yet seen the agreement. “He’s been doing a lot of negotiating. He’s the one that put the [199A] language” in the tax bill, Roberts said.
A group of House Republicans sent a letter February 21 urging Republican congressional leadership to address the tax disparity, arguing that a remedy would “restore the competitive marketplace for agricultural producers.” Mnuchin, Finance Committee Chair Orrin G. Hatch, R-Utah, and House Ways and Means Committee Chair Kevin Brady, R-Texas, have expressed support for a fix.
Bipartisan Support Needed
There’s a significant obstacle to resolving the grain glitch, Ways and Means member Tom Reed, R-N.Y., said during a March 6 interview on C-SPAN.
“Right now, in my humble opinion, I don’t see 60 votes in the Senate that we could get, because we’re going to need 60 votes in the Senate to do this,” Reed said. “I don’t know where that path is.”
But Hoeven said he has been talking to Senate Democrats about the issue and he expects bipartisan support for correcting the new tax law.
The grain glitch is just one of many technical tax corrections needed, and some congressional Democrats have signaled their unwillingness to take action on these items unless other tax policy changes they favor can also be considered.
“I think if we’re going to be able to get more than just the obvious mistakes that have been made corrected, it’s going to take a real bipartisan effort, which means it’s going to have to be balanced,” Finance Committee member Benjamin L. Cardin, D-Md., told Tax Analysts March 6.
Technical corrections would be challenging to advance by themselves and will likely end up in another legislative vehicle, he said.
One Senate GOP tax aide agreed, saying that rather than one large technical corrections bill passing Congress, lawmakers will likely attach smaller fixes to the next several pieces of must-pass legislation or a tax extenders bill. But the aide downplayed potential roadblocks from Democrats, noting that negotiations will likely center around what policy options will be in play to win their votes.
David van den Berg contributed to this story.
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