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Lawmakers Working to Fix Tax Law's Grain Glitch

Posted on February 6, 2018 by Asha Glover

Lawmakers are working to make technical corrections to a provision in the Tax Cuts and Jobs Act that puts many grain suppliers at a competitive disadvantage to agricultural cooperatives.   

The provision, which offers a deduction to farmers and ranchers who sell to cooperatives, was a last-minute addition to the month-old tax law (P.L. 115-97) and prompted howls from independent grain companies unintentionally threatened by the change.  

House Ways and Means Committee Chair Kevin Brady, R-Texas, told reporters February 5 that the provision “has a serious flaw and it needs to be corrected soon.” He said it was too soon to tell if a solution would be included in the upcoming continuing resolution, which expires February 9. 

Senate Finance Committee member John Thune, R-S.D., and Sen. John Hoeven, R-N.D., are credited with getting the provision included in the final tax legislation. Brady said he met with the senators during the Republican retreat the week of January 29 and that “our tax teams are working through it.”

The provision was intended to retain benefits for agricultural cooperatives under the new tax law, but a change under the new section 199A passthrough language instead gives them a larger benefit than they had under prior law and larger than comparable benefits for non-cooperative grain elevator operators. 

Brady said he wasn’t aware of any other technical corrections that needed to be addressed in the tax bill.

“I think we had early on a couple that surfaced immediately,” Brady said. “We’re going on receive mode right now and we’ve had a number of different entities coming in just asking about how certain provisions work, including [on] the international side, and so I think Treasury rules will help address a number of them.” 

If Treasury rules can’t address specific issues, “we’ll be looking for technical corrections, but not of the policy nature,” Brady said. 

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