Pressure for backdated 199A resolution mounts as ‘lone issue’ remains
Pressure for a backdated solution to the Section 199A tax situation affecting the US agriculture sector is building as National Grain and Feed Association president Randy Gordon revealed that one "lone remaining issue" is still to be addressed.
Discussions between the NGFA, the National Council of Farmer Cooperatives, government tax staff along with industry stakeholders have been underway since January, when the problem with changes to Section 199 came to light.
In a newsletter update for NGFA members, Gordon assured that “industry stakeholders… continue to make progress and that resolution of the lone remaining outstanding issue to reaching a solution is nearing.”
Gordon is also quoted as saying that, once the wording is agreed, they would look to tack a legislative solution onto a funding bill that needs to be passed by March 23.
The NGFA declined to comment when approached by Agricensus for further clarification, while no response was received from the NCFC.
US politicians intervene
The newsletter, published on the Arlington-based agriculture trade association’s website, also highlighted a letter sent by 84 Republican members of the House of Representatives calling for the change to be backdated.
It was addressed to two of Washington DC’s most senior political figures – Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell.
The letter, dated February 21, refers to the "unintentional inequity" caused by Section 199A which has resulted in a "dramatic competitive imbalance impacting numerous agricultural value chain stakeholders".
"Left unchecked, Section 199A’s uncompetitive impacts will ripple across many other industries," the letter warns.
Although nuanced and domestically-focused, the changes introduced as part of the Tax Cuts and Jobs Act – a flagship part of president Trump’s election campaign – unwittingly introduced an advantage for farmers trading with cooperatives.
In so doing, it potentially froze major players such as agribusiness giants ADM, Bunge, Cargill and Louis Dreyfus out of the US supply chain.
"We’re concerned this provision unfairly distorts the marketplace with the potential to reduce competition, directly harm small and independent businesses, and increase consolidation in the agricultural industry," the letter says.
It concludes with a call to address the issues immediately, and retroactively restore the pre-TCJA situation, but there remains a lack of clarity over when that process may conclude.
Patience wears thin
The newsletter also refers to senator Chuck Grassley’s comments earlier in the week that suggested that time was running out, and Congress may yet act even without full agreement of the various stakeholders.
It is unclear what the delay is, as cooperatives are believed to want the old conditions to be restored as they fear being swamped by an increase in volumes, with one market analyst saying it is likely to be “more procedural than anything else.”
In the interim, industry sources have also seen an increase in interest around registering cooperatives, with speculation that independent and private companies may be mulling a switch in their business structure.