USDA breaks silence on tax code to urge Congressional solution

The USDA has urged Congress to move quickly to redress what it sees as a mistake in President Trump’s Tax Cuts and Jobs Act, claiming it is not the role of tax authorities to “pick winners and losers”.

In a statement released late Friday, the USDA Under Secretary for Marketing and Regulatory Programs Greg Ibach said that the aim of the act was to spur economic growth across the entire economy including the agriculture sector.

However, he said: “While the goal was to preserve (tax) benefits… for cooperatives and their patrons, the unintended consequences of the current language disadvantage the independent operators in the same industry.”

“We applaud Congress for acknowledging and moving to correct the disparity, and our expectation is that a solution is forthcoming,” he said.

Last month, the US Senate passed President Trump’s flagship Tax Cuts and Jobs Act, which initially removed a tax provision that allowed farmers to offset revenues from the sale of agricultural goods.

However, a last-minute special provision that sought to reinstate the deductions has given tax rebates to farmers that sell to cooperatives where they are members over selling to corporations.

The USDA statement adds further weight to calls to reverse a tax code change that heavily favours cooperatives, such as CHS, over traditional agribusiness giants, such as Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus – so-called ABCD companies.

Without being specific, these companies last week said they were working together to find solutions to reverse the impacts of the bill.

This development has drawn support from the two senators from North and South Dakota who introduced the measure without appreciating the unintended consequences it may have brought.

“Ultimately, Senator John Thune believes that producers should make decisions about where and how to sell their products without the tax code unfairly tipping the scales in favour of marketing to one type of business entity or another,” said an email statement from the office of Senator Thune of North Dakota.

However, it is as yet unclear how the measure, which was signed by President Trump on December 22, will be undone.

Last week policy analysts at DC-based think tanks warned that it may take some time to unwind the impact of the bill.