SD Farmers Union: 199A of tax code should stay
February 1, 2018
"As it is written, section 199A is scheduled to sunset in 2025 – it needs to be permanent if our farmers and cooperatives are to remain competitive in the global marketplace," Sombke said.
Under previous tax law, farmers using Sec. 199 were entitled to a deduction of up to 9 percent of net farm income. The overall limit was 50 percent of wages paid and a final limit of taxable income. It could not create a net operating loss.
"The Section 199A deduction is designed to level the playing field between corporations-which are now taxed at 21 percent while pass-through farmers, would be taxed at 37 percent," Sombke said.
He added that corporate tax rates are now permanent, while rates for individuals and other small businesses, including co-ops, is temporary.
"199A expires in 2025. The goal of the current negotiations is keep the competitive balance," Sombke said. "Returning to Sec 199 is not an acceptable outcome, it must be enhanced to maintain the balance. There is no reason businesses of all types get a boost from reform, but coops must maintain what they previously had. Congress must also make Sec. 199A permanent."
Since most farms don't have a significant wage base, they were able to use wages passed through from their cooperative. In 2018, under current law (199A) farmers are allowed a 20 percent deduction based on net farm income and net taxable income less net capital gains and cooperative distributions. Once that deduction is calculated, the farmer is allowed to add 20 percent of gross cooperative payments received as a patron. You must be a patron to receive this.
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Senators Thune & Rounds along with others, support making Section 199A a permanent fixture in the tax code.
Today (Monday, Jan. 29, 2018) Sombke sent the following letters to support South Dakota's congressional leaders. He urges all South Dakotans to do the same. Contact Senator John Thune at (202) 224-2321. Contact Senator Rounds at (202) 224-5842
"Agriculture is our state's number one industry. If 199A were to go away, it could have devastating impact on commodity prices. Please support our state's growers and urge Thune and Rounds to remain steadfast in their support," Sombke said.
–South Dakota Farmers Union