Stand for Farmers - 199A
The American farmer is the foundation of our Nation. It’s time to stand up for all agriculture and all family farmers. Expand a well-designed Sec 199A benefit to all farmers, but don't “fix" what isn't broken by taking away a vital competitive tax tool for all farmers."
We are asking every farmer, coop farmer, and independent farmer to join forces with their purchasers (coops and independent commodity buyers) and contact their U.S. Senators and Congressman and join our petition to ask them to support Sec 199A for all farm interests.
What is 199A?
It is a tax law. It was included as a critical part of the Tax Cuts and Jobs Act (TCJA), enacted on Dec. 22, 2017. This section was designed to give tax relief to small businesses and passthrough entities, with certain provisions designed specifically to benefit farmers.
What does the Section 199A do?
It allows farmers, with certain limitations, to deduct 20 percent of the gross revenue they receive from the sales of products to agriculture cooperatives from their taxable income.
Why is the 199A deduction necessary?
Under the new tax reform bill, large corporations receive a significant tax cut (a permanent 40 percent reduction — from a 35 percent rate to 21 percent), but a previous benefit affecting many businesses, including farmers, referred to as the Domestic Production Activities Deduction (DPAD) was eliminated. Without a fix, farm taxes could have actually increased. In response, Congress established the new deduction — 199A. Congress deserves our thanks for recognizing the problem and creating Section 199A.
What is the controversy?
199A currently provides an advantage to cooperatives over non-cooperative farmers. This could disadvantage small, independent grain elevators and large companies like ADM and Cargill.
Can this be fixed?
Yes! It was no ones’ intent to create a disparity. Champions of farmers in Congress who authored 199A agree the situation should be addressed and have directed agriculture to come together on a fix.
How would it be fixed?
The deduction should be retained and expanded to include all farmers regardless of where they sell their production.
Do all parties agree on a fix?
No! Some are saying the fix is to do away with this positive and unique farm provisions in 199A altogether, while others say 199A should be repealed and the old section 199 reenacted. Both are unacceptable. Either would put cooperatives and farmer members at a big disadvantage under the new tax law which would still confer a 40 percent reduction in rates for corporate structures.
What should be done?
We believe the current law should be expanded to include all farmers, whether coop farmers or non-coop farmers. To include all farmers and maintain budget neutrality, the percentage of the deduction to gross revenue in 199A will need to be reduced from 20% to 5% — an amount that is fair for all, and will stimulate the economy like no other policy. Impartial tax experts in academia could help lawmakers understand the serious, negative implications of doing away with section 199A and also help demonstrate the stimulus and advantages that 199A will bring to all farming community businesses creating an increase in tax income that serves as an offset to the tax reduction of 199A.
What challenges are facing agriculture that make this issue so important?
High and rising foreign tax barriers, together with our competing farm export countries offering lucrative farm subsidies to their farmers has created one of the longest running periods of time in our countries farm history in which the majority of farm commodity prices have remained below the average cost of farm production. In fact, net farm income has declined for each of the last three years. This is creating deep hardships within rural farming communities throughout the Nation. Last February, a Wall Street Journal headline proclaimed that “The Next American Farm Bust Is Upon Us”, and things have not improved since while farm commodity prices are headed even lower. This combined with a strengthening dollar which make our product less competitive in the world marketplace, American agriculture desperately needs help. 199A is a rural America infrastructure redevelopment and revitalization stimulus package in itself. It is the very best idea our Congress could have produced to make “agriculture great again”.
How will this help farmers?
By lowering agriculture tax burdens, farmers will be better able to withstand the many pressures they face, including high and rising foreign trade barriers, depressed commodity prices, natural disasters, and all of the volatility associated with a high risk, low margin business. We will be able to once again compete against those in the world being subsidized and less efficient than us allowing us to survive low commodity prices until the playing field has been reset in which we are the dominant players.
How will this help America?
Supporting American agriculture helps lower our trade deficit with foreign countries, bring in more revenue to distressed rural farm communities, support rural job creation, and help ensure a stable and competitive food supply. We will see a reinvestment in infrastructure which will bring a revitalization, modernization and innovation throughout all agriculture from coast to coast and border to border. From generational farming families to those who are setting their feet in the soil for the first time, this will revitalize rural America and even boost urban farming. From small towns to abandoned urban areas, we will see investment and opportunity like never before. Along with it, we will see the creation of support businesses that will prosper, grow the economy and pay more taxes. This 199A tax law will poise the United States of America as the powerhouse of world agriculture for the next 100 years!
Are there other questions or controversies?
Some are concerned about the loss of revenue to the government. But this provision would impact only a tiny fraction of tax revenues while being hugely meaningful to farmers and their communities businesses and way of life. The total impact to tax revenue is less then 1/3 of 1 percent of the total US tax revenue. We believe the impact will be even less for a number of reasons, including limitations on the amount of the benefit when adjusted by capital gains and the fact that the stimulus to the agriculture sector will increase American agriculture support businesses sales, bringing in more tax revenue that could serve to totally offset and most likely increase tax revenue as a whole.
Time's running out
What should I do?
Use the simple form on this webpage to contact your Senators and Congressmen and let them know you support continuing and expanding Section 199A. This will also include you in our petition to save Section 199A for all farmers. The petition will be forwarded to Congress letting them know you support keeping 199A for all farmers. The letter will be thanking your legislator for creating the 199A provision and let them know you appreciate them standing up for agriculture. You can view all your letters here. Then share this site with your friends and family.
Let’s all together “Stand up for Farmers”.