Tag: agriculture tax

A Permanent Section 199(A): Now That’s Beautiful

Posted on by Rachel Ravencraft

The legislation President Trump has called a “big, beautiful bill” is slowly making its way through Washington. The House and Senate have both approved blueprints for the plan, but months of hard negotiations may lie ahead.

And while the tax provisions that make up the heart of the legislation will touch every American, one specific part of it — an initiative called Section 199(A) — is one we’re watching especially closely as talks unfold. We’re working across the agriculture and cooperative communities to get this critical part of the 2017 tax legislation that lapses this year made permanent in a new law. And with tax season upon us, it’s a good time to explain why this is so important for agriculture and dairy cooperatives.

Section 199(A) of the Internal Revenue Code, also known as the Qualified Business Income Deduction, provides a deduction of up to 20% on qualified business income for certain pass-through entities, including partnerships, S-corporations, and sole proprietorships. Dairy cooperatives, which are structured as pass-through entities, benefit from this deduction as it reduces their taxable income, allowing them to retain more earnings, which then can be reinvested into the cooperative.

That’s critical to help co-ops stay competitive in today’s marketplace. When Congress cut the corporate tax rate in 2017 from 35% to 21%, it recognized that other forms of businesses — including cooperatives — should also have an equitable tax reduction. Section 199A does that. It’s helped farmer cooperatives and their owners navigate through a global pandemic, geopolitical conflict, supply chain problems, and record inflation. Allowing Section 199A to expire would raise taxes on agricultural cooperatives and their farmer-owners at a moment of renewed challenges; making it permanent will remove a critical piece of uncertainty for farmers and give them a chance to plan a brighter future.

Including Section 199(A) in tax legislation is critical for the continued economic stability of dairy farmers and the cooperatives they own. It helps co-ops make capital investments. It encourages investment in innovative technologies, sustainable practices, and advanced infrastructure, all of which enables them to produce high-quality products at lower costs. And in the end, that benefits consumers too — by providing them with affordable and nutritious dairy products.

Making 199(A) permanent also supports the whole reason the cooperative system was established under the Capper-Volstead Act passed more than a century ago, by keeping the playing field level with other businesses that benefit from tax provisions other than 199(A). Dairy cooperatives operate on principles of mutual assistance, democratic governance, and equitable distribution of benefits. Section 199(A) aligns with these principles by providing a tax benefit that is shared among cooperative members.

Dairy needs Section 199(A) to thrive. That’s why we’ve been working across not only agriculture, but across the entire cooperative community, signing letters that include signatures ranging from community bankers to building contractors and that cut across the entire U.S. economy. Section 199(A) doesn’t only support dairy farmers of all sizes, in all regions, and the rural communities they support — it ensures economic stability, enhances competitiveness, and serves consumers all across America.

That’s big. And, it’s beautiful. As the bill makes its way to the president’s desk this year, we’ll be fighting for Section 199(A) at every turn. It’s the right thing to do for dairy — and as it turns out, for everyone in our rural communities too.

Gregg Doud

President & CEO, NMPF

 

A win for everyone

Posted on by Rachel Ravencraft

By Paul Bleiberg, Executive Vice President, Government Relations, National Milk Producers Federation

Amid a frenetic daily pace in Washington, Congress is slowly moving toward renewing the provisions of the Tax Cuts and Jobs Act of 2017, a major tax legislation that President Trump signed into law during his first year in office. The provisions are due to expire this year. The House and Senate have each approved their blueprints for the plan, but challenging negotiations lie ahead.

The National Milk Producers Federation is focusing attention on one piece: The Section 199A deduction, which is vital to dairy farmers and the cooperatives they own and merits being made permanent in this year’s tax law.

Section 199(A) of the Internal Revenue Code, known as the Qualified Business Income Deduction, was enacted in the 2017 tax law. It provides an up to 20% deduction on qualified business income for certain pass-through entities. It includes the benefits previously afforded to agricultural cooperatives under the earlier Section 199 tax deduction for domestic production. Dairy cooperatives benefit through their domestic manufacturing activity; they can either pass the deduction directly back to their member-owners or reinvest it into the cooperative.

This important public policy boosts economic stability in rural America, but it wasn’t an easy road to this point. Early in 2017, congressional tax writers indicated they were likely to repeal the previous Section 199 that dairy cooperatives had used for many years. Congress believed the previous provision would be redundant because most of the domestic manufacturers that had benefited from it would now benefit from the planned reduction in the corporate tax rate.

This would not have been the case for cooperatives, which don’t file taxes as corporations. Accordingly, farmers were staring down a significant tax increase, so NMPF got to work making a case for the important role Section 199 played in helping ag cooperatives stay competitive in today’s marketplace. House members wrote letters, Senators filed amendments, and stakeholders spoke loudly and in unison in support of preserving the benefits of Section 199.

The result of agriculture’s united efforts was the inclusion of farmer-owned cooperatives in the new Section 199A deduction. Letting it expire this year would raise taxes on dairy farmers and the cooperatives they own while other businesses enjoy continued tax relief. Congress should make this important deduction permanent to maintain certainty for producers and help them prosper in the coming years.

As dairy prepares for the hard work that lies ahead, the agriculture community is again speaking with one voice. NMPF is grateful to the many producer associations, cooperatives, and agricultural partners that have joined a letter in support of making Section 199(A) permanent in this year’s tax legislation. This early strong showing underscores the consensus behind continuing this key policy — a consensus that will be essential to getting the job done.

This column originally appeared in Hoard’s Dairyman Intel on March 27, 2025.

NMPF Objects to Proposal Raising Taxes on Farm Assets

Posted on by Theresa Sweeney

NMPF joined other key agriculture stakeholders on May 10 in sending a letter to the top Democrat and Republican in each chamber of Congress, urging them to not alter or eliminate long-standing tax code provisions fundamental to farm businesses.

“Because assets in agriculture are typically held by one owner for several decades, resetting the basis on the value of the land, buildings, and livestock on the date of the owner’s death under a step-up in basis is important for surviving family members and business partners to ensure the future financial stability of the operation,” said the groups in the letter, which came from NMPF and organizations including the American Farm Bureau Federation and the National Association of State Departments of Agriculture. The letter was addressed to House Speaker Nancy Pelosi, D-CA; House Minority Leader Kevin McCarthy, R-CA; Senate Majority Leader Chuck Schumer, D-NY; and Senate Minority Leader Mitch McConnell, R-KY.

Woven throughout Congress’s discussion of a broad, multi trillion-dollar infrastructure package are proposals for how to pay for the bill’s programs and projects, including several changes to the tax code. Two potential tax-code changes could impact farms and farmer assets in specific, yet common circumstances. The first would alter estate tax provisions, which could increase the taxes paid on inherited farm assets. The second changes how capital gains are taxed – repealing the “step-up basis” currently used – which could increase the taxes due on capital gains made on farm and farm-related assets.

While NMPF recognizes the importance of investing in the nation’s infrastructure, the negative impact of these proposed tax changes on producers and their businesses is too vast. These changes could make it more difficult for dairy producers to continue their operations without tax-caused disruption, including buying and selling land and other assets and for families to hold on to their farms through generational changes.

NMPF also joined 115 groups on May 25 organized through the Family Business Estate Tax Coalition (FBETC) in calling on the Leadership of the Senate Finance Committee and the House Ways and Means Committee to oppose these proposed tax changes. “Repealing stepped-up basis by imposing capital gains taxes when assets transfer ownership at death would force many family-owned businesses to liquidate assets or lay off employees to cover the tax burden,” the group’s statement then said. The coalition then urged committee leaders to “protect family-owned businesses from tax increases by defending stepped-up basis and opposing any changes to current law.”

NMPF was pleased to see both Democrats and Republicans in the House send their own messages to their chamber’s leadership, calling for both proposed changes to be dropped from consideration in infrastructure discussions, and will continue to be active in the discussions as they evolve.