TaxFax Summer 2021

Originally published in The Cooperative Accountant, Summer 2021 Issue

The Continuing Saga of Section 199A(g)
Throughout 2020, the National Council of Farmer Cooperatives (“NCFC”) continued its concerted effort to have the U.S. Treasury and the Internal Revenue Service (“IRS”) follow Congress’s explicit intent for the agencies to recreate how “old” Section 199 worked for farmer co-ops when writing rules to implement the fix to the so-called grain glitch.

As you may recall, in 2019 the U.S. Treasury and IRS issued a draft proposal that would limit a co-op’s deduction solely to patronage activity.  Under the old Section 199, co-ops calculated the deduction on both patronage and non-patronage income, so the proposal directly contradicted Congressional intent in crafting the fix to the so-called grain glitch.

NCFC and its Section 199A Working Group – drawn from NCFC’s Legal, Tax & Accounting (“LTA”) and Government Affairs Committees – engaged in the early months of the year with key members of Congress to push Treasury and IRS to respect congressional intent.

These efforts seemed to pay off in early March, when both Republicans and Democrats on the House Ways and Means Committee pushed Treasury Secretary Steven Mnuchin on the issue at an oversight hearing.  In response to one question, the Secretary said he was "very aware of and very focused on" the issue, and, in fact, “met for one hour on it yesterday.”  He noted that their job “is to implement the law and not make policy,” and planned to meet with the House and Senate tax writing committees to determine what was intended.

To read this full article, visit nsacoop.org/publications/tca or NSAC Connect