January 5, 2018
On December 21st we mailed each of you a letter discussing the changes in the Tax Reform Bill of 2017. As I wrote in that letter it has always been and will continue to be my policy to steer away from giving individual tax advice to anyone. I do believe it is critical for each of you to have an individual discussion on how the following information may affect you and your tax return moving into 2018. I would certainly suggest you have that discussion as soon as possible prior to making grain marketing decisions which could prove to be quite costly in 2018.
As you are aware, over the past seven years, Two Rivers Cooperative has passed through to you a tax deduction based on Section 199. During that time we have passed through nearly $7 million in tax deductions, which conservatively have saved our members nearly $2 million in federal income taxes. As I stated in my letter Section 199 has been eliminated with any tax years beginning after January 1, 2018.
Over the past two weeks, I have met with several tax professionals in the area to discuss their understanding of the replacement for Section 199 which has been so imaginatively named Section 199A. I can tell you at this time there is considerable confusion and hand wringing amongst the tax professionals regarding how the implementation of Section 199A will be accomplished.
I have found the wide majority of the tax professionals I have talked with are in agreement related to how Section 199A is written. The main challenge will be when the actual rules and regulations are written in Washington to determine final implementation of Section 199A.
At this time, it appears a majority of our members will be allowed to take a 20% deduction from their net taxable income based on the grain sold to a cooperative of which you are a member. Therefore with every $100,000 of grain sold to your cooperative you may receive a deduction of up to $20,000 from your taxable income. On $3.00 corn this tax deduction could amount to tax savings of approximately 12 cents per bushel and on $9.00 beans could total as much as 36 cents per bushel.
Over the next few weeks we will continue to discuss this new deduction with our internal tax accountants. Once the final ramifications of the bill become clearer, we will hold meetings with the tax professionals in the area and also with you, our members, to be certain there is a complete understanding of this new development.
Please understand, I am not a tax professional and strongly suggest you discuss with your tax professional how Section 199A may affect your operation in 2018 as you finalize your 2017 tax return.
Two Rivers Cooperative