If Congress passes a $1.3-trillion government funding bill — and it is expected to do so by the end of the week — it will fix the so-called grain glitch, which gave farmers a powerful incentive to sell their grain and livestock to cooperatives. The provision, Section 199A of the tax code, is the first significant flaw found in the tax law passed late last year.
The National Council of Farmer Cooperatives said the corrective language will largely re-create a tax deduction, available to producers, that existed before the tax bill was passed. The end result, said the NCFC, “preserves the competitive position of co-ops in the marketplace.”
Farm-state lawmakers found themselves on a legislative roller coaster in dealing with the original Section 199. Initially, the tax bill was going to eliminate Section 199. Then farm-state lawmakers added last-minute language to allow co-ops to pass along a tax deduction to their farmer-members. But the updated Provision, Section 199A, gave farmers a much larger tax deduction for sales to co-ops than if they sold to privately owned merchants, leading to the new effort to rebalance the tax code.
The National Farmers Union lamented the fix. Corporations, it said, got a huge break in the tax bill. “Reverting back to Section 199 … leaves farmers and their cooperatives worse off than before the passage of the Tax Reform and Jobs Act.”
Michigan Sen. Debbie Stabenow said the spending bill includes $600 million in new funding for high-speed internet service in rural America.
A summary of the USDA and FDA portion of the spending bill is available here.
To read a Senate Appropriations Committee statement about the spending bill, summaries of its provisions, or the 2,300-page bill, click here.