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Farm and tax policies highlighted at land expo

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Several U.S. senators are working to fix a tax provision that allows some farmers to take significant tax deduction for selling goods to agricultural cooperatives, which hurts some producers and businesses. (Photo: Joseph L. Murphy/Iowa Soybean Association)

By Matthew Wilde, ISA senior writer


A controversial tax benefit and the farm bill were hot topics at the recent Peoples Co. Land Investment Expo in West Des Moines.

Bill Hanigan and Tim Coonan, attorneys with the Davis Brown Law Firm based in Des Moines, led a farm bill and policy discussion at the 11th annual event on Jan. 26, which addressed evolving challenges and opportunities facing agriculture.

The new 199A tax provision included in the tax reform bill allows farmers and farm operations, except those organized as a C corporation, to deduct 20 percent of sales to agricultural cooperatives. Grain sold to corporations such as Archer Daniels Midland and Bunge wouldn’t quality for the tax credit.

Sen. Orrin Hatch, R-Utah, told The Hill last week that lawmakers are working to fix the tax issue that is having “unintended effects” on agriculture. It will help some farmers and hinder others and possibly influence future grain sales and business transactions.

“It’s potentially market distorting,” Hanigan told a group of farmers attending the expo. “There’s private elevators, ethanol plants and livestock feeders with their own feed mills trying to organize as a co-op.”

Hanigan estimates the tax deduction is worth about 15-18 cents per bushel.

Senators have been working to resolve the issue for weeks but haven’t reached a deal. According to media reports, larger and smaller co-ops couldn’t agree on a compromise.

“Though the aim of that provision, in part, was to preserve benefits previously available to agricultural cooperatives and their patrons for income attributable to domestic production activities, the current statutory language does not maintain the previous competitive balance between cooperatives, other agricultural businesses, and the farmers who sell their crops to them, which existed prior to enactment of the tax reform bill," Hatch told The Hill.

The Utah senator hopes to find a solution soon, with the help of Sen. Chuck Grassley and others.

Hanigan isn’t optimistic that will happen this year. Sixty senators need to vote for it.

“I think by this time next year it will be fixed,” Hanigan said.

Mark Muench, a farmer from Ogdon, hopes a deal making 199A fair can be struck soon. The Iowa Soybean Association member and former director said his farm, which is a C corporation, can’t utilize the deduction. That puts him at a competitive disadvantage.

“If a neighbor has a 15-cent per bushel tax savings, his break-evens are that much lower than mine,” Muench said. “It would impact rent and buying land. In a low-margin environment, 15 cents or more per bushel makes a big difference.”

If the co-op tax deduction is short-lived, Muench said he wouldn’t restructure the farm due to the time and money to dissolve a corporation. If it’s in place for more than two years, he would likely do it.

“I’m planning on talking to my attorney about this and discuss what my options are,” Muench said. “I think it will get changed, but the question is when.”


More than 650 people from dozens of states annually attend the expo, which is billed as the nation’s premier farmland event. It’s hosted by Peoples Company, an agricultural land brokerage, management, appraisal and investing firm based in Clive.

Company President Steve Bruere said the expo is a great opportunity for farmers, investors and landowners to talk about pressing issues. The current farm bill, which expires in September, and the cooperative tax deductibility rule top the list, he said.

“We’re able to bring in speakers that farmers don’t often hear daily to broaden their knowledge of what’s happening around the country,” Bruere added. “The farm bill and 199A certainly impact future decisions pertaining to land, grain sales and more.”

Farm programs

President Trump recently unveiled a proposal that would slash crop insurance and other farm programs by $47 million over 10 years as policymakers discuss the next farm bill. It includes a major overhaul of the Supplemental Nutrition Assistance Program (SNAP), otherwise known as food stamps.

The proposal would cut $22 billion by reducing crop insurance premium subsidies from the current average of 62 percent to a “more reasonable” 48 percent. Underwriting gains to insurance companies would be capped at 12 percent.

Other farm proposals include:

  • Eliminate crop insurance premium subsidies and other payments to farmers who have an adjusted gross income of more than $500,000.
  • Cut conservation spending by more than $14 billion over 10 years.
  • End the Regional Conservation Partnership Program.
  • Cap Conservation Reserve Program payments at 80 percent of local rental rates.

Agri-Pulse reports the proposals are likely dead on arrival in the House and Senate Agriculture committees. However, experts say cuts are likely.

“The federal government has budget issues and there’s not a lot of money,” Hanigan said.

Iowa is well positioned to help shape the next farm bill, Coonan added. Rep. David Young is on the U.S House Appropriations Committee and an agriculture appropriations subcommittee. Grassley is a senior senator.

 Given the bulk of the farm bill spending is SNAP, Coonan expects a bill to get done.

“I would be shocked if it went away,” he said.

For permission to republish articles or to request high-res photos contact Aaron Putze at

©2017 Iowa Soybean Association On-Farm Network®. All rights reserved. On-Farm Network® is a registered trademark of the Iowa Soybean Association, Ankeny, IA.Portions of some On-Farm Network trials are paid for in total or in part by the soybean checkoff.

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December 2017 Contact Ann Clinton for past publications.