OPINION A wise elderly farmer I knew in my youth would to sum up hard times on the farm with the adage, “Mother always said there would be days like this, but she never said there would be this many of them.”
That thought must be crossing the minds of farmers all across the Midwest as the year of COVID-19 moves on, steeped in uncertainty. The year began with optimism that after five years of depressed prices, adverse weather, trade disputes and market disruption, famers were about to see better days. Those better days are proving elusive.
Now as the growing season moves toward fall harvest, new federal tax rules are threatening to be another burden on agriculture. The U.S. Treasury and Internal Revenue Service are considering a proposal that would raise taxes on thousands of cooperative farmer-owners. In this time of a global pandemic and economic strife, increasing the tax burden on our farmers should be unthinkable.
The proposal being considered ignores the clear intention of Section 199A(g) of the 2018 tax code, which Congress approved to remedy the so-called “grain glitch.” If adopted, income from cooperative business conducted with non-cooperative members – known as nonpatronage income – could no longer be used to calculate tax deductions.
Before the “grain glitch” cooperatives could use business with both members and non-members alike in their calculations. Congress clearly intended to keep that in place. The Treasury and the IRS, by ignoring that intent, threaten to take millions of dollars out of farmer pockets at a time when every dollar is needed to make ends meet.
The challenges facing agriculture are well-documented. The federal government must be aware or it would not have approved farmer-assistance programs on several occasions during the past year. Why then with the other hand slap farmers with an unfair, additional and potentially devastating tax?
There is still time to stop the proposal but we must speak now. The cooperative community needs to speak as one voice to Treasury Secretary Steve Mnuchin and Congressional Representatives, asking for the original deduction to be upheld. Not to do so will place thousands of farmers in financial risk. In agriculture there are things we can control and things we cannot. Tax policy is one we can, and we must.