Today, Gov. John Bel Edwards and Louisiana Commissioner of Agriculture and Forestry sent a letter to congressional leaders asking they fix a provision in the Tax Cuts and Jobs Act that unfairly penalizes family-owned or privately-held agriculture companies.
The Act eliminated the former Section 199 Domestic Production Activities Deduction, which allowed certain businesses, including farmers’ cooperatives, a 9% domestic production deduction, in favor of a new 20% deduction contained in the newly enacted Section 199A. Under the new Section 199A, farmers are now permitted to deduct up to 20 percent of gross sales made to an agricultural cooperative. Conversely, sales made to a non-cooperative, such as a family-owned or privately-held company, are limited to a 20 percent deduction of net farm income as it relates to those sales.
“The effect of this disparate treatment is to incentivize and encourage farmers to sell their products to agricultural cooperatives, rather than independent businesses organized in a manner other than as a cooperative,” Gov. Edwards and Commissioner Mike Strain said in the letter. “In Louisiana, this means many local and family-owned businesses will be at a distinct competitive disadvantage in the marketplace and will result in lost business and lower wages, the exact opposite of what the Tax Cuts and Jobs Act was intended to produce. In addition to creating winners and losers in the marketplace, the new Section 199A unintentionally opens up a deduction meant to benefit farmers, to sectors for which the deduction was never intended. For the reasons previously stated, we respectfully request that you introduce immediate legislation to restore the level playing field previously enjoyed by both agricultural cooperatives and independent businesses.”