November 6, 2017
The Honorable Kevin Brady The Honorable Richard Neal
Chair Ranking Member
Committee on Ways and Means Committee on Ways and Means
U.S. House of Representatives U.S. House of Representatives
1102 Longworth H.O.B. 1139E Longworth H.O.B.
Washington, DC 20515 Washington, DC 20151
Dear Chairman Brady and Ranking Member Neal:
The National Council of Farmer Cooperatives (NCFC) supports tax reform, but not the elimination of the Section 199 deduction for agriculture. Elimination of the jobs-creating measure would increase the tax burden of farmers at a time of continued low commodity prices.
Passed as part of the “American Jobs Creation Act of 2004,” the Section 199 deduction is working as designed, plowing millions of dollars into rural communities across the country. The unique structure of farmer co-ops—being owned and controlled by producers—means that they use the deduction differently than other businesses. Co-ops pass 95 percent of the benefit—nearly $2 billion nationally—directly back to farmers across rural America. Farmers can then deduct their share of the Section 199 benefit from their farms’ tax burden.
Ending the Section 199 deduction for agriculture would result in individual farmers paying more in taxes, as most do not pay under the corporate code and the proposal to tax patronage dividends at a 25% rate will not overcome the loss of the deduction. If fact, in many cases farmers will see a double-digit increase in their tax bill under the proposed plan. As a matter of basic fairness, it makes no sense to consider tax reform that will lower rates on businesses broadly but will raise taxes on farmers.
Since 1929, NCFC has been the voice of America’s farmer cooperatives. Our members are regional and national farmer cooperatives, which are in turn comprised of nearly 2,500 local farmer cooperatives across the country. Farmer cooperatives – businesses owned, governed and controlled by farmers and ranchers – are a proven tool to help individual family farmers and ranchers improve their income and allow them to compete in a way that would be impossible to do individually. The majority of America’s two million farmers and ranchers belong to one or more cooperatives across the country.
We encourage you to preserve Section 199 for agriculture as part of any tax reform efforts.
Charles F. Conner
President & CEO