President Trump signed the Consolidated Appropriations Act, 2018, H.R. 1625, on March 23, 2018. At the end of the 2,232-page legislation, Congress included a section written to “fix” the “grain glitch.” This is, of course, the provision in the Tax Cuts and Jobs Act that provided significantly higher tax deductions (in most cases) to patrons who sold commodities to cooperatives rather than to non-cooperatives. You can read more detail about the original provision here.The 17-page “fix,” while attempting to level the playing field, adds even more complexity to an already convoluted section of the new tax law, IRC § 199A. The fix retroactively takes effect, beginning January 1, 2018. This wipes from existence the provision giving cooperative patrons a 20-percent deduction based upon gross sales.
Non-Coop Sales
Under the fix, the tax benefit to farmers who sell grain, for example, to a non-cooperative does not change. They are generally entitled to the new 20 percent 199A deduction, calculated based upon their net income from the sale. Their overall 199A deduction is limited to 20 percent of taxable income (minus capital gains). It is also restricted by a wages/capital limitation if their income exceeds $157,000 for singles and $315,000 for those who are married filing jointly.
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