On December 22, 2017, the recent tax reform package known as the “Tax Cuts and Jobs Act of 2017” was signed into law. The new Act, effective for the 2018 tax year, contains many sweeping changes to the current tax system, including provisions that could impact the tax deductibility of the proceeds received from sales of the commodities to CVA.
Language from the new law indicates that producers may be entitled to a tax deduction of up to 20% of distributions received from certain types of entities, including payments received from qualified cooperatives as per unit retains paid in money for sales of commodities, provided the payments are includible in the members’ gross income.
This deduction is not available to payments received for commodities sold to private grain companies or ethanol organizations, operating as C-corporation taxpayers.
Considering the potential 20% tax deduction, the value of commodities sold to cooperatives appears very favorable when compared to the value of commodities sold to private grain or ethanol organizations that cannot provide the same advantages. This year, we encourage you to carefully consider these opportunities when making decisions concerning your operations.
The Treasury Department and Internal Revenue Service are still in the process of implementing the provisions of the new Act. Due to these circumstances and because tax strategies and tax consequences vary from producer to producer, our communications regarding these provisions should not be considered as tax advice. We encourage you to confer with your trusted tax professional to better understand the tax implications and possible benefits under these new provisions.
We appreciate your business and look forward to serving you!