Rep. Steve King Proposes Section 199A Fix in Letter to Brady

King Offers 199A Tax Fix for Commodity Sales to Co-ops/Private Elevators

King's proposal places co-ops/private elevators on equal footing, preserves competition

Mar 15, 2018

Washington, D.C. — Congressman Steve King is releasing the text of a letter he has to House Ways and Means Chairman Kevin Brady in which King proposes a legislative fix for a mistake in the tax code affecting co-ops and private grain elevators. While the recently enacted Tax Cuts and Jobs Act has been a remarkable success for Iowans, a mistake in the law's revisions to Section 199A has distorted the competitive market between co-ops and elevators, granting large tax advantages to those who sell their commodities to a co-op instead of to a private elevator.

“It is my position to bring both co-ops and private elevators to a revenue neutral level,” said King “My proposal would bring both co-ops and private grain elevators together so there is an equal incentive for farmers. This proposal does not pick winners and losers, but it does put choice back in the market.”

King does not want to see the tax code used to pick winners or losers, and he is urging Chairman Brady to adopt King's proposal which brings both co-ops and private elevators together at a revenue neutral level. Adoption of King's fix to 199A would ensure that competition and choice remained key drivers of the marketplace, instead of a poorly drafted provision of the tax code.

The letter can be read here or below.

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Text of King's Letter to Chairman Brady:

March 13, 2018

Chairman Kevin Brady
1102 Longworth Building
Washington, DC 20515

Dear Chairman Brady,

The Tax Cuts and Jobs Act has been nothing short of successful in Iowa; it has created jobs, grown the economy, and given tax cuts to most Iowans. Unfortunately, the law's revision to Sect. 199A has caused a lot of due concern for my constituents. While our new tax law has improved many aspects of the economy, this specific revision has further chosen winners and losers.

I urge you to ensure that this mistake is fixed as soon as possible, and in a way that keeps the farm commodity markets competitive between co-ops and private grain elevators. Currently farmers who take their grain to a co-op will receive a 20% gross sales deduction. On the other hand, if farmers take their grain to a private grain elevator, then they will only receive a 20% net income deduction. According to Iowa State University the average farmer in my home state of Iowa has $399,235 in grain sales and an average net income of $97,719. If the farmer takes his/her grain to a co-op they will be able to deduct 20% of gross sales — which is $79,847 in deductions. If the average farmer takes his/her grain to a private elevator then they will be able to deduct 20% of net income — which is $19,543.80. There is exactly a $60,303.20 difference between these two deductions.

It is my position to bring both co-ops and private elevators to a revenue neutral level. My proposal would bring both co-ops and private grain elevators together so there is an equal incentive for farmers. This proposal does not pick winners and losers, but it does put choice back in the market.

Putting both co-ops and private grain elevators on equal footing is a simple, yet logical fix to this problem. It will help keep the market competitive and increase commodity prices — in a time when commodities are struggling. I hope this common sense proposal can help fix this problem soon to protect American businesses and farmers.

Sincerely,

Congressman Steve King