Farmers are closely watching the tax package a congressional conference committee is finalizing in Washington, D.C.
Experts say many provisions will benefit agriculture, but some will make farm management more complicated and one provision could cost some farmers thousands of dollars.
That provision raising concern across the agriculture sector would end a deduction that will affect cooperatives. The Section 199 deduction, also called the domestic manufacturing deduction, allows deductions for income earned from manufacturing or production. For cooperatives like Moorhead-based American Crystal Sugar, the savings are passed on to 2,800 cooperative members.
"For us it's sort of an unfair situation where we don't get any benefit of the lower corporate tax rates but we lose the deduction. And that deduction is worth $10,000 to $15,000 a year for our average shareholder, so it's a significant, significant issue," said American Crystal President Tom Astrup.
Astrup says he hopes the Section 199 issue can be resolved in the House-Senate conference committee.
"Members of Congress get that they screwed up on this and they want to fix it," said National Farmers Union President Roger Johnson.
"But politics always reigns supreme," he said, injecting a note of caution. "The problem that they're running into politically is the Republican leadership is saying, 'This has been such a high-profile issue, if we in fact did that we're going to get a lot of bad press about caving to wealthy farmers again.' "
Johnson believes that overall the GOP tax proposals won't have a large effect on most farmers and he says there are some good provisions. Still, the Farmers Union opposes the effort, not because of any specific provisions, but because it will increase the national debt.
The National Farm Bureau supports the emerging tax plan. Tax policy specialist Pat Wolff said farmers will benefit from lower rates for pass-through businesses. Those are businesses that pay taxes as individuals, not corporations, and Wolff said that includes the majority of farmers and ranchers.
Wolff thinks farmers will benefit from deductions for business expenses. The loss of the Section 199 deduction affecting cooperatives is a concern she said, but her main concern is that some of the tax provisions that are good for farmers are temporary.
"Temporary provisions in the tax code cause confusion," said Wolff. "They make farm management difficult. It's hard enough for a farmer to deal with uncertainties because of weather and markets, let alone having to worry about whether they can take a deduction next year because it expires on Dec. 31."
Wolff said her organization is pushing hard for any tax changes to be permanent.
Minnesota 7th District Rep. Collin Peterson thinks the tax package will cause upheaval in agriculture. He expects a lot of legal maneuvering to take advantage of changes to the tax code.
"Over the next year you're going to have these lawyers and accountants poring over this thing and I can guarantee you they are going to find all kinds of loopholes," he said. "And I predict that there will have to be a correction bill in two or three years because of the excesses of what's in this bill."
Peterson, who is the ranking Democrat on the House Agriculture Committee says the tax bill is generally good for agriculture. He's hopeful the deduction for cooperatives can be fixed, but he says he's had no input on the legislation in the Republican-controlled Congress. And Peterson doesn't expect the tax package to require cuts in farm spending in the new farm bill that will be written early next year.
Congressional leaders say they want a final tax package to the president before Christmas.