As we all know, tax laws change frequently. Under current law, we can compute and deduct (or allocate to your members) this section 199 deduction. In fact, this deduction even increases for tax year 2009 to 9% of adjusted taxable income before PURPIMs and allocated qualified patronage (currently 6%).

We feel that this ruling, coupled with IRS instructions regarding effective dates of electing the enhanced section 199 calculation, provide a clear authority to amending cooperative returns for purposes of computing and deducting the larger section 199 deduction.

The Internal Revenue Service rulings are clear that for Federal Tax purposes, under code section 1382, payments made by a marketing cooperative to its patrons for product are considered Per Unit Retains Paid in Money or PURPIMs.

Since the IRS issued Internal Legal Memorandum 200806011 in early 2008, which provided guidance on computing the section 199 deduction for both pooling and non-pooling cooperatives, we at Gardiner Thomsen have spent many hours researching this issue to provide the best possible tax service to our cooperative clients.

Effective October 3, 2008, the basic limit on the FDIC amount was increased from $100,000 to $250,000 per depositor through December 31st, 2009. On May 20, 2009, the FDIC extended the coverage date through December 31, 2013. (However, the extension does not apply to the Transaction Account Guarantee Program. The unlimited coverage under the Transaction Account Guarantee Program is only in effect for depositors at participating institutions through December 31, 2009.) On January 1st, 2014, coverage will revert to $100,000, except for certain retirement accounts.

Last year, based on IRS guidance, we changed the way that Section 199 was computed. This year we are researching the Internal Revenue Code, specifically sections 1381, 1382 and 1383, which are related to Section 199, to investigate the possibility of writing down your tax basis member grain inventory (in dollars) to zero. This would have the affect of creating a tax deduction equal to your ending member grain inventory.