Enjoy This Deduction While It Is Available.
By: Charles L. Telk Jr., CPA, Senior Tax Adviser | email
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%).
With the new administration in place, tax publications are speculating on what changes may be in store for the taxpaying community. Many of these publications are of the opinion that this section 199 deduction will be eliminated in its entirety. At this point, it is not possible or even reasonable to speculate– so our advice is to maximize your utilization of this deduction while it is available. And right now, it is available.
Another point to consider is, if your cooperative sells grain products to a Regional Cooperative, your deduction may be somewhat limited. We have heard that some of the large Regional Cooperatives are now investigating taking this enhanced deduction. If so, then you would not be able to claim the grain payments received from them as Qualified Domestic Production Gross Receipts (just like your members cannot count their grain checks received from you).
Again, the message is to maximize these deductions while they are available. Should you be notified that a Regional Cooperative is now making this calculation, we will be able to determine what effect, if any, this has on your deduction. The silver lining is that, because your deduction is limited to 50% of your qualified wages, it is possible to reduce your taxable income limitation calculation without reducing your deduction. This is a complicated issue, so please contact us if you have any questions.
