GROWMARK Section 199 Case
The Tax Court recently issued a long-awaited ruling in the GROWMARK section 199 case. As in the AGP case (issued in October), the Tax Court ruled that section 199(d)(3) does not require separate domestic production activities deduction (DPAD) computations for patronage and nonpatronage activities. However, once DPAD is computed it must be allocated between patronage and nonpatronage activities.
The Judge further ruled that because the Schedule G allocation is done pursuant to subchapter T (not section 199), the taxpayer should allocate the aggregated DPAD on its Schedule G using the same method it used for other Schedule G allocations. GROWMARK had argued that its DPAD should be allocated on the basis of its qualified production activities income (QPAI).
The case is GROWMARK Inc. & Subsidiaries, Petitioner v. Commissioner of Internal Revenue, Respondent, T.C. Memo 2019-161.
We will keep you posted on any impact this may have on your cooperative, if any.