The straight line

Form IA 137 is used to compute the ethanol promotion tax credit. This form and credit are quite confusing, but beginning January 1, 2009 an ethanol promotion tax credit is available to taxpayers who: are retail dealers of ethanol blended gasoline, and who operate motor fuel pumps at an Iowa retail motor fuel site. Note that for this credit, a tank wagon is considered a fuel site.

The topic of how much retained earnings is appropriate keeps surfacing as well. One of the concerns that comes up is how the proceeds of a sale of the company would be distributed if the company were to sell. And, with the retained earnings being significant relative to the equity in the names of the members, the concern turns to how vulnerable the cooperative is to an offer that could be perceived as attractive to the members but would end up being a discounted sale of the coop– one heck of a bargain for a buyer.

With their letter dated August 19, 2009, AGP announced their intent to take advantage of the enhanced section 199 deduction effective with their current fiscal year ended August 31, 2009. They will now be computing their section 199 deduction in accordance with the prescribed manner that Gardiner Thomsen brought to you last year.

As we visit your offices to perform audits, you may notice a few new faces. We have increased the size of our staff this year and have enjoyed growth at a faster pace than in the past. Much of this growth is associated with your growth. Your industry continues to consolidate and grow. We have always been proud to be associated with organizations who are survivors; successful companies whose goals are to build strong balance sheets to ensure their financial viability.

Having started as just an auditing-only firm, such services as corporate and personal tax return preparation and tax planning, mergers and consolidations and business consulting have been added over the years in order to more efficiently meet our clients' needs. Also, between four partners and our staff, there are over 200 years of combined experience in the cooperative industry, and we operate from four different offices: Des Moines, Iowa; Lincoln, Nebraska; Charles City, Iowa and Sioux Falls, South Dakota.

So, what is the benefit? This could allow your cooperative to pass the section 199 deduction through to your members, which enhances their cooperative patronage. This could allow the cooperative to reduce its qualified patronage allocation, which allows the cooperative to retain equity, thereby strengthening the balance sheet. And there is no question that it would generate a Federal Net Operating Loss which can be carried over for 20 years (under current law) which would provide for virtually unlimited income tax planning to minimize your Federal (and in some cases State) income tax. In laymen’s terms, it would generate additional working capital for the cooperative– potentially an increase in working capital of millions of dollars.