Section 199 – Good News!

By: Charles L. Telk Jr., CPA, Senior Tax Advisoremail

More Good News Regarding the Section 199 Deduction– IRS Issues Private Letter Ruling On Non-Pooling Grain Cooperatives

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. Because of the time and effort that the firm put into researching and implementing this significant tax deduction, our clients have enjoyed a substantially increased tax deduction under section 199. In some cases, this deduction has reached into the high seven-figures, saving our cooperative clients millions of dollars. That number is worth mentioning again. This increased deduction has saved our cooperative clients millions of dollars. We started informing and educating our clients of the new methodology of computing this deduction over one year ago. At the time, there were no other firms in the Midwest that agreed with our position. In fact, we took some pretty nasty shots from some of our competition– despite the fact that the rules were clear and some of the nationally recognized cooperative tax authorities agreed with our position. The IRS had issued five private letter rulings that had been requested by Pooling Cooperatives. These rulings were consistent with our position as well. It is interesting to note that the five requesting pooling cooperatives were “pooling” in name only. In fact, they were operating as “non-pooling” cooperatives. Earlier this month, the IRS issued a private letter ruling that was requested by a non-pooling grain marketing cooperative. This ruling was also consistent with our position, providing additional evidence that we have been properly computing this increased deduction. We were pleased to see this ruling because it was the first ruling requested by a non-pooling marketing cooperative, and the fact pattern mirrors our client’s situations virtually 100% and provides us with additional confirmation that we are making the correct calculations. As always, we value your business and we continue to take steps to be on the cutting edge of exciting tax issues– issues that can potentially save your cooperative millions of dollars of working capital. We appreciate your confidence in the firm. We understand the excitement, anxiety and frustration that this issue has caused over the past year, and we are pleased you were rewarded with this increased deduction.