Agriculture firms warn of unintended impact of tax law

 A provision inserted into the tax code during Senate and House negotiations in December gave farmers more lucrative deductions when they sell agricultural products directly to the farm cooperatives he competes against rather than to businesses like his own.Mr. Tronson, whose four storage facilities handle 17 million bushels of grain a year, said the competition could spell the end of his 76-year-old family-owned business.“We’ve made a big investment. And this law, if they don’t change it, the scenario is that we’ll go broke,” he said.Farm groups and agricultural cooperatives battled last year to preserve a deduction on domestic U.S. production, which manufacturers also received. That deduction went away in the tax rewrite, but lawmakers including Sen. John Hoeven (R., N.D.) won the inclusion of a new deduction. The new provision allows farmers to deduct up to 20% of their total sales to cooperatives, letting some farmers reduce their taxable income to zero. It is a more generous version of a deduction that owners of pass-through businesses, such as partnerships and S-corporations, get in the law.Farmers would get a smaller deduction—about 20% of income—if they sell grain or other farm products to privately held or investor-owned companies like Mr. Tronson’s.Tax lawyers and accountants said the new law will give cooperatives a significant edge over competitors. That stands to benefit co-op giants including American Crystal Sugar Co., Land O’Lakes Inc., CHS Inc. and Ocean Spray Cranberries Inc.