A Look at the Final Tax Bill

Various farmers, ranchers and agricultural companies are likely to see a wide variation in benefits — and in costs. The vast majority of farms are structured as pass-throughs, such as sole proprietorships, partnerships and limited liability companies, or LLCs, whose owners pay taxes on profits through the individual code. These pass-throughs account for 85 percent of U.S. agricultural production. It would increase deductions or passthroughs. It would repeal the Section 199 deduction Co-ops use. Many agricultural co-ops have used the Section 199 benefit and then passed along the money to their farmer members. But Hoeven-Thune provision would allow farmer-members to claim a new 20 percent deduction on payments from cooperatives. Also, the cooperatives themselves could claim that deduction on gross income minus payments to members, with certain limitations.The maximum amount an individual can deduct for new asset purchases, like a tractor or combine, would be raised to $1 million (compared with $500,000 under current law) and the phase-out threshold is boosted to $2.5 million.The reconciled bill would cut benefits for business interest deduction after four years. Small businesses making less than $25 million in annual gross receipts would be exempt from the new restrictions.The bill would repeal "carryback" provisions for net operating losses, but make an exception for farming. The deduction would be limited to 80 percent of taxable income and applicable to the previous two years, starting in 2018. Carryforwards would be permitted indefinitely.