The 2017 Tax Cuts and Jobs Act has introduced section 199A, which generally provides special tax deductions to taxpayers doing business as pass-through entities. While an in-depth analysis of section 199A is beyond the scope of this article, section 199A generally allows a special deduction on 20% of qualified business income subject to various limitations. One of the limitations is that this deduction is limited to 50% of wages related to such qualified business or 25% of such wages plus 2.5% of the cost basis of certain fixed assets.

Strangely, section 199A has a provision, which provides special benefits to farmers selling crops to cooperatives. For those farmers who are the patrons of cooperatives and sell to cooperatives, they are permitted to deduct up to 20 percent of qualified cooperative dividends (limited by taxable income minus net capital gain) from sales made to cooperatives in the tax years 2018 to 2025. There is no wage limitation or other calculation. Qualified cooperative dividend means any patronage dividend, and similar amounts from cooperatives. Obviously, this provision places other non-cooperative companies purchasing crops from farmers at a disadvantage, and there is a strong protest to correct this. However, section 199A, as enacted in December 2017, provides significant incentives for farmers to sell crops to cooperatives.