The Consolidated Appropriations Act, 2018 (Pub. L. No. 115-141) included changes to section 199A concerning the application of a new deduction for certain cooperatives and grain companies.
Proposed regulations [PDF 382 KB] (39 pages) from the U.S. Treasury Department and IRS provide guidance to implement the statutory revisions. The proposed regulations (REG-118425-18) were published in the Federal Register on June 19, 2019.
As enacted in Pub. L. No. 115-97, section 199A generally provides a deduction for qualifying income of certain noncorporate owners of some pass-through entities and sole proprietorships. The Consolidated Appropriations Act attempted to address certain concerns raised within the agricultural industry, and (effective for tax years beginning after December 31, 2017) section 199A was modified to:
The proposed regulations are extensive and address a number of topics that:
The new regulations are proposed to be effective for tax years beginning after the date of publication of a Treasury decision adopting them as final regulations in the Federal Register. The preamble indicates that taxpayers may rely on the proposed regulations in their entirety before their finalization.
The regulations are extensive and rely significantly on existing regulations under section 199A (in the case of section 199A(a)) and under section 199 (in the case of section 199A(g)). Since they are specific to cooperatives, there are a number of special rules with implications for eligibility, computations, and compliance. Treasury and the IRS have requested comments; it is possible that modifications could be made accordingly prior to finalization of the regulations.
For more information, contact KPMG’s National Director of Cooperative Tax Services:
David Antoni | +1 (267) 256-1627 | firstname.lastname@example.org
Or Associate National Director of KPMG’s Cooperative Tax Services:
Brett Huston | +1 (916) 554-1654 | email@example.com
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