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OIRA review: Domestic production activities deduction for agricultural, horticultural cooperatives

Final regulations pending OIRA review

OMB’s Office of Information and Regulatory Affairs (OIRA) has received for review from the U.S. Treasury Department final regulations relating to application of the domestic production activities deduction for specified agricultural or horticultural cooperatives.

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Treasury regulations that are identified as “major” regulations are subject to review by OMB’s OIRA before being issued, pursuant to Executive Order 13771. Accordingly, knowing the status of OIRA review of Treasury regulations can help in predicting when regulations may be issued by Treasury and the IRS.

The final regulations pending review are listed on the OIRA website as:

  • RIN: 1545-BO90: Domestic production activities deduction for specified agricultural or horticultural cooperatives [TCJA]


OIRA’s description of these regulations is:

On March 23, 2018, Congress modified section 199A(g) to provide specified agricultural or horticultural cooperatives with a deduction similar to the repealed section 199 deduction effective retroactively to January 1, 2018, in H.R. 1625 - Consolidated Appropriations Act, 2018, Pub. L. 115-141 (H.R. 1625). Section 199A(g)(6) provides that the Secretary shall prescribe such regulations as are necessary, including regulations which prevent more than one taxpayer from being allowed a deduction under section 199A(g). Such regulations shall be based on the regulations applicable to cooperatives and their patrons under section 199 as in effect before its repeal.  

Background

As enacted by the 2017 tax law (Pub. L. No. 115-97)—the legislation that is often referred to as the “Tax Cuts and Jobs Act” (TCJA)—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, 2018 (Pub. L. No. 115-141) enacted March 23, 2018, 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:

  • Restore prior-law section 199 treatment for specified agricultural and horticultural cooperatives under new section 199A(g)
  • Allow eligible patrons to claim a deduction passed through from a specified agricultural and horticultural cooperative
  • Revise the patron-level deduction to 20% of taxable income or qualified business income (in line with all other non-corporate taxpayers), with limitations for patrons (e.g., farmers) with high taxable incomes or capital gains, and further modifications for patrons who enter into transactions with a cooperative

Regulations to implement these measures under section 199A were proposed in June 2019. Read TaxNewsFlash


For more information, contact KPMG’s National Director of Cooperative Tax Services:

David Antoni | +1 (267) 256-1627 | dantoni@kpmg.com 


Associate National Director of KPMG’s Cooperative Tax Services:

Brett Huston | +1 (916) 554-1654 | bhuston@kpmg.com

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