The U.S. House and Senate have passed the Tax Cuts and Jobs Act, which if signed by the President, will repeal the IRS Section 199 Domestic Production Activities Deduction (DPAD), effective Dec. 31, 2017. As a result of this pending change, CHS will share fiscal 2017 DPAD allocations with eligible cooperatives and owners by Dec. 31, 2017.
Past federal income tax law allows agricultural cooperatives, like CHS, to pass through Section 199 Domestic Production Activities Deduction known as DPAD to eligible patrons. The CHS Board of Directors determined that, based on fiscal 2017 performance, eligible owners will receive the unused portion of the company’s DPAD, totaling nearly $151 million generated from patronage-related business conducted with CHS for the fiscal year ending Aug. 31, 2017.
The fiscal 2017 allocations being made by the end of December 2017 replace the DPAD allocations eligible owners would have typically received in May 2018. We encourage you to consult a tax professional to determine how this deduction can be claimed for federal and state purposes.
Based on our understanding of the potential tax law changes, if your cooperative intends to pass any of the CHS Section 199 DPAD allocations on to your members, you must do so no later than Dec. 31, 2017. Local cooperatives will be notified of their allocation amounts by mail soon.
CHS farmer-owners will receive a statement outlining their Section 199 DPAD allocation for fiscal year 2017 within the next week. The Section 199 DPAD allocated to you is available as a deduction for the tax year in which you received this statement. For most individuals, this means the deduction can be used on your 2017 federal tax return. The deduction allocation will also be shown in Box 6 of a 1099 PATR that you will receive by mail in January 2018. Deductibility for state purposes varies by state.
If you have questions regarding Section 199 DPAD, please contact the CHS Patron Equities team at 1-800-328-6539, ext. 6124.
What You Need To Know