Tax Law and News Guidance Issued on Deductions for Cooperatives and Their Patrons Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Intuit Accountants Team Modified Jun 21, 2019 2 min read The Treasury Department and the IRS recently issued legal guidance under the Tax Cuts and Jobs Act (TCJA) and the Consolidated Appropriations Act of 2018, providing information on certain deductions to cooperatives and their patrons. The proposed regulations provide guidance for cooperatives and their patrons on calculating the deduction for the qualified business income (QBI) deduction, and the deduction for domestic production activities for agricultural or horticultural cooperatives and their patrons (the Sec. 199A(g) deduction). In addition, Notice 2019-27, contains a proposed revenue procedure providing guidance on methods for calculating W-2 wages for purposes of Sec. 199A(g). The QBI deduction is available for tax years beginning after Dec. 31, 2017, for taxpayers, including certain patrons of cooperatives, with income from a domestic business operated as a sole proprietorship, a partnership, S corporation, trust or estate. The QBI deduction is up to 20 percent of the QBI from the business. Some taxpayers may also be allowed a deduction up to 20 percent of qualified real estate investment trust dividends and publicly traded partnership income. Patrons’ Deduction Certain patrons that conduct business through cooperatives may be able to include patronage dividends and similar amounts they receive from those cooperatives to calculate their own QBI deduction. For example, a farmer receiving patronage dividends from a marketing cooperative, through which the farmer sells agricultural products, may be able to include these dividends in calculating the QBI deduction from the farmer’s agricultural business. The proposed regulations provide guidance to cooperatives and patrons regarding the QBI deduction. Certain patrons, like farmers, must reduce their QBI deduction if they receive qualified payments from specified agricultural or horticultural cooperatives. The QBI deduction must be reduced by either 9 percent of the QBI from each business related to the qualified payments, or 50 percent of the wages allocated to each such business, whichever is the smaller amount. The proposed regulations provide guidance to patrons regarding the reduction to the QBI deduction. Specified Agricultural or Horticultural Cooperatives’ Deduction Specified agricultural or horticultural cooperatives are allowed a Sec. 199A(g) deduction for income attributable to domestic production activities, which is similar to the domestic production activities deduction under the former Sec. 199 before its repeal by the TCJA. Cooperatives cannot pass through any portion of their Sec. 199A(g) deduction to patrons structured as C corporations, unless they are specified agricultural or horticultural cooperatives. The proposed regulations provide guidance to cooperatives and patrons regarding the Sec. 199A(g) deduction. Be sure to visit the Intuit® Tax Pro Center for a full library of articles on tax reform. Previous Post 3 Options to Pay Tax Owed Throughout the Year Next Post July 2019 Tax and Compliance Deadlines Written by Intuit Accountants Team The Intuit® Accountants team provides ProConnect™ Tax, Lacerte® Tax, ProSeries® Tax, and add-on software and services to enable workflow for its customers. Visit us at https://proconnect.intuit.com, or follow us on Twitter @IntuitAccts. More from Intuit Accountants Team Comments are closed. Browse Related Articles Tax Law and News IRS Issues Tips on How Tax Reform Affects Farmers and R… Tax Law and News IRS Issues Guidance on TCJA Changes to Business Expense… Tax Law and News Guidance issued on tax relief on deductions for food or… Tax Law and News Wage requirements for enhanced credits/deductions Tax Law and News IRS aims to close tax loopholes for wealthy Tax Law and News IRS clarifies rules for new corporate alt min tax Tax Law and News IRS Issues Proposed Regulations on New 20 Percent Deduc… Tax Law and News IRS Updates Per-Diem Guidance for Business Travelers an… Tax Law and News IRS Issues Final Sec. 199A Regulations Tax Law and News Guidance on credit for sequestration of carbon oxide