South Dakota Farmers Union President, Doug Sombke urges Congressional leadership to follow Senators Thune and Rounds' lead and vote to make section 199A of the tax code permanent.
"As it is written, section 199A is scheduled to sunset in 2025 - it needs to be permanent if our farmers and cooperatives are to remain competitive in the global marketplace," Sombke said.
Under previous tax law, farmers using Sec. 199 were entitled to a deduction of up to 9 percent of net farm income. The overall limit was 50 percent of wages paid and a final limit of taxable income. It could not create a net operating loss.
"The Section 199A deduction is designed to level the playing field between corporations-which are now taxed at 21 percent while pass-through farmers, would be taxed at 37 percent," Sombke said. He added that corporate tax rates are now permanent, while rates for individuals and other small businesses, including co-ops, is temporary.
"199A expires in 2025. The goal of the current negotiations is keep the competitive balance," Sombke said. "Returning to Sec 199 is not an acceptable outcome, it must be enhanced to maintain the balance. There is no reason businesses of all types get a boost from reform, but coops must maintain what they previously had. Congress must also make Sec. 199A permanent."
Recalling his youth, Wessington seedstock producer, John Christensen says school wasn't really his thing.
His lack of interest didn't go unnoticed.
"My teacher caught me staring out the window one day, I was probably daydreaming about cattle. She moved my desk to face the wall. To this day, I can still see those gray boards of that one-room schoolhouse," says the 64-year-old.
Classroom learning may not have captured John's attention - cattle genetics on the other hand - for more than 50 years, they have driven an unquenchable thirst for knowledge.
"Cattle are my life," John explains. "I've been making the mating decisions for this herd since I was 11."
His passion is most obvious when you're among the offspring. Point to any yearling bull or heifer in John's winter feedyard and he recites their genetic strengths and bloodlines.
Calving out 600 cows most years, if John needs a reminder, he simply pulls out a worn calving notebook from his shirt pocket. He's been keeping careful calving records since childhood. "I have only lost one book in all these years. I have 50 years-worth of books saved," he explains.
Although maintaining pen and paper records may be a bit old fashioned, it is not an indicator of John's attitude toward technology and genetic tools.
In the mid-'60s his dad, Jens, was among South Dakota's early adopters of AI (artificial insemination). At 14, John went to AI school.
Efforts by U.S. senators to reform a tax provision passed into law December 2017 may not be in the best interest of farmers or the viability of cooperatives, said Doug Sombke, President of South Dakota Farmers Union.
The provision in question involves Section 199 of the tax code which applies to agricultural products marketed through cooperatives. Section 199 allows cooperatives to keep a tax deduction or pass it through to their farmer members.
Under the new tax code, passed Dec. 2017, farmers can deduct up to 20 percent of their total sales to a cooperative to offset the loss of the previous Section 199. Private businesses get a tax benefit from a lower tax rate and a lower corporate tax.
Before taking a position, Sombke took the time to visit with leadership from a traditional South Dakota cooperative (one where all patrons who do business with the cooperative receive patronage) and a closed cooperative (where patrons have to meet specific qualifications in order to receive dividends).
"My understanding is, this newly passed cooperative tax reform measure is unclear how it will affect our cooperative and their members," Sombke explains. "The only way we will support further action on Section 199 is to see it revised to the way it was prior to December 2017 or left alone. Anything else puts our farmers and cooperatives' tax position in jeopardy."
Sombke said he is aware that Sen. John Hoeven (R-ND) and Sen. John Thune (R-SD) are working on a solution, collaboratively.
Calling it a "swing and a miss," the South Dakota Farmers Union (SDFU) criticized a recent report by the Inter-Agency Task Force on Agriculture and Rural Prosperity in an editorial published this week in the Sioux Falls Argus Leader for failing to highlight the critical role of agricultural derived ethanol.
According to SDFU President Doug Sombke, the report references renewables but does so in the most general way imaginable, and lumps the need to produce renewables in rural America with coal, natural gas, oil, and nuclear power. The word ethanol is not mentioned despite the fact that it is a multi billion dollar domestic industry and in South Dakota alone it contributes nearly four billion dollars to the state's economy
"Agriculturally derived biofuels, primarily ethanol, have single-handedly reversed a decades long trend of rising oil imports and a staggering flow of American dollars to foreign countries that support drugs, terrorism, and other activities. While we are struggling to see commodity prices above the cost of production, I shudder to think of where we would be without the 15 billion gallon ethanol market," said Sombke .
Sombke noted that the report failed to not only pinpoint the contributions to date but the untapped potential of the future. "Ironically, the report keys on the need for regulatory reform in order to "unleash the potential" of rural America when there is no industry held back more from expansion than ethanol. We need USDA to lead the charge to break down the barriers at EPA and let us grow this market," he said.
"We can thrive in a free market if given access and we can play a key role in protecting public health through higher blends like E20, E25, and even E30."