The U.S. House and Senate have passed the Tax Cuts and Jobs Act, and the President has signed it, which repeals 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 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. You are encouraged to consult a tax professional to determine how this deduction can be claimed for federal and state purposes.
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.
Click here for answers to frequently asked questions about DPAD and this change. If you have additional questions, please contact the CHS Patron Equities team at 1-800-328-6539, ext. 6124.