By JIM RUTLEDGE

D.C. Correspondent

WASHINGTON, D.C. — Republican lawmakers are rushing to address a mistake in their new tax bill that gave farmers more lucrative deductions when they sell farm products directly to farm cooperatives they compete against, rather than businesses like their own.

Unless it’s changed, farmers face a tax hit.

At issue in the 2018 Tax Cuts and Jobs Act signed by President Trump on Dec. 22, 2017, is a new 199A deduction that, if it stands, allows farmers and ranchers to claim a 20 percent deduction on all payments for sales of crops to farmer-owned cooperatives, but not for sales to private or investor-owned grain handlers such as global firm Archer Daniels Midland Co.

“It’s a massive issue for people like us, ADM, Cargill, all private ethanol buyers and on and on and on,” said Dale Beyer, chief financial officer for private grain handler Minn-Kota Ag Products of Minnesota.

Consider a simplified example The Wall Street Journal gives about a wheat farmer with $500,000 in annual grain sales and $80,000 in profit. A farmer selling grain to a cooperative could deduct 20 percent of sales ($100,000), wiping out the entire income-tax liability.

By contract, if the farmer sells grain to an independent grain operator, the farmer’s deduction would be limited to 20 percent of the profit, or $16,000, leaving that farmer with up to $64,000 in taxable income.

If not fixed, the new tax provision could reshape parts of the agricultural economy and dramatically hit farmers’ taxes. Last year, the USDA reports, U.S. crop production was $183.1 billion.

In a joint statement issued by the National Council of Farm Cooperatives (NCFC) and the National Grain and Feed Assoc. (NGFA): “We are aware of questions and concerns raised about the potential marketplace effect of the new section 199A (in the new tax law) as it relates to (food) producers and agribusinesses.

“Congress’ intent in including this provision was to replicate the tax treatment previously available to co-op farmer-members, consistent with the bill’s overarching goal of creating jobs and economic growth including in rural America,” said statement authors Chuck Conner, head of the NCFC, and Randy Gordon of the NGFA.

USDA Under Secretary for Marketing and Regulatory Programs Greg Ibach said, “While the goal was to preserve (tax) benefit … for cooperatives and their patrons, the unintended consequences of the current language disadvantage the independent operators in the same industry. Our expectation is that a solution is forthcoming.

“The federal tax code should not pick winners and losers in the marketplace,” Ibach later added in a separate statement.

During the negotiations on the tax overhaul, farm groups and agricultural cooperatives battled last year to preserve a deduction on domestic production, which manufacturers received. That deduction went away, but lawmakers including Republican Sen. John Hoeven of North Dakota won inclusion of the new deduction.

An aide to Sen. John Thune (R-S.D.), who assisted Hoeven with the tax rewrite provision, said to reporters that lawmakers are in search of a “reasonable solution” to “potential unintended effects.”

Republican lawmakers say they intend to pass a technical corrections measure to fix the mistake, but need 60 votes in the Senate, with the GOP holding only 51 seats to the Democrats’ 49. Bipartisan cooperation is needed to win the fix, but the measure’s fate is uncertain. Senate GOP leaders have not scheduled a hearing to debate reversing the error.