After tweaking Section 199A of the tax reform bill, the Domestic Production Activities Deduction (DPAD) was reinstated for cooperatives. CHS Director of Taxation Jim Heine says the Section 199 issue should be settled, for now. However, there has been no IRS guidance on the deduction. “At the individual level, the deduction will keep some accountants busy trying to figure out what that looks like. However, I think the concept is there,” says Heine. “It is probably a lower priority on the treasury’s guidance list. Undoubtedly they will get around to it and issue some guidance.”
C-corps weren’t included in the Section 199 portion of the tax law. Heine says the Congressional reason was C-corps will have the 40 percent deduction in the corporate rate. “The ability for them to receive DPAD in addition was too large of a benefit.”