There are several benefits of doing business through the cooperative. One of those benefits involves selling grain to the cooperative where you could receive a DPAD (Domestic Production Activities Deduction) pass through. A patron who delivers grain to any Crystal Valley location, as well as direct ship bushels, is potentially eligible for this deduction.
There is an equation the cooperative uses to calculate the total Section 199 tax deduction available to the cooperative. This allows your cooperative to take advantage of special IRS rules to Section 199 that are only available to agricultural cooperatives. The cooperative can pass back any remaining Section 199 tax deduction as a Domestic Production Activities Deduction to its patrons on a per bushel rate, subject to board of director approval.
In the last couple of years, Crystal Valley has passed back the following DPAD:
2016- $.085 per bushel
2017- $.10 per bushel
2017- $.17 per bushel (This was issued in 2017 due to the tax reform act possibly eliminating the Section 199 tax deduction)
2018- $0 per bushel (This is zero due to the $.17 stated above being a pass through in 2017)
2019- $.14 per bushel
This adds up to significant dollars for our eligible patrons to use as a deduction on their income taxes.
In the rush of tax reform in late 2017, many cooperatives, including Crystal Valley, pushed out additional Section 199 DPAD’s to their patrons. This created an additional DPAD for our patrons to use towards 2017 income taxes. As a result, and to get us back onto a normal schedule of passing back the DPAD, we did not have one for 2018, as it was passed back at the end of 2017. We will be back on schedule for the DPAD deduction in 2019. Letters went out to eligible patrons mid-February stating the amount to be used on 2019 income taxes. Make sure to keep this notice until you file your 2019 taxes.
For more information on how this affects your income taxes, please consult a tax professional.
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