IRS Issues Proposed Regulations for Cooperatives Under New Section 199A

The IRS issued proposed regulations to provide cooperatives and patrons guidance under New Section 199A, which was enacted as part of the tax reform act, Public Law 115-97 (the “Act”). See our prior blog posts about New Section 199A:

 

The IRS summarized the new proposed regulations as follows:

These proposed regulations provide guidance to cooperatives to which sections 1381 through 1388 of the Internal Revenue Code (Code) apply (Cooperatives) and their patrons regarding the deduction for qualified business income (QBI) under section 199A(a) of the Code as well as guidance to specified agricultural or horticultural cooperatives (Specified Cooperatives) and their patrons regarding the deduction for domestic production activities under section 199A(g) of the Code. These proposed regulations also provide guidance on section 199A(b)(7), the rule requiring patrons of Specified Cooperatives to reduce their deduction for QBI under section 199A(a). In addition, these proposed regulations include a single definition of patronage and nonpatronage under section 1388 of the Code. Finally, these proposed regulations propose to remove the final regulations, and withdraw the proposed regulations that have not been finalized, under former section 199. These proposed regulations affect Cooperatives as well as patrons that are individuals, partnerships, S corporations, trusts, and estates engaged in domestic trades or businesses.

The proposed regulations can be accessed here. For more information about cooperative taxation, click here. Contact David Cook for more information or to schedule an informational session.