Dairy co-ops face a $2B tax cliff in 2025. Will Congress act before rural economies collapse?”
EXECUTIVE SUMMARY: Dairy cooperatives are racing against a 2025 deadline to save Section 199A, a tax provision funneling $2 billion annually to farmers. Without congressional action, co-ops like Northwest Dairy Association (NDA) risk losing deductions tied to their manufacturing income, squeezing patronage dividends and rural investments. Bipartisan bills (H.R. 4721, S. 480) aim to make the deduction permanent, but political gridlock threatens progress. Co-ops employ 200,000 workers and fund critical infrastructure, making their survival vital to rural economies. The expiration would deepen inequities between corporate tax cuts and temporary farmer relief, forcing operations to cut dividends and services. Farmers must urge lawmakers to prioritize parity before the 2025 expiration.
KEY TAKEAWAYS:
- $2B Tax Lifeline at Risk: Section 199A’s expiration threatens to strip $2 billion in annual benefits from dairy cooperatives.
- Legislative Battle: Bipartisan bills (H.R. 4721, S. 480) seek permanence, but political divides endanger passage.
- Rural Economic Collapse: Co-ops employ 200,000 workers and fund infrastructure; their decline would devastate communities.
- Corporate vs. Farm Equity: Corporations enjoy permanent tax cuts while farmers face temporary relief, exacerbating power imbalances.
- Urgent Farmer Action: Producers must advocate for Section 199A extension to protect dividends, jobs, and rural stability.
The clock is ticking. With Section 199A set to expire in 2025, nearly $2 billion in annual tax benefits could vanish—leaving your operation exposed to crushing new tax burdens while corporations keep their permanent cuts.
Section 199A vs. Corporate Tax Cuts: A Rural Survival Guide
Farmer co-ops pass 95% of Section 199A benefits—over $2 billion annually—directly to members. This isn’t corporate welfare; it’s financial oxygen for operations battling inflation and volatile milk prices.
“Section 199A has driven job creation and rural investment,” the National Milk Producers Federation (NMPF) warns. “Without it, co-ops like Northwest Dairy Association (NDA)—which processes milk through its Darigold subsidiary—would lose deductions tied to their manufacturing income.”
Key Stat:
$2 Billion Annual Benefits
Cooperatives pass 95% of deductions to members (NMPF).
Legislative Timeline: What 2017, 2018, and 2025 Mean for Dairy Farmers
| Year | Legislative Action | Impact |
| 2017 | Tax Cuts and Jobs Act (TCJA) | Introduced Section 199A with temporary benefits for co-ops |
| 2018 | Consolidated Appropriations Act | Restored prior-law section 199 treatment for co-ops; ensured parity between co-op/non-co-op sellers |
| 2025 | Section 199A Expiration | Potential loss of $2B annual deductions if not extended |
“Section 199A was a critical adjustment to ensure cooperatives could compete with corporations. Its expiration would erase decades of progress.”
— NMPF Statement, 2023 Legislative Priorities
Tax Provision Comparison: Fixing the “Grain Glitch” Disparity
| Provision | Original 199A (2017) | 2018 Amendment |
| Deduction Type | 20% of qualified business income (QBI) | Restored prior-law section 199 treatment for co-ops |
| Eligibility | Applied to all pass-through entities | Limited to specified agricultural/horticultural co-ops |
| Key Fix | Created disparity between co-op/non-co-op sellers | Added “grain glitch” reforms to level playing field |
Why This Matters:
“The 2018 amendments were a hard-won victory for parity. Expiring 199A would leave co-ops at a renewed disadvantage.”
— CALT Analysis, 2018 Tax Reform Impact
Beyond the Balance Sheet: Community Survival at Stake
Co-ops employ nearly 200,000 workers and generate $13.3 billion in payroll. When they thrive, they:
- Build Processing Facilities (e.g., Darigold plants) that create non-farm jobs.
- Fund Infrastructure (roads, broadband) for entire communities.
- Train the Next Generation through educational programs.
Case Study:
NDA’s Darigold Plants
Northwest Dairy Association’s processing facilities employ hundreds and stabilize milk prices for Pacific Northwest producers.
The Political Chess Match: Will Dairy Be Sacrificed?
Bipartisan bills (H.R. 4721, S. 480) aim to make Section 199A permanent. But with Congress divided, dairy risks being sidelined.
The Double Standard:
“Dairy farmers aren’t asking for handouts—they’re asking for parity. Corporate America got permanent cuts; we need the same.”
— NMPF Advocacy Campaign, 2023
What’s At Stake For Your Operation
Expiration means:
- Reduced Dividends (e.g., $3,500/patron in some cases).
- Higher Taxes (up to $20,000 more annually for some).
- Weaker Co-op Services as margins tighten.
Farmer Reality:
“Our co-op’s dividends fund equipment upgrades and feed purchases. Without 199A, we’ll have to cut back—hurting both our farm and the local economy.”
— NMPF Member Testimony, 2023 Advocacy Campaign
The Bottom Line: Action Required
Contact Your Reps Today. Explain how Section 199A impacts your bottom line. The future of America’s dairy co-ops—and your operation—depends on making rural voices heard.
Learn more
- The Tax Man Cometh to the Farm: Three TCJA Provisions Set to Expire in 2025 and What Dairy Producers Need to Know
- How Trump’s Re-Election Will Redefine the Dairy Industry
- CAFTA-DR Unleashes U.S. Dairy Export Boom: $441M Tariff-Free Breakthrough in 2025
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