Some things in life are certain, taxes are one of those things. Fortunately, thanks to an ongoing grassroots effort to preserve an important tax rule for co-ops, Land O’Lakes is able to pass through its largest-ever tax deduction to its member-owners.
The Domestic Production Activities Deduction, also called DPAD or section 199A, is a tax deduction for U.S. pass-through businesses, and there are special rules built within the deduction that apply specifically to cooperatives. As a cooperative, Land O’Lakes, Inc. is eligible for this deduction and able to utilize it in part at the cooperative level and pass through the rest to cooperative member-owners to help offset their taxable income.
“We find great value in allocating it to the farmers and retail-owners who are member-owners of the cooperative,” says Land O’Lakes Tax director Tami Peterson, “This kind of tax law is so beneficial, because we get to instill some savings right back into member-owners across the U.S., that they can invest back into their operations and in their communities.”
Peterson does “all things tax” for Land O’Lakes, meaning she’s also responsible for tallying up the DPAD allocations every year. According to her, “Land O’Lakes, by far, in all of the interactions I’ve had with other dairy co-ops, sends out the highest amount to its farmer-members.”
At $136 million dollars, this counts as the largest passthrough to date, and it brings our member-owners’ cumulative total savings to $1.5 billion since its inception in 2007.
In terms of year-over-year improvement, $16 million will be allocated across ag service owners this year — that’s a $2 million increase from last year — and $120 million will be allocated across dairy members — up $7 million from 2019. Every dairy member can expect $0.95 in tax credit per hundredweight.
In August, member-owners received letters informing them of the dollar amount they would be allocated this year and who to contact for questions about claiming your share. (Word of advice: don’t wait for a check! Member-owners should contact their tax advisor, and if you have any questions get in touch with Tami Peterson at email@example.com or 651-375-2499.)
This year’s allocation represents a huge win in the timeline of DPAD advocacy. In 2017, DPAD came under pressure when sweeping tax reform threatened this valuable deduction in favor of larger tax cuts for corporations, not co-ops.
You answered the call. Our member-owners advocated, making phone calls to their state representatives to share their stories and the importance of the rule for their businesses and communities. Combined with the herculean efforts of Land O’Lakes Government Relations team, who partnered with trade associations and advocated with membersof congress, the rule stayed intact.
Still, there’s work to be done.
“With a new congress in 2021, we’re going to need to start educating that audience,” says Autumn Price, vice president of Government Relations at Land O’Lakes, “The provision expires in 2025, then it can be at risk again. So the work needs to start today.”
Since 2017, Land O’Lakes has been working diligently to protect this law for the long-term. From Government Relations team members meeting with top-tier representatives of the White House’s National Economic Counsel, to Beth Ford meeting with the Treasury department, to Land O’Lakes Board Director Neal Keppy publishing an op-ed in the Des Moines Register, we will keep working for you.
So, in September, make sure to claim your special deduction for 2020’s taxes, and in the months and years ahead, look out for communications on how you can be part of the efforts that preserve this ruling.
And if you’re curious about how the allocation translates to your tax forms, make sure to connect with your tax advisor or Land O’Lakes tax director Tami Peterson at firstname.lastname@example.org or 651-375-2499.