Campus Units

Economics

Document Type

Article

Publication Version

Published Version

Publication Date

Fall 2019

Journal or Book Title

Western Economics Forum

Volume

17

Issue

2

First Page or Article ID Number

16

Last Page

23

Abstract

U.S. agricultural cooperatives create unique benefits for their producer members (USDA- RBCS, 1990). Cooperatives create economies of scale and scope in procuring inputs and marketing and processing commodities (Sexton 1990). Those scale economies also help to provide access to markets. Cooperatives provide an unseen and often unappreciated benefit in offsetting market power and maintaining the competitive environment. Agricultural cooperatives are unique in that they are an extension of the farm or ranch. Producer members can benefit at the farm level through prices and availability of services or at the cooperative level through patronage refunds. When many agricultural cooperatives first formed, they were able to pass along volume discounts for buying inputs at greater bargaining power or pass along volume premiums through greater negotiating ability. Over time, Congress passed various laws and the Internal Revenue Service codified cooperative taxation principles (Frederick 2013). Beginning in 2004, a new member benefit emerged from Congress, which was revised in the tax reform legislation of 2018 and again in 2019. Agricultural marketing cooperatives have been able to receive a federal income tax deduction and can retain that deduction at the cooperative level or pass some or all of the deduction on to their producer members.

Comments

This article is published as Kenkel, P., G. McKee, M. Boland and K. Jacobs. 2019. “The New Role of Agricultural Cooperative in Pooling and Distributing Tax Deductions.” Western Economics Forum 17(2): 16-23. Posted with permission.

Copyright Owner

Western Agricultural Economics Association

Language

en

File Format

application/pdf

Share

COinS