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Tax Benefit Frequently Asked Questions

How do I participate in the benefits of the Domestic Production Activities Deduction?

What is the Master Marketing Agreement?

How do I complete the Master Marketing Agreement so that I can participate in the Domestic Production Activities Deduction?

How do I complete the Master Marketing Agreement electronically?

What are the benefits of the Domestic Production Activities Deduction?

How is my Domestic Production Activities Deduction calculated?

Does the Domestic Production Activities Deduction affect my patronage allocation?

Is the Domestic Production Activities Deduction applicable for state income taxes?

What is reported on a 1099?

Is it important where I initiate my grain checks or ACH settlements?

Does it make a difference if I utilize ACH for grain settlements?

What can I expect over the next year?

Case Study - Domestic Production Activities Deduction

 

How do I participate in the benefits of the Domestic Production Activities Deduction?

If you sell grain to the cooperative, you will automatically be included in the deduction as long as you meet the following requirements:

  • You are a member of that purchasing cooperative
  • You have signed a Master Marketing Agreement as required by the IRS
  • Sold grain to the cooperative
  • Initiated grain settlements (check or ACH) at that cooperative location

What is the Master Marketing Agreement?

The Master Marketing Agreement is an agreement between the member and the cooperative that outlines and documents the terms, obligations, warranties and remedies in regards to sales and purchase contracts between the cooperative and its members. A similar Master Marketing Agreement is already included with all Team Marketing Alliance grain purchase contracts.

The Master Marketing Agreement also acknowledges that cash grain purchases between the cooperative and the member constitute “per unit retain allocations” for the purposes of calculating the Domestic Production Activities Deduction for the cooperative. This is a requirement to qualify for the Domestic Production Activities Deduction.

The Master Marketing Agreement also guarantees the payment to the member by Team Marketing Alliance, LLC.

How do I complete the Master Marketing Agreement so that I can participate in the Domestic Production Activities Deduction?

You may complete the Master Marketing Agreement electronically, or you may sign the agreement and return it via mail, scan and email it to This e-mail address is being protected from spambots. You need JavaScript enabled to view it or by dropping it off at your local elevator.

How do I complete the Master Marketing Agreement electronically?

  • This process is very quick and easy. Simply go to the website http://esign.tmagrain.com. You will enter your account number, email address, verification code and then click submit. You can find your account number and verification code on the letter that was mailed to you.
  • Log into your email and open the email from DocuSign. Click on the yellow button in the middle of the screen that says View Documents. You will be directed to the DocuSign site.
  • Click on the yellow button that says Review Document and continue to click on the yellow navigation buttons on the left side of your screen.
  • When you get to the signature line, click the Sign Here button. Your name will be displayed as your account is listed with TMA. Click Adopt and Sign. You will be taken back to the contract and you will click Confirm Signing.
  • After you confirm your signature, a confirmation email will be sent to you, and you will be taken to a screen that says you have completed your documents, and you will be given the option to sign up for a DocuSign account. You can either sign up for an account or exit out of the screen by clicking the X in the upper right hand corner.

What are the benefits of the Domestic Production Activities Deduction?

Once the Domestic Production Activities Deduction is calculated by each individual cooperative, the cooperative is allowed to pass-through the deduction to its members – very similar to a patronage allocation, except it is a deduction rather than income. Once reported to the members on a 1099 PATR (box 6), the member will be allowed to utilize the deduction on their personal or corporate income tax return.

How is my Domestic Production Activities Deduction calculated?

Each individual cooperative is required to follow the IRS guidelines for calculating the overall company Domestic Production Activities Deduction. Similar to the member’s patronage allocation, the individual member’s share of the Domestic Production Activities Deduction will be based on their proportionate share of qualifying grain sold to the cooperative during the cooperative fiscal year.

Does the Domestic Production Activities Deduction affect my patronage allocation?

The Domestic Production Activities Deduction is a separate calculation from the patronage calculation and will not affect your patronage calculation.

Is the Domestic Production Activities Deduction applicable for state income taxes?

Deductibility for state purposes varies from state to state. We encourage you to seek competent advice to determine how this deduction can be claimed for state purposes.

What is reported on a 1099?

As required by the Internal Revenue Service, each individual cooperative will report the following member transactions separately on a 1099 PATR:

  • Grain purchases qualifying as per unit retains (January 1 through December 31)
  • Domestic Production Activities Deduction (your cooperative’s fiscal year)

Is it important where I initiate my grain checks or ACH settlements?

  • Yes, it is a requirement of the IRS that only checks written to a member from the cooperative will be eligible to be counted toward the Domestic Production Activities Deduction calculation. If your grain checks or ACH settlements are not made with your local cooperative, your local cooperative may be unable to maximize their aggregate deduction, which may affect the deduction passed through to you.
  • Both TMA and cooperative staff will be working with all members to be sure they get their grain settled at the location that will allow all local cooperatives to maximize their Domestic Production Activities Deduction.

Does it make a difference if I utilize ACH for grain settlements?

No, participating in the ACH program does not disqualify you from participating in the Domestic Production Activities Deduction.

What can I expect over the next year?

Over the next couple of months, we will be contacting members to get them involved in the Domestic Production Activities Deduction process. As part of that contact, we will be updating members on required process changes and encouraging them to return the Master Marketing Agreement so they will be eligible to receive the pass-through deduction.

Case Study - Domestic Production Activities Deduction

Producer A sold 20,000 bushels of grain to the cooperative for the twelve (12) months ending on February 28, 2014 under the following scenarios:

  • 06/28/2013 - 6,000 bushels out of open storage (cash position)
  • 08/25/2013 - 2,000 bushels under deferred payment grain contracts with TMA
  • 11/30/2013 - 3,000 bushels under other qualifying grain contracts
  • 02/15/2014 - 9,000 bushels out of open storage (cash position)

At year end, the cooperative declared a grain patronage rate of 20 cents per bushel and a domestic production activities deduction of 15 cents per bushel. Assuming that Producer A was a member of the cooperative, and settled the grain at their local cooperative, the producer would receive the following allocations:

Patronage Calculation:

20,000 bushels at 20 cents/bushel     $4,000 Income

Domestic Production Activities Deduction:

20,000 bushels at 15 cents/bushel     $3,000 Deduction     (tax benefit)

Under this case study, the member would receive a 1099 PATR for the following periods:

December 31, 2013

Per Unit Retains (income reported in box 3) – 9,000 bushels x gross purchase price

Per unit retains (grain purchases) are required to be reported on a 1099 PATR to qualify for the Domestic Production Activities Deduction. This does not increase your revenue to the IRS because this amount was previously reported as grain sales (revenue) on your tax return.

Grain purchased by the cooperative after 12/31/2013 would be reported as Per Unit Retains for the subsequent reporting period (12/31/2014).

December 31, 2014 (from 02/28/2014 fiscal year-end calculations)

  • Patronage Allocation (revenue reported in box 1) – $4,000
  • Domestic Production Activities Deduction (expense reported in box 6) - $3,000

In this case study, it should be noted that deferred payment and deferred pricing transactions may reduce the aggregate deduction computed by each cooperative, but members will still get a pass-through deduction on all bushels sold to the cooperative because the cooperative allocates the Domestic Production Activities Deduction based on the same bushels that are used to calculate patronage.