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Highlights of the §199A Rules for Cooperatives and Their Patrons

Treasury and the IRS published proposed regulations (REG-118425-18, 84 Fed. Reg. 28,668 (Jun. 19, 2019)),which provide guidance for cooperatives and their patrons regarding the deduction for qualified business income (QBI) under I.R.C. §199A(a). The proposed regulations provide guidance for specified agricultural and horticultural cooperatives (“Specified Cooperatives”) and their patrons regarding the deduction for domestic production activities under §199A(g), which is similar to the deduction under former §199 but now only available to Specified Cooperatives.

This report discusses four primary areas of guidance from the proposed regulations:
1. The proposed §199A(a) rules for cooperatives and their patrons.
2. Key new definitional guidance for the §199A(g) deduction.
3. Rules for computing the §199A(g) deduction.
4. Similarities the §199A(g) deduction bears to the deduction under former §199and highlights significant modifications from those familiar rules.

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