In an effort to keep you informed of the decisions made by your cooperative this past year as they relate to yearend tax planning we have summarized several key points below for 2014:
Old Year Equity – Wheat Grower’s Board of Directors has voted to pay out $2.6 million in old year equity. This represents your equity in Wheat Growers for 100% of 1997. Old year equity retirement checks will be mailed in October.
Domestic Production Activities Deduction (Section 199) – Wheat Growers will again be passing through all of this tax deduction to patrons in 2014 with an anticipated total pass through of $18M. On a 169M bushel handle this equates to 11 cents per bushel of additional value back to our patrons. Assuming a 25% tax bracket this should save our patrons approximately $4.5M. In the past five years, Wheat Growers has passed through $80M of section 199 tax deduction to patrons. This pass through deduction is available by doing grain business with Wheat Growers. We will be sending letters in November with pass through deduction amounts in order to allow ample time for tax planning.
Non Qualified Patronage Allocation – In an effort to get more equity in the names of our patron owners, Wheat Growers will again be issuing a non qualified patronage allocation in 2014. In December patrons will receive a letter showing their portion of a $5M non qualified patronage allocation approved by the Board of Directors. Please keep this letter as record of your non qualified allocation amount. There are no tax consequences to the patron related to the non qualified patronage allocation in the year of allocation as the cooperative pays the tax on the non qualified amount. Wheat Grower’s Board reserves the right to pay the non qualified allocation at any time in the future. In the year approved, checks would be written to patrons and the tax liability to the patron would follow the receipt of cash.
Qualified Patronage Allocation – Wheat Grower’s Board has approved a $4.6M qualified patronage allocation for 2014 with $1,840,000 (40%) of this to be paid in cash. Checks will be mailed in December.
We hope the information provided in this letter helps clarify issues around your tax planning for 2014. You may want to share this letter with your tax preparer.
South Dakota Wheat Growers Association
Blake L. Bomesberger, CPA
Chief Financial Officer