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Cooperative Ownership

Increasingly, a small handful of corporations control inputs, credit, elevators, processing facilities, and markets necessary to grow and distribute agricultural products. Since the last half of the 19th century, farmer owned cooperatives have provided farmers a stronger presence in the marketplace and greater bargaining power to control the costs of inputs and the value of outputs. These new forms of agricultural cooperatives are commonly referred to as "value-added coops" or "new generation coops." In 1994, 2,200 marketing coops sold 31 percent of all U.S. farm commodities and 29 percent of the nation's farm supplies. The 240 farm credit cooperative banks made 25 percent of all agricultural loans. But as costs of inputs continue to rise and prices of commodities fall, farmers need ways to add value to the raw materials they produce. Rather than only growing and selling commodities, many value-added agricultural cooperatives have formed to process crops and return added value to producers rather than middlemen. While value added dairy and fruit cooperatives are not a new phenomena, a new generation of diverse cooperatives is on the rise - corn processing coops produce ethanol and fructose, and cooperatives owned by wheat farmers produce pasta.

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Rules

Missouri Incentives for Schools to Buy Biodiesel from Cooperatives

  • State
    • In 2001 the state of Missouri passed a new law that gives school districts an incentive to purchase biodiesel fuel for their bus fleets. The law begins with the 2002-03 school year and lasts through the 2005-06 school year. Any school district may contract with an eligible new generation cooperative to purchase biodiesel fuel for its buses of a minimum of B-20 (20 percent biodiesel). The state will then reimburse the school district so that the net price to the contracting district for biodiesel will not exceed the rack price of regular diesel. More

    Farmer Cooperative Ownership - Federal Tax Provisions

  • Federal
    • The Internal Revenue Code, Section 1042(g) is a new provision passed by Congress in 1998 that allows the owners of agricultural and horticultural processing plants to defer the capital gains tax as long as they (1) sell to a farmers' cooperative whose members include the farmers who supply the facility, and (2) reinvest the proceeds in corporate stocks and bonds. The purpose of this tax break, according to the National Council of Farmer Cooperatives, is to give farmers a "tax-leveraged self-help mechanism to encourage them to move into further processing and capture a larger share of the nation's food dollar." The new provision helps to make farmer co-ops the buyers of choice for agricultural processing facilities and gives them enough leverage to negotiate an attractive price. The buyers must include growers responsible for at least 50% of the input to the plant. More

    Producers Tax Credit - Oklahoma

  • State
    • The Oklahoma Producers Tax Credit (H.B. 2959) passed in 1996, giving a value added processing tax credit to farmers and ranchers. For every dollar an Oklahoma agricultural producer invests in an agricultural processing venture, they receive a 30% tax credit. Outside investors may invest in facilities, but do not qualify for the tax credit. The credit can be carried for 7 years. More

    Agriculture Cooperative Income Tax Credit - North Dakota

  • State
    • In 2001 North Dakota lawmakers approved Senate Bill Number 2386, which gives a state income tax credit of up to a maximum of $6,000 annually for people who invest in agricultural processing cooperatives. The tax credit is equivalent to thirty percent of the amount invested in the cooperative by the taxpayer, up to a total annual investment of $20,000. Investors in cooperatives or limited liability corporations are eligible for the credit, so long as the business has an agricultural commodity processing facility in this state and is more than half farmer-owned. More

    Cooperative Tax Credit - Missouri

  • State
    • The Missouri New Generation Cooperative Incentive Tax Credit Program is provided by the Missouri Agricultural and Small Business Development Authority to encourage investments in new-gen co-ops. Authorized under HB 888 passed last July, the credit is allocated specifically for incorporated cooperatives that own or develop facilities producing products derived from agricultural commodities or renewable fuel production facilities. More

    Value-Added Agriculture Investment Tax Credit - Iowa

  • State
    • In 1999 the Iowa legislature passed a law allowing value-added agricultural businesses to claim a ten percent corporate tax credit on new investment which is "directly related to new jobs created by the location or expansion of an eligible business." But co-ops, which don't pay state income tax, weren't eligible. HF 716, signed into law on July 1, 2001, changes that by making ethanol cooperatives eligible for the $4 million in annual available tax credits. It allows investors in non-profit co-ops, organizing to create new ethanol plants, to use tax credits up to 10% of their investment. More

    Agriculture Value-Added Development Fund Program - Colorado

  • State
    • In May 2001 the Colorado legislature passed HB 1086, which created the Agriculture Value-Added Development Board within the Department of Agriculture. The Board makes grants, loans and loan guarantees, and equity investments, and also offers tax credits to eligible agricultural value-added cooperatives. The tax credit is available for members of eligible agriculture value-added cooperatives in an amount equal to the lesser of 50 percent of the member's investment or $15,000, up to a maximum amount per project of $1,500,000 (these are the same limits as the Missouri tax credit). $4 million is available for tax credits on an annual basis. More

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