Friday, August 30, 2013

Understanding the Domestic Production Activities Deduction

By Nichole Gouldie, Communications Specialist

Through a requested IRS Private Letter Ruling (PLR), MKC has found a path to pass a significant tax deduction on to the producers who are members through the Domestic Production Activities Deduction (DPAD).

“I was very excited when MKC contacted me regarding the cooperative’s willingness to set up the Domestic Production Activities Deduction to give this great benefit to their members,” said Jim Graber, a local accountant. “Right away I saw a potential of several million dollars of tax deduction to farmers.”

DPAD, often referred to as Section 199 Deduction, is a special federal income tax provision allowing a cooperative to allocate to its members a tax deduction generated by “qualified production activities.”  As outlined by the Internal Revenue Service, and as it relates to the DPAD, grain payments the cooperative makes to its members are considered qualified production activities by the cooperative, thus making the cooperative and its members eligible for the tax deduction.

“As of the first of the year, MKC has initiated a plan to fully capture the value of the Domestic Production Activities Deduction for our members,” said CJ Blew, MKC board chairperson. “This project further enhances the value of the cooperative to its members.”

The favorable ruling will allow the partnered cooperatives within Team Marketing Alliance, Inc. to utilize a $5M deduction previously not available to the cooperatives or their members. The ruling, which will require specific process and documentation changes by TMA and the partnered cooperatives, will have a significant financial impact on their local communities and members.

“Economic value of this kind of cash savings being injected into the local economy is a real boost for the area,” Graber said.

DPAD is a tax deduction established to benefit the U.S. manufacturers and oil companies for domestic production. “Farmers are domestic producers as well. They are eligible for the tax deduction even though it is missed on many tax returns,” Graber said.

With the danger of oversimplifying what the deduction is and how it works, Graber explains it to his clients as an extra deduction that equals 9% of profit from domestic production.

Similar to patronage, this deduction will be shared by members based on the amount of grain business each member does with the cooperative. “Another benefit that separates your cooperative from other competition,” Blew said.

Once the Domestic Production Activities Deduction is calculated by each individual cooperative, the cooperative is allowed to pass through the deduction to its members. Once reported to the members on a 1099 Tax Form, the member will be allowed to utilize the deduction on their personal or corporate income tax return.

Graber has personally seen the deduction save up to $10,000 on an individual tax return. He said most farmers he sees could see a savings of $1,000 to $6,000.

According to Graber, there are no disadvantages of DPAD to the members of MKC. “It doesn’t decrease dividends, it doesn’t cost any extra in products,” he said. “It is simply a win-win situation.”

“I have found over the past 40 years as a public accountant, some of the worst tax advice comes from the coffee shops, church parking lots and family,” Graber said. “Before you dismiss this golden opportunity for a tax deduction on the coffee shop chatter, seek the advice of a competent professional. It is a great deal.”

Writer’s note: The views in this article are not intended to replace the advice of your tax professional. MKC encourages members to address questions to their tax professional or accountant.

Tuesday, August 27, 2013

Japanese Trade Team Tours MKC

By Nichole Gouldie, Communications Specialist

Industry representatives from Japan visited MKC at Groveland on July 26 through a trip hosted by the Sorghum Checkoff and the U.S. Grains Council (USGC). The week-long trip was an effort to emphasize the quality of sorghum produced in the U.S. and the value it can provide in Japan.

“We enjoyed the unique opportunity to host the Japan delegation to MKC,” said Nathan Eck, Groveland Location Manager for MKC. “Our visitors were very interested to see how the commodities they purchase from the U.S. work their way through the supply chain from farm gate to our cooperative to port and then on to their facilities in Japan.”

Matt Long, Grain Operations Manager at Groveland for MKC, covered Groveland’s intake of wheat, corn, sorghum and other commodities. Japan representatives also learned about the need for speed and space MKC customers are looking for and how the Groveland location fits those needs. The group also toured the warehouse and elevator facilities.

The Japanese group, consisting of five individuals involved in livestock feed production, arrived to the U.S and traveled to several different locations in Texas before making their way to Kansas. The group began in the Ft. Worth area where they met with sorghum farmers and learned how it was produced. Representatives also met with grain traders in the Texas Panhandle to learn about marketing sorghum and how sorghum is traded in the U.S. Their trip also included a feed lot tour learning about utilizing sorghum silage and flaked grain in beef production.

Their first stop in Kansas was in Wichita where they visited with animal nutritionists to learn more about the feeding value of sorghum. They also toured the Kansas Ethanol Plant in Lyons, KS, and learned about the feeding value of sorghum distillers grains. The group also had the opportunity to visit Baldwin Farms near McPherson.

Tetsuo “Tommy” Hammoto, Japan Director for the U.S. Grains Council, said this was the third
trip to Kansas for groups of Japan representatives.  “Hosting international trade teams continues to be an important effort by the USGC and the Sorghum Checkoff,” Tommy said. “The trips focus on internal marketing, allowing other countries to see the U.S. sorghum industry first-hand while making purchasing decisions.”

Japan is the third largest importer of U.S. sorghum and primarily utilizes the grain in its livestock industry. The United Sorghum Checkoff Program works to improve the profitability of the sorghum industry through research, promotion and information.

Saturday, August 24, 2013

Building Momentum

By Dave Christiansen, President and CEO

It was a pleasure having more than 750 guests in attendance at our annual stockholders’ meeting last month.  Each year a theme is selected for the meeting and this time we felt “building momentum” best represented our past year.

Not only this past year, but over the course of the past several years, the board of directors and staff has focused on how to build momentum. Admittedly, there were days when we took two steps forward only to take three steps back. The challenge we faced - and will continue to - is the world and progressive producers continue to build their own momentum and at an ever-increasing rate.

Significantly contributing to building momentum at MKC is our vision and strategic objectives.  Once these elements became a part of everything we do at MKC, your cooperative began to achieve more.  We became more focused and began communicating the same message to all of our stakeholders, customers, vendors and employees.

Tuesday, August 13, 2013

Employee commitment - consistency in an ever-changing industry

By Melissa Woeppel, Communications Intern

As farming and technology continue to change, cooperatives must change as well in order to remain viable in the agriculture industry of today. Amid the change, however, loyalty and commitment from employees is an incomparable advantage for the co-op. MKC is fortunate to have employees who continue to help the co-op supply quality inputs and services and market our customers' products, resulting in the profitability of all.

Dianne Gilfillan, Grain Coordinator at Talmage, is just one example of such an employee. Growing up on a farm, Dianne has found memories of the local co-op where her dad would do his business with grain, feed and coal, and later on fuel and crop nutrient and protection products. For the past 32 years, Gilfillan has been working in the cooperative system. She started in May 1976 and left when her husband’s work moved the family to Oklahoma City, OK in 1978. After moving back to Abilene in 1981, she received a call asking her to come back to work. "I jumped at the chance!" admitted Gilfillan. She began work as a counter person on June 1, 1981. After the grain bookkeeper retired in 1985, she moved into grain accounting.

Tuesday, August 6, 2013

Building the future

By Melissa Woeppel, Communications Intern

Every day the agriculture industry continues to change and adapt new technologies and improvements. Because of this it is vital for young adults to be actively involved in agricultural processes. MKC is doing its part to help prepare the next generation of agriculturalists through the internship program.

This summer MKC hired ten college students to complete internships at various locations and within a number of departments. According to Brett Myers, Director of HR and Development for MKC, most interns were recruited from their university of college career fair. "Others were either referred to the company or had previously been summer employees," he said.

Thursday, August 1, 2013

Going beyond the call of the job

By Nichole Gouldie, Communications Specialist

His business casual was put away and replaced with more suitable attire including steel toe
MKC Human Resource Manager,
Jeff Frizell, (at left) gains insights
to different positions during a
week-long experience in Haven.
boots, gloves and a hat. His face saw more sun and his hands were dirtier than usual as he set out to learn the job. But this MKC employee wasn’t starting a new job, instead Jeff Frizell was learning the jobs for which he hires.

"In conversation with senior management, the point was made it would be of value to me and MKC to experience the jobs I spent my time hiring candidates for," Frizell said. "By doing this, I would gain a better understanding of what is needed for the position."

Going beyond the call of his job, Frizell, MKC Human Resource Manager, endured a week-long experience at the MKC Haven location in late June.