January 28, 2010
Dear Patron:
EXPLANATION OF 1099-PATR BOX 3 “EARNINGS”
FOR CROSSROADS COOPERATIVE ASSN 2009
CALENDAR YEAR GRAIN PURCHASES
FOR DOMESTIC PRODUCTION ACTIVITIES DEDUCTION (DPAD)
There is a permanent deduction for businesses that have manufacturing or production taxable income, called the “Domestic Production Activities Deduction” (referred to as DPAD). The deduction is based on a percentage, phased in over 6 years, and applied to most partnerships, corporations, LLCs, sole proprietorships and other pass thru entities including cooperatives. The deduction for Crossroads Cooperative’s Fiscal Year End, 2009 year (2008 crop) is 6% of “qualified production activities income” which increases to 9% for tax years beginning after December 31, 2009. The deduction is also limited to 50% of qualified wages paid by Crossroads Cooperative. The wage limitation does not apply a second time to an amount passed through, if any, to the member on his return.
For the year ended Fiscal Year End, 2009, Crossroads Cooperative has computed the DPAD in accordance with these rules and has elected to retain this deduction at the cooperative level and will NOT pass it on to its members.
As a grower, you may be eligible to compute your own Domestic Production Activities Deduction on your farming operations. Since we have used the net payments when calculating DPAD, the tax laws state that you cannot double count your net payments when computing your own DPAD for your farming operation. This amount is shown in Box 3 on your form 1099-PATR.
Please consult with your tax advisor for further information on the Domestic Production Activities Deduction and how it applies to your individual situation.
Respectfully,
Deborah Brauer
CEO
Crossroads Cooperative Assn
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