Agribusiness conference at Arkansas State University February 10

Posted January 21, 2016

Arkansas State University’s 22nd annual Agribusiness Conference will be held Wednesday, February  10. 

The conference provides information and education outreach to farmers, agribusiness professionals and educators across the Mid-South. This year’s conference focuses on the agricultural economy, environmental law and regulation, business transition planning, trade policy and the commodity market outlook. On-site registration begins at 7:45 a.m. in the Fowler Center at Arkansas State. Lunch will be served in the Convocation Center at noon. Afternoon sessions will follow and the conference concludes at 4 p.m.

The morning general session features five speakers and a panel discussion:

- Stan Miller, an attorney and partner with ILP+McChain, Miller and Nissman, will discuss succession and estate-planning issues for agribusiness owners.

- Harrison Pittman, director of the National Agricultural Law Center, will describe how the regulation of crop agriculture is evolving and discuss other environmental law issues.

- Bob Cummings, COO of the USA Rice Federation, will give an update on agricultural and trade policy and how it is impacting the rice industry.

- David Schweikhardt from Michigan State University will explain the economics and politics of the Trans-Pacific Partnership and how it will impact U.S. agriculture.

- Jason Henderson, director of Extension at Purdue University, will review the agricultural finance situation and the outlook for the farm economy.

Luncheon speaker John Phipps is a farmer and commentator on the U.S. Farm Report, America's longest-running farm television program.

Afternoon special-interest sessions include an update on Arkansas Department of Agriculture programs by the state’s Agriculture Secretary Wes Ward, three speakers on commodity market trends, and three presentations on poultry and beef industry issues.

Admission to the conference and luncheon is free, but pre-registration is encouraged. Detailed conference information and online registration is available here.

Nursing Home & Medicaid Costs Webinar, OSU Ag Law & Taxation

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Posted April 9, 2015

The Ohio State University Extension’s Agriculture Law & Taxation Blog is host a planning for nursing home costs and Medicaid webinar for farmers.

Craig Vandervoort, Sitterly & Vandervoort, Ltd., is hosting the webinar and it is free to register.

To view the webinar, please view their website here on Friday, April 10 from 1-2 p.m. EST.

 

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For more information on the Agriculture Law & Taxation Blog, please visit their website here.

Farm Groups Urge Section 179 Restoration

Posted November 20, 2014

The National Milk Producers Federation along with 41 other agricultural organizations in are urging Congress to restore Section 179 code provision that allows small businesses and farms to write off capital purchases such as farming equipment immediately as opposed to over time, according to a Wisconsin Ag Connection article available here. Farm Futures also published an article available here and Agri-Pulse here.

The provision is one of more than 50 expired tax policies expected to be under consideration for reinstatement by the House and Senate during their post-election lame duck session. Farm groups have pushed restoration of Section 179 in a letter on November 18 to congressional leadership.

"Farming requires significant investments in machinery and equipment," said NMPF President and CEO Jim Mulhern. "By allowing farmers to immediately write off these purchases on their taxes, Section 179 gives producers an incentive to invest in their businesses while it reduced their record-keeping burden."

Previously farmers were able to take full depreciation deductible of an eligible item in the current tax year with a maximum deduction of $500,000 and a phase-out threshold of $2 million, according to Farm Futures.

Now the deduction level has fallen to $25,000 with a $200,000 phase-out for 2014 unless Congress acts on tax reform or a "tax extenders" package before the year’s end.

In a conference call with reporters, Dorothy Coleman, vice president of tax and domestic policy with the National Association of Manufacturers, said the focus of the letters “is not on telling Congress how to do it, but asking them and strongly urging them to get it done,” according to Agri-Pulse.

If the provision is not addressed during the lame duck session, tax extenders could still be approved in 2015 and retroactively applied to 2014 purchases.

A copy of the letter signed by 42 agriculture organizations and addressed to the Senate and House leadership outlining the importance of Section 179 in a potential tax extenders package is available here.

Two identical letters addressed separately were sent to all members of the House and Senate, and more than 500 organizations, companies, and local chambers of commerce signed the letters emphasizing the importance of action during the lame duck session.

For more information on estate planning and taxation, please visit the National Agricultural Law Center’s website here.

OSHA Released New Guidance on the Small Farm Exemption

Posted August 4, 2014

The Occupational Safety & Health Administration (OSHA) was the target of harsh criticism when the agency inspected and issued fines to small farms engaging in grain storage activities.
 
The farms argued that OSHA did not have the authority to issue fines, because of the "small farm exemption," which limits OSHA’s authority to enforce safety regulations on small farms.
 
OSHA has released a guidance memorandum that clarifies how its regional administrators should interpret the small farm exemption. The new guidance defines whether an activity on a small farm is “not related to farming operations and not necessary to gain economic value from products produced on the farm.”

For more information on the small farm exemption, visit The OSU Agricultural Law & Taxation blog here. The OSU Agricultural Law & Taxation blog is an excellent resource for current issues involving agricultural and tax law in Ohio.

Ohio's Small Business Income Tax Deduction Increases

Posted July 15, 2014

Ohio Governor John Kasich signed a bill that increases the small business income deduction from 50 percent to 75 percent of the first $250,000 in net business income.

Last year the Ohio budget bill included significant tax law changes to deliver a $2.7 billion tax cut to individuals and businesses over the course of three years.

The business deduction percentage reverts back to 50 percent for taxable years after 2014.
 

For more information on the small business tax deductions, visit The OSU Agricultural Law & Taxation blog here. The OSU Agricultural Law & Taxation blog is an excellent resource for current issues involving agricultural and tax law in Ohio.

Estate Taxes Ready for Repeal

Posted June 20, 2014

Legislation to repeal estate taxes is ready for floor action with 218 co-sponsors, more than half of the House of Representatives, on board, according to an American Farm Bureau Federation (AFBF) press release available here. Wisconsin Ag Connection also published the release here and Sierra Sun Times here.

Rep. Kevin Brady's (R-Texas) Death Tax Repeal Act, H.R. 2429, would repeal estate taxes, and maintain stepped-up basis.

“Although permanent law enacted as part of the American Taxpayer Relief Act of 2012 provided significant estate tax relief, repeal is the best solution to protect all farms and ranches from the estate tax,” said AFBF President Bob Stallman.

Because it takes more capital assets, such as land and equipment to produce the same amount of income as other types of businesses, the estate tax burden rests heavily on farmers.

Surviving family members may be forced to sell off their assets if Congress fails to permanently repeal the estate tax.

“Look at land alone,” Stallman said. “As it skyrockets in value, the chances of surviving family members having to sell some substantial acreage to pay estate taxes grows right along with it. This not only can cripple a farm or ranch operation, but also hurts the rural communities and businesses that agriculture supports.”

For more information on estate planning and taxation, please visit the National Agricultural Law Center’s website here.

Tax Court Says Non-Farmer’s CRP Income Subject to Self-Employment Tax

Posted March 11, 2014

In a case which could have broad implications for passive investors in farmland, the U.S. Tax Court ruled that a non-farmer’s Conservation Reserve Program (CRP) income is subject to the self-employment tax, according to a Western Farm Press article available here.  An article by Iowa State University’s Center for Agricultural Law and Taxation is available here.

Since the 1980s, the IRS consistently took the position that a taxpayer “had to be materially participating in a farming operation for CRP payments to be subject to self-employment tax” and the courts agreed.  In 2003, however, the IRS altered its position: “the mere signing of a CRP contract resulted in the taxpayer being engaged in the trade or business of farming with the result that the CRP payments were subject to the self-employment tax.”

In Morehouse v. C.I.R., 140 T.C. No. 16 (2013), available here, the U.S. Tax Court agreed with the IRS, ruling that the CRP payments received by non-farmer participants are subject to the self-employment tax because they are engaged in the trade or business of farming as a result of signing the CRP contract.

Morehouse was a non-farmer who lived in Texas.  He inherited land in South Dakota and put a majority of the property into CRP, hiring a local farmer to maintain the CRP land consistent with the CRP contract.  He reported the CRP income in Schedule E, where it was not subject to the self-employment tax.

The Tax Court ruled that CRP payments may not constitute “rents from real estate” and are not exempt from self-employment tax under I.R.C. § 1402(a)(1).  In addition, the issue of whether a taxpayer is engaged in a trade or business as required by I.R.C. § 1402(a) is a fact question.  The Court concluded that by signing the CRP contract and fulfilling its obligations, Morehouse’s involvement was regular and continuous and constituted a trade or business, thus making the CRP payments subject to the self-employment tax.

For more information on agricultural tax issues, please visit the National Agricultural Law Center’s website here.

Nebraska Bill Would Exempt Ag Repair and Replacement Parts from Sales Tax

Posted January 28, 2014

A bill introduced in the Nebraska legislature would exempt agricultural repair and replacement parts from Nebraska’s sales tax, according to an Associated Press story available here.

The bill, LB96, was introduced by state Sen. Annette Dubas.  The full text of the bill is available here.

Nebraska Governor Dave Heineman has expressed his support for the bill.

Sen. Dubas, said she introduced the bill because the same parts are sold tax free in neighboring states including Kansas, Iowa, Missouri, South Dakota, and Colorado, according to a KVNO News article available here.  “If our farmers and ranchers are traveling to another state to buy repairs, they are ultimately buying their equipment there as well.  These are big ticket items, costing hundreds of thousands of dollars,” said Dubas.

State Sen. Tom Hansen, supports the bill, but cautions against taking tax cuts too far.  “This legislation stands in sharp contrast to some of the radical and fiscally irresponsible approaches that members of this body have put forward in regard to tax policy this session,” said Hansen. 

If passed, the ag repair tax exemption is “expected to reduce state revenues by a little more than $9 million.”

For more information on agricultural tax issues, please visit the National Agricultural Law Center’s website here.

Lawmakers Disagree over New Method for Taxing SD Farmland

Posted January 15, 2014

South Dakota lawmakers will consider changing the state’s system for setting the taxable values of agricultural property when they meet for the upcoming legislative session, according to an article by the Rapid City Journal available here.

House Bill 1006 has already been pre-filed for the legislative session and recommended by the legislature’s continuing task force on agricultural assessments. 

The proposal would value farm and ranch property by their actual use as cropland or non-cropland, rather than on “productivity potential” for tax purposes. 

The current system focuses on productivity potential of the land, rather than actual sales prices to determine value, according to an AgWeek article available here.  In 2008, the “legislation sponsored by then-Senate Majority Leader Dave Knudson and 10 lawmakers with backgrounds in farming or ranching,” directed county assessors to stop using sales prices to determine the taxable value of agricultural land.  Under the legislation, farmland was to be assessed through a “productivity formula that considers crop yields and prices, and cash rents” to determine value for ranch land.

The new law limits the rate of growth for agricultural property values.  While farm income doubled from 2009 to 2011, assessed values and taxes paid “grew at a much slower rate.”  All of the agricultural land and buildings in the state last year were worth $61.1 billion, but were taxed as if they were worth $27.1 billion, according to recent data from USDA and the South Dakota Department of Revenue.

While there is a consensus that there is a drastic difference in taxable value and sale value for agricultural land, lawmakers disagree on whether the law should be changed. 

Sen. Larry Rhoden (R-Union Center), a rancher who has helped shape the productivity system, said that taxes have increased for agricultural property owners.  He said, “To say that we’re not paying our fair share, that’s a misnomer.”

Others, like Sen. Jason Frerichs (D-Wilmot), say it’s appropriate to give agriculture a break on property taxes.

Sen. Al Novstrup (R-Aberdeen) says, “The current formula is designed to produce a low number” for taxing agricultural land and that the legislature should lift the artificial limits on the productivity formula to allow more accurate land prices.

For more information on agricultural taxation issues, please visit the National Agricultural Law Center’s website here.

Oregon Farm Bureau Helps Draft Crop Donation Tax Credit

Posted January 14, 2014

The Oregon Farm Bureau (OFB) is working with the Oregon Food Bank to draft a bill that would give farmers and ranchers the opportunity to donate fresh fruits, vegetables, and meats to charitable organizations in Oregon, according to an article by the Natural Resources Report available here.

“It is inspiring to see the generosity of so many Farm Bureau members who have incorporated crop donation programs into their family farming operation,” said Ian Tolleson, OFB government affairs specialist.  “Reinstating a tax credit that helps farmers and ranchers recover some of the costs associated with crop donations will go a long way in helping feed hungry Oregonians, and hopefully will encourage more farmers to participate.”

For more information on agricultural tax issues, please visit the National Agricultural Law Center here.

PA Bill to Provide Sales Tax Exemption to Timber Companies

Posted November 12, 2013

A bill, which would amend the Pennsylvania tax code to exempt timber companies from paying sales and use tax on items used directly in their operations, will be considered by the state House of Representatives on Wednesday, according to an article by the Bradford Era available here.

House Bill 1138 was introduced by Pennsylvania state Representative Matt Gabler (R-DuBois), to extend a sales tax exclusion for timber harvesters.  The tax exclusion already exists for agriculture, manufacturing, and sawmills.

Gabler explained that the intent of the legislation is to prevent compounding taxation on timber harvesters.  The legislation has been reported by the House Finance Committee and will be examined by the House Appropriations Committee for the fiscal impact of omitting that stream of tax revenue.

Examples of the current sales tax exclusion that applies to agricultural operations include tractors, combines, tools, feed, and fertilizers that go directly into the farming operation, according to Gabler.

“The irony in current law has the very same sawmill industry that works hand-in-hand with the timber industry exempt from sales and use tax…The timber industry belongs in the same category with farming, dairy, and manufacturing in being excluded from what essentially is double-taxation, since sales tax is charged at retail on the final product.”  A press release from Rep. Gabler’s office is available here.

For more information on timber law, please visit the National Agricultural Law Center’s website here.

Farm Tax Proposal Causes Concern

Posted October 30, 2013

A proposal making its rounds in the U.S. House Ways and Means Committee would require all entities, other than individuals, with gross annual receipts over $10 million to use the accrual method of accounting for income tax calculation, according to a Farm Futures article available here.

Currently, farmers may use a cash method of accounting unless their businesses are structured as C-corporations, with gross receipts of more than $1 million, or as a family corporation, with gross receipts of more than $25 million.

Under the cash method of accounting, a farmer may recognize an item of income when it is actually received and an expense when it is actually paid. The use of this method of accounting “combined with the ability to accelerate expenses and defer income gives farmers and ranchers the flexibility they need to manage their tax burden.”

Jeff Wald, CEO at Kennedy & Coe, said that the requirement to force farmers with $10 million or more in gross receipts to use accrual accounting for tax purposes would place a “significant burden on many mid-sized farmers, feedlots and hog, cattle and dairy operations.”  Wald continued, “Many of these family operations support dozens of employees but run at very thin margins with very low net income.  Wald added that the tax proposal would make accounting significantly more complex for farm operations. 

House Ways and Means Committee Chairman Dave Camp (R-MI) said that his committee will pass a tax reform bill by the end of the year and “Member-only meetings” are reportedly taking place.

For more information on tax issues affecting agricultural operations, please visit the National Agricultural Law Center’s website here.

Drought-Stricken Farmers Have Additional Year to Replace Livestock

Posted October 25, 2013

The Internal Revenue Service (IRS) announced that farmers and ranchers affected by drought have an additional year to replace livestock before capital gains apply, according to an article by Tri Valley Central available here.

Farmers and ranchers who sell more livestock than normal usually have four years in which to replace the livestock before capital gains applies to the sale.  The announcement by the IRS extends this period by one more year. 

Bill Brunson, IRS spokesman, said the extension generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes due to drought.  Sales of livestock raised for slaughter or held for sporting purposes, and poultry, are not eligible. 

The extension applies to any farm located in a county, parish, city, borough, census area or district, listed as suffering exceptional, extreme or severe drought conditions by the National Drought Mitigation Center (NDMC) during any weekly period between Sept. 1, 2012 and Aug. 31, 2013, according to an Ag Weekly article available here.  Any county contiguous to a listed county is also eligible for relief. 

For more detailed information, IRS Notice 2013-62 is available here.  For more information on Selected Farm and Small Business Tax Issues, an article by Roger A. McEowen and Neil E. Harl originally published in the Drake Journal of Agricultural Law is available here.