Agricultural Law and Taxation Blog

Hunting Use Agreements and Recreational Entrants – Legal Issues

Overview

A farm or ranch is a business much like any other.  Every day people may come to a farm to buy, sell, visit, hunt, fish, or to do any number of activities.  With respect to people coming on a farm or ranch to hunt, some do it by oral permission, but other landowners may take the step executing a written agreement to avoid misunderstandings and minimize future legal issues.  So, what are the elements of a good hunting use agreement? 

Building a solid hunting use agreement – it’s the topic of today’s post.

The Property Interest Involved

All wildlife, whether animal, fish, or fowl not privately owned belongs to the state.  See, e.g., Kan. Stat. Ann. §32-107.  But this does not allow hunters or fishermen to enter land at will and take what belongs to the state.  Outdoorsmen have no right to enter another person’s land to hunt or fish without first getting permission.  Doing so could subject the person to either a civil action for trespass; prosecution under a criminal trespass statute; or prosecution under an unlawful hunting statute. 

Note:  In Kansas (and most other states), licensed hunters are allowed to pursue wounded game upon the land of others without permission in order to capture the game.  But such persons must leave the premises upon the landowner’s request.  In these situations, the best approach for the landowner is to call the Sheriff and never personally try to force the trespasser off the land with threats of physical violence or at gunpoint. 

Engaging in a hunting activity on someone else’s property involves the property law concept of that of a license.  A license is a term that covers a wide range of permissive land uses which, unless permitted, would be trespasses.  Thus, a hunter who is on the premises with permission is a licensee.  The license can be terminated at any time by the person who created the license (the landowner) by denying permission to hunt.  A license is only a privilege. It is not an interest in the land itself and can be granted orally. 

As for a farm tenancy, without a specification in a written lease, the tenant has the right to hunt the leased ground.  The hunting rights follow the possession of the ground.  Thus, the landlord does not have a right to hunt the leased premises during the term of the lease unless the lease is in writing and the landlord reserves the right in the written lease.

Elements of a Hunting Use Agreement

When permission to hunt is obtained in writing, what makes for a good agreement?

Legal description and map.  It is essential to include a description of the property that the “hunting operator” may hunt.  Provide the number of acres and give a general description of the property, and then provide a precise legal description attached as an “Exhibit” to the agreement.  Also, it is generally a good idea to provide a map showing any areas where hunting is not allowed and attach the map as an Exhibit to the agreement. 

Hunting rights.  The agreement should clearly specify the rights of the hunting operator.  Because the agreement is a hunting use agreement, the document should clearly state that the “hunting operator” has the right to use the property solely for the purpose of hunting wild game that is specifically described in the agreement.  That specific game should not only be listed, but bag limits, species, sex, size and antler/horn limitations should be noted as appropriate. 

The agreement should also clearly specify whether the hunting operator’s right to use the property for hunting game are exclusive or non-exclusive.  If the hunting operator is granted an exclusive hunting right, the landowner is not entitled to use the property for game hunting purposes during the term of the agreement.  If the hunting operator’s right is non-exclusive, the landowner (and/or any designees) is entitled to use the property for game hunting purposes.  With non-exclusive rights, it may be desirable to denote any limitations to the landowner’s retained hunting rights. 

On the hunting rights issue, it is usually desirable on the landowner’s part to include a clause in the agreement specifying that the landowner and the landowner’s family, agents, employees, guests and assigns retain the right to use and control the property for all purposes.  Those purposes should be listed, with the common “including but not limited to” language.  Such uses as livestock grazing; growing crops and orchards; mineral exploration; drilling and mining; irrigation, timber harvesting; granting of easements and similar rights to third parties; fishing; horseback riding; hiking; and other recreational activities, etc., may want to be listed.

Specification of the beginning and ending date of the hunting operator’s right to use the property should be included.  It is suggested to denote that the property may be used for game hunting purposes limited to legal hunting seasons and hours tied to the particular wild game at issue.  The agreement should not extend the hunting operator’s rights beyond the applicable hunting season(s). 

Consideration.  What is a “fair” rate to charge for the granting of hunting rights?  The answer to that question will depend upon rates charged for similar properties and game in the area. That could be difficult to determine, but data might be available for comparison.  Check your state’s land grant university Extension Service for any information that might be available.  County Extension agents may be a good place to start.  

The agreement should describe how payment is to me made and when it is due.  In addition, give thought to including clause language noting that the landowner might have lien rights under state law and state whether a security deposit is required and/or security agreement is or has been executed to secure payment. 

Think through whether and to what extent (if any) payment is required if the property (or a part thereof) becomes unavailable to hunting because of unanticipated events such as flood; fire; government taking or condemnation; drilling, mining or logging operations, etc.  Is payment to be adjusted?  If so, how? 

Improvements.  Is the hunting operator to be given the right to construct improvements on the property?  If so, the right needs to be detailed.  Is the landowner obligated to construct any improvements?  For larger hunting operations the landowner commonly constructs certain improvements such as new roads; fences; gates; hunting camps; wildlife crops and feeding facilities; water facilities; blinds; tree stands, and similar structures.  List a completion date for constructed improvements.  Also, give thought to including a provision in the agreement for the cleaning, repair and maintenance of improvements.  Which party does what, and which party pays? 

Prohibited uses.   Clearly state what uses on the property are not allowed.  Are campfires allowed?  What about the use of dogs?  What about camping overnight on the property?  Are pack animals to be used?  If so, specify that the animals must be in compliance with any applicable branding or other identification requirements.  If pack animals are allowed, that might mean that corrals will be needed and feeding requirements will have to be met.  Also, with respect to pack animals, make sure the document requires that the hunting operator complies with inspection, inoculation, vaccine and health requirements.  The landowner should be provided with reports and certificates, etc. 

The driving of vehicles should be restricted to particular areas and if gates are to be driven through, include a provision requiring the hunting operator to be responsible for leaving the gates in the condition found (locked, unlocked, etc.). 

Insurance coverage.  An important aspect of any fee-based activity on the premises is insurance.  The agreement should specify whether which party (or both) is to maintain liability insurance coverage and in what amount.  Make sure the insurance covers any improvements on the property.  Also, for landowners, don’t rely on coverage under an existing comprehensive liability policy for the farm or ranch.  That policy likely has an exclusion for non-farm (or ranch) business pursuits of the insured. Being compensated for hunting on the property would likely fall within the exclusion. 

Miscellaneous.  There may be numerous miscellaneous provisions that might apply. These can include provisions for the landowner’s warranty of ownership; whether the agreement is to be recorded; and the maintenance of trade association memberships and licenses and permits. 

Liability Issues

Numerous states have enacted agritourism legislation designed to limit landowner liability to those persons engaging in an “agritourism activity.”  Typically, such legislation protects the landowner (commonly defined as a “person who is engaged in the business of farming or ranching and provides one or more agritourism activities, whether or not for compensation”) from liability for injuries to participants or spectators associated with the inherent risks of a covered activity.  The statutes tend to be written very broadly and can apply to such things as corn mazes, hayrides and even hunting and fishing activities.

Recognizing the potential liability of owners and occupiers of real estate for injuries that occur to others using their land under the common law rules, the Council of State Governments in 1965 proposed the adoption of a Model Act to limit an owner or occupier's liability for injury occurring on the owner's property. The Council noted that if private owners were willing to make their land available to the general public without charge, every reasonable encouragement should be given to them. The stated purpose of the Model Act was to encourage owners to make land and water areas available to the public for recreational purposes by limiting their liability toward persons who enter the property for such purposes. Liability protection was extended to holders of a fee ownership interest, tenants, lessees, occupants, and persons in control of the premises.  Land which receives the benefit of the act include roads, waters, water courses, private ways and buildings, structures and machinery or equipment when attached to the realty. Recreational activities within the purview of the act include hunting, fishing, swimming, boating, camping, picnicking, hiking, pleasure driving, nature study, water skiing, water sports, and viewing or enjoying historical, archeological, scenic or scientific sites.  Most states have enacted some version of the 1965 Model legislation.

Note:  The point is to check state law with respect to both agritourism statutes and recreational use statues.  Generally, they will provide liability protections to the landowner for hunting activities on the premises if the landowner does not act willfully or wantonly (with reckless disregard to the safety of the hunting operator).  State laws vary on the protection of the statutes if a fee is charged.  Also, it is a good idea to check with an insurance agent to see if coverage is extended if you charge a fee for hunting.  The statutes don’t remove the possibility of a suit being brought and the landowner being required to defend.  Instead, a recreational use statute is typically used as an affirmative defense. 

Conclusion

Allowing hunting activities to be engaged in on farming or ranching property can provide an additional source of income.  But it’s important to enter into properly drafted written agreements with hunters (and others on the premises for recreational purposes) and ensure that appropriate insurance coverage applies. 

Kansas Court of Appeals Decides Major Hog Nuisance Case

Overview

A recent opinion by the Kansas Court of Appeals provides a thorough explanation of property rights with respect to road ditch rights-of-way, as well as the common law of trespass and nuisance in addition to the Kansas Right-to-Farm law.  The case involved what is perhaps the most egregious ag nuisance case that has ever gone to an appellate-level court in Kansas.  The case is Ross et al. v. Nelson, et al., No. 125,274, 2023 Kan. App. LEXIS 32 (Kan. Ct. App. Aug. 25, 2023).

Of trespass, nuisance and right-to-farm laws – it’s the topic of today’s post.

Background Facts

The defendant (Nelson) owns multiple farming operations and installed about 2 miles of pipeline in the road ditch right-of-way next to a public road to transport liquified hog waste to spread on his crop fields.  He installed the three underground pipes (two to carry water to his hog operation and one to carry the effluent) without the consent of the adjacent landowners (the plaintiffs).  He also did not follow the applicable county permitting process.  The defendant’s daughter-in-law later filled-out a permit application and paid the fee for installing the pipes but neither the county clerk nor Road and Bridge Supervisor ever signed the permit application.  The defendant also created an impression with the County Commissioners that he had the permission of the landowners adjacent to the roadway where he was wanting to install pipes.  The County Attorney advised the Commissioners that the adjacent landowners had to consent before the application could be approved.  But the fact remained that the Commission never granted approval to install the pipes and the County Attorney called the Sheriff who temporarily stopped the installation process.  However, the defendant later completed the installation. The Sheriff also contacted the Kansas Department of Health and Environment (KDHE), but the KDHE explained that it does not oversee piping installation between hog operations and disposal sites.  The KDHE regulates the disposal of hog waste.

Note:  The defendant consistently maintained that he didn’t need permission to install the pipes in the road ditch right-of-way.  He also lobbied the county commissioners and the state legislature for express authority to lay the pipelines.  His lobbying efforts were not successful. 

Once installed, the pipes ran for a mile along each of the plaintiffs’ road frontages.  The liquified hog manure was sprayed from a pivot irrigation system (and end gun) near a home of one of the plaintiffs.  The plaintiffs, also farmers, sued for trespass and nuisance. 

The spray from the pivot came within 200 feet of one of the plaintiffs’ homes.  As noted, neither of the plaintiffs gave permission to the defendant to lay pipes in the road right-of-way, and the defendant choose not to dispose of the hog waste on other land that he owned where no one lived nearby. 

In the Spring of 2019, the waste was pumped through the pipelines and effluent was sprayed on the field.  The plaintiffs filed a report with the Sheriff concerning the odor.  The report noted that hog waste mist would drift onto the plaintiffs’ property and sprayed one of the plaintiffs personally as well as their home which then became covered in flies.  The wife of one of the plaintiff couples moved to their Nebraska home.   One of the plaintiffs had planned to sell their farmland to one of their tenants, but the sale fell through because of the odor.

Trial Court

The plaintiffs sued for trespass and nuisance.  The trial court ruled for the plaintiffs on both issues.  On the trespass issue, the trial court noted that the defendant did not have a public purpose for installing pipes in the road right-of-way and he didn’t have permission – either from the landowners, the county or the legislature.   

The trial court also ruled for the plaintiffs on the nuisance issue.  The Kansas Right-to-Farm law didn’t apply to authorize the defendant’s conduct because the nuisance was the result of the defendant’s trespass. 

The trial court also added a claim for punitive damages. 

The jury returned a verdict of $126,720 in property damages for the plaintiffs, plus $2,000 in nuisance damages plus $50,000 of punitive damages. 

The defendant appealed.

Appellate Court

The appellate court affirmed and in doing so made some important points relevant to all farming operations.

Use of road ditch right-of-way.  The appellate court pointed out that a road ditch right-of-way cannot be used for private purposes without first securing the adjacent landowners’ permission or otherwise receiving local or legislative authority.  The right-of-way is owned by the adjacent property owners.  The public has an easement to use the roadway for travel, that’s it.  Shawnee County Commissioners v. Beckwith, 10 Kan. 603 (1873).  The ownership of the land and “everything connected with the land over which the road is laid out” does not pass to the public but remains with the owner of the underlying (and adjacent) land.  Id.  While the defendant lobbied the legislature for a change in the law on this point, the bill died in committee.  Thus, the defendant’s laying of the pipes in the road ditch right-of-way was a trespass. 

The appellate court specifically noted that “fee owners of real property containing a public roadway have a possessory right to use, control, and exclude others from the land, as long as they do not interfere with the public’s use of the road.  In contrast, the public has an easement over the property to use the road for transportation purposes…but not other rights beyond those purposes.  Any further use by member of the public may be authorized through state action, provided the landowner is compensated for the diminished property rights, or through the landowner’s consent.”  The scope of the public’s easement in a road ditch right-of-way, the court noted, must be for a public purpose.  Any private use must be merely incidental to the public purpose.  Stauber v. City of Elwood, 3 Kan. App. 2d 341, 594 P.2d 1115, rev. den. 226 Kan. 793 (1979). 

Because the defendant was using the road ditch right-of-way solely for his private purposes, he had no right to lay the pipelines without permission or official government authority.  He had neither.  The appellate court pointed out that it was immaterial that the pipelines didn’t interfere with public travel.  The appellate court also rejected as absurd and with no support in Kansas law the defendant’s argument that supplying pork for ultimate public consumption constituted a public purpose.  Consequently, the appellate court upheld the trial court’s determination that the defendant had committed a trespass.

Nuisance and right-to-farm.  The appellate court also upheld the trial court’s consideration of the nuisance claim and the resulting jury award for the plaintiffs on the nuisance claim.  The general legal principle underlying the doctrine of nuisance is that property must be used in such a manner that it does not injure that of others.  See, e.g., Wilburn v. Boeing Airplane Co., 188 Kan. 722, 366 P.2d 246 (1961).  However, there is a limitation placed on nuisance laws.  Many states, including Kansas, have adopted what are know as a “right-to-farm” law.  Such a law limits the extent to which a farm operation may be considered to be a nuisance.  Under the Kansas right-to-farm law, if a farming operation is conducted according to good agricultural practices and was established before surrounding nonfarming activities, the courts must presume that there is no nuisance.  Kan. Stat. Ann. §2-3202(a).  An activity is a good agricultural practice if it “is undertaken in conformity with federal, state, and local laws and rules and regulations.”  Kan. Stat. Ann. §2-3202(b). 

The defendant claimed that the Kansas right-to-farm law protected his fertilization practices from nuisance claims and that there was no evidence submitted at trial to support the jury’s finding that spraying the effluent as fertilizer was a nuisance. 

The appellate court noted that neither party raised on appeal whether the defendant’s activity predated the plaintiffs’ residing nearby.  Thus, the appellate court presumed that the right-to-farm law could apply to protect the defendant’s activity.  The appellate court also did not address the fact that the plaintiffs were also farmers.  It has been held in a district court case in Kansas that the Kansas right-to-farm provisions do not apply to disputes between farmers, since the law is designed to protect farmers only from nuisance claims brought by nonfarmers. 

The defendant’s basic argument was that his manure spreading activity was protected by the right-to-farm law because he was in compliance with all federal and state and local laws rules and regulations.  This was in spite of him already found to have committed a trespass which allowed him to engage in the activity that gave rise to the nuisance claim.  The defendant (and amici) tried to finesse this hurdle by asserting that the common law of trespass was not part of state law.  The appellate court concluded that this was another of the defendant’s absurd arguments and rejected it.  The appellate court determined that the nuisance was the result of a trespass (a violation of state law) and was not protected. 

Punitive damages.  The appellate court also upheld the trial court’s assessment of punitive damages against the defendant.  While an award of punitive damages is a relatively rare occurrence, it will be assessed where the court determines that the evidence warrants it based on the defendant’s particularly bad conduct.  Here, the appellate court determined that witness testimony was persuasive – the wife of one of the plaintiff couples hadn’t stayed at the home for a year; the plaintiffs couldn’t host guests at their home because of the hog odor; a plaintiff’s house was covered with the effluent mist and coated with flies; there was a lingering stench both outside and inside a plaintiff’s home; spray drifted onto one of the plaintiffs; and after the lawsuit was filed, the defendant sprayed twice as much fertilizer as he had the prior year.  The defendant also piled truckloads of manure across from one of the plaintiffs’ homes for several days straight.  The appellate court concluded that this was clearly “willful” and “reprehensible” conduct that warranted imposing punitive damages. 

The defendant claimed that the punitive damage award should be set aside due to “instructional error.”  He claimed that the jury verdict form was unclear as to whether the punitive damages were for trespass or for nuisance.  But his attorney failed to object to the verdict form and the appellate court determined that the form was not clearly erroneous. 

Conclusion

The appellate court’s opinion is thorough and well thought-out.  It is a “win” for property rights in upholding an adjacent owner’s rights in road ditch rights-of-way and noting that the protections of the right-to-farm law is limited to situations where the farming operation accused of committing a nuisance is in compliance with state law – all of it, including state common law. 

The appellate court began its opinion by stating that the case arose “at the intersection of property rights, public roadways and the Kansas Right to Farm Act.”  Unfortunately, the path that led to that intersection was lined with arrogance, greed and a lust for power. 

Ag Law and Tax Ramblings

Overview

The subject matter of agricultural law and taxation is very dynamic.  Farmers, ranchers and agribusiness ventures can find themselves involved in legal and tax issues in many ways.  Let’s take a look at a few of those issues.

Random thoughts and developments in ag law and tax – it’s the topic of today’s post.

Crop Insurance Deferral

Farmers facing drought this year will likely collect crop insurance.  The tax law allows crop insurance proceeds to be deferred if the farmer has a business practice of deferring crop sales.  But there’s a limitation on the amount that can be deferred.  The amount that you can defer is limited to the portion related to crop damage.  The portion associated with price is not deferrable.  Crop damage is based on yield loss times the crop’s base price before you plant the crop.  If the price at harvest equals or is greater than the base price, all of your crop insurance proceeds are related to yield and will be fully deferable. 

However, if harvest price is lower than the base price, the portion of the crop insurance proceeds related to the drop in price is based solely on the price drop.  That means that at least some of the crop insurance proceeds won’t be deferable. 

Note:  I have a formula in my treatise, Principles of Agricultural Law, with examples of the computation.  Note that the formula is not official IRS policy, but the IRS in Pub. 225 does recognize the principal of the formula.

The good news is that you won’t have to calculate the numbers.  Your crop insurance provider usually reports the amount of price and yield loss when the proceeds are sent out.

This year, it’s looking likely that most crop insurance proceeds will be a result of a price drop and not a price increase at harvest.  So don’t be surprised if you won’t be able to defer all of your crop insurance proceeds.  Keep that in mind as you start to think about tax planning coming into the last quarter of 2023.

Tax Legislation

The Tax Cuts and Jobs Act (TCJA) enacted in late 2017 contains numerous provisions that will expire at the end of 2025.  Farmer and ranchers and tax preparers are beginning to raise questions with me about how I see the tax landscape shaping up come 2026.  For starters, I think it’s unlikely that the Congress will act on major tax policy until it has too.  That would mean that we won’t see tax legislation until late in 2025.  However, the Congress has a habit of passing Omnibus spending legislation late in the year and tax provisions could be thrown in that bill this coming December.  If that happens, what might be addressed later this year?  I see one possibility being that of bonus depreciation being reinstated to 100 percent, perhaps on a retroactive basis.  It’s currently 80 percent and is phasing down.  Also, I have heard rumblings about making the qualified business income deduction (20 percent for sole proprietorships and pass-through income) permanent.  There might also be another attempt to increase the Child Tax Credit.

As for what might happen in 2025, it will depend on the politics at that time and general economic conditions.  One thing is for sure, the higher interest rate on the debt (caused by bad economic policies) is causing the government to spend much more on debt service and will make tax reform to help the economy more difficult.

Trains and Crossings

An issue for all motorists, but one of particular interest to motorists using rural roadways is the length of time that a train can block a crossing. 

Many states have statutes that specify the maximum length of time that a train can block a public road.  The state laws vary, but a general rule of thumb is that a blockage cannot exist for more than 20 minutes.  There are numerous exceptions concerning such things as emergencies and when the blockage is a result of something beyond the railroad’s control.  When state law doesn’t address the issue, there may be restrictions at the local level.

An interesting question involves the extent to which state laws on road blockages are valid.  Railroads are subject to an interesting mix of federal and state law.  Does federal law preempt state law on this issue?  It can if state law only applies to railroad companies rather than the public at large and has more than just a remote or incidental effect on railway transportation.  That’s because the Surface Transportation Board has exclusive jurisdiction to regulate railways. 

This all means that state law must be carefully tailored to apply broadly to roadway obstructions generally, and not have anything more than a slight impact on railway transportation.  If those requirements are not satisfied, federal law may control.

What’s a Tractor?

A recent case (Brownell v. Brownell, No. SCSC024547 (Dist. Ct. Fayette Co, IA (Aug. 16, 2023)) involved a father suing his son over the sale of a tractor.  The father bought a tractor to use in his farming operation.  It was equipped with a cab, three-point hitch, draw bar and PTO shaft – all of which were detachable.  During his high school years, the son used the tractor in tractor pulls, which required the removal of the detachable parts.  Dad continued to pay for the fuel for the tractor and kept it insured.  Mom and Dad then divorced and as part of the divorce Dad discussed selling the tractor to their son.  No formal written sale contract was entered into, but Dad told his attorney that he had agreed to sell the tractor to his son for $10,000 with no weights or other items, noting that a bank had a lien on all farm equipment. 

The son paid $10,000 to his parents and when he took delivery of the tractor, he also took the draw bar, three-point hitch and PTO shaft.  The legal question was whether the attachments counted as the “tractor” entitling the son to them.  While the attachments were extraneous to the oral contract, the court said the son reasonably believed that they came with the tractor and were a part of it.

It’s always a good idea to get contracts in writing – even seemingly simples ones, and even ones between family members.  It’s hard for me to fathom a father suing his son, but I have seen it happen numerous times.

Also, this case reminds me of a Kansas case about 25 years ago involving a new combine that caught fire during its first usage when the engine malfunctioned.  While the insurance company made the farmer whole, the company claimed in court that it only insured the shell of the combine and not the component parts (i.e., the engine) so the engine manufacturer should be on the hook for the loss.  The court disagreed.  A “combine” meant all of the component parts of the combine.  That’s what a reasonable insured would think with respect to a self-propelled combine. 

Renting Out Part of the Home

If you rent out part of your home, be careful in how you account for the income.  You will need to do an allocation for the expenses and the basis of the portion of the home rented out.  For instance, in Lin v. Comr., T.C. Memo. 2023-37, a married couple rented out a basement apartment in their home to a friend.  They charged $300/month (the Tax Court ignored the issues that the rent might have been below fair rental value) and deducted expenses associated with the rental on their Schedule E.  They also claim depreciation but in doing so used their basis in the entire house.  The Tax Court determined that the expenses should have been allocated to the space rented and that some of the expenses didn’t pertain to the rented portion of the home.  For example, expenses incurred to renovate the bathroom were incurred after the tenant moved out and there was no evidence provided that they had ever rented the space before or would do so in the future.  On the depreciation issue, the Tax Court held that the rental income was only offset by the basis in the rented space and that the couple didn’t supply any square footage numbers on which to allocate depreciation (or the other expenses) attributable to the rented portion of the home.  The IRS did allow some expense deductions, and the Tax Court allowed those. 

Recent Happening in Ag Law and the Courts

Overview

The field of agricultural law is broad and dynamic.  There is always something happening.  That’s a function of the many varied ways that the law intersects with land ownership, land use, economics and the production of food and fiber.  Below is my commentary on a few recent cases involving farmers and ranchers – farm bankruptcy; veterinarian’s lien; confined animal feeding operations and an injury sustained while assisting a downed heifer.

Some recent court cases involving ag – it’s the topic of today’s post.

Chapter 12 Plan Could Be Modified – Substantial Change in Circumstances Must be Shown

In re Swackhammer, 650 B.R. 914 (Bankr. S.D. Iowa 2023)

Chapter 12 bankruptcy is exclusively for family farmers.  A creature of the farm crisis of the 1980s, it became a permanent part of the bankruptcy code in 2005.  A key feature is the ability to restructure debt and put together a reorganization plan that allows the farm debtor to pay off creditors over time.  But a significant question is whether that reorganization plan can be modified and, if so, how many times it can be modified.  A recent case shed some light on those questions. 

In Swackhammer, the debtors filed Chapter 12 bankruptcy in 2018, and a second modified plan was confirmed in 2019.  In 2020, the debtors move to modify their confirmed plan to extend the time to make payments to secured creditors based on changed circumstances such as weather, equipment failure, employee illness or losses due to delayed financing.  Each time the creditors objected, but each time the court allowed the modification.  In 2022, the debtors motioned to approve a third modified plan to extend the deadline for payments to creditors because of unforeseen revenue loss from the 2021 crops.  The debtors, for the first time, claimed that nothing in 11 U.S.C. §1229 required them to prove changed circumstances.  The creditors objected, claiming that the court had plenty of evidence that none of the debtors’ plans were feasible.  The creditors also asserted that the debtors had to prove that their revenue loss was due to a substantial and unanticipated change in circumstances.  The creditors motioned to dismiss the debtors’ Chapter 12 case. 

The bankruptcy court directed the parties to discuss whether they could agree to the terms of a fourth modified plan.  Ultimately, a fourth modified plan was approved with the bankruptcy court noting that this would be the last modification allowed.  A secured creditor appealed on the basis that 11 U.S.C. §1229 required a debtor to show “unanticipated, substantial change in circumstances” before confirming a proposed modified plan.  The appellate court noted that the circuit courts of appeal were split on the issue and that it had not yet addressed the issue.  The appellate court held that 11 U.S.C. §1229(a) requires a showing, at a minimum of a “substantial change in circumstances” but that it didn’t need to take a position on the issue in the case because the evidence illustrated that the debtors had met the burden.  Accordingly, the bankruptcy court had not erred in allowing the fourth modification because, in any event, the evidence showed an unanticipated substantial change in circumstances. 

Veterinarian’s Lien Fails for Lack of Proof. 

In re Kern, No. 22-40437-12, 2023 Bankr. LEXIS 1392 (Bankr. D. Kan. May 26, 2023)

Every state has numerous statutory liens that, when properly “perfected” can beat out a prior perfected secured lien.  Common ones include a mechanic’s lien, an agister’s lien, and a landlord’s lien.  Some states, including Kansas, also have a statutory veterinarian’s lien.  That lien was at issue in a recent case.

In In re Kern, the debtor had pastured cattle for third parties until February of 2022.  During that time, a veterinarian provided medications and veterinary care for the cattle.  After shipping the cattle at the direction of the owner, the third party’s check was dishonored, and the debtor couldn’t pay the veterinary bill.  Ultimately, the veterinarian came into possession of some of the debtor’s cattle and the veterinarian cared for the cattle for slightly over two months.  It was unclear and disputed how the veterinarian came into possession of the cattle.  The veterinarian filed a veterinary lien under Kan. Stat. Ann. §47-836 with the local county Register of Deeds and a copy of the lien from mailed to the debtor and printed in the local newspaper.  The debtor’s primary lender then intervened, claiming a first-priority lien on the cattle.  The county Sheriff sold the cattle for $18,714.83.  That amount was deposited with the county court. 

The veterinarian then sought payment pursuant to the lien, and the primary lender objected.  The debtor then filed Chapter 12 bankruptcy.  The parties stipulated that the primary lender held a valid perfected lien in the cattle and cattle proceeds, that could be beat out by a valid veterinarian’s lien.  The debtor claimed that he didn’t request veterinary services for the cattle, but that the cattle owner must have.  Ultimately, the court concluded that the veterinarian could only establish that someone with lawful possession of the cattle delivered them to him for veterinary services, but that it couldn’t be established that it was the debtor.  Thus, the veterinarian couldn’t establish it was the debtor that requested his services and the veterinarian failed to meet his burden of proof by a preponderance of the evidence and the veterinarian’s lien was invalid. 

Court Vacates Medium-Sized CAFO Rule

Dakota Rural Action v. United States Department of Agriculture, No. 18-2852 (CKK), 2023 U.S. Dist. LEXIS 58678 (D. D.C. Apr. 4, 2023)

The plaintiff, a non-profit organization that was initially formed during the farm debt crisis of the 1980s to provide various forms of assistance to smaller-sized family farming operations, acting on behalf of various farm and animal rights groups, challenged a rule promulgated by the Farm Service Agency (FSA) in 2016.  That rule exempted medium-sized confined animal farming operations (CAFOs) from environmental review for FSA loans.  A medium-sized CAFO can house up to 700 dairy cows, 2,500 55-pound hogs or up to 125,000 chickens.  The plaintiff challenged the rule as being implemented without complying with the National Environmental Policy Act (NEPA) [42 U.S.C. §4332(2)(C)] which requires all federal agencies to undertake a certain degree of environmental review before effecting an agency decision or policy.  In addition, the NEPA specifies that “an agency will inform the public that it has indeed considered environmental concerns in its decision-making process.”  Alternative, an agency can provide an environmental impact statement (EIS).  An EIS requires agency review before any action is taken that will “significantly affect the quality of the human environment.”  Another alternative is for an agency to prepare an “environmental assessment” (EA) when environmental impact is not clearly established, an EIS is not necessary and there will not be any significant environmental impact.  But, no analysis need be made public is the agency determines that its proposed action will not individually or cumulatively have a significant effect on the human environment.  The FSA concluded that it didn’t need to do any environmental analysis before making loans to medium-sized CAFOs, categorically exempting them from NEPA review.  The court disagreed and vacated the rule.  The court noted that FSA had provided no rationale for the exemption or the data upon which it relied except a 2013 discussion of a proposed categorical exemption.  FSA conceded that it made no finding as to environmental impact.  The court determined that to be fatal, along with providing no notice that it was going to categorically exempt all loan actions to medium-sized CAFOs.  Thus, the rule was procedurally defective.  The court vacated the rule and remanded to the FSA. 

Domesticated Animal Activity Act Doesn’t Provide Immunity for Feedlot Operator

Vreeman v. Jansma, No. 22-1365, 2023 Iowa App. LEXIS 492 (Iowa Ct. App. Jun. 21, 2023)

The defendant operated a feedlot and discovered a downed heifer in an area where he couldn’t get tractor or equipment to assist the heifer in getting up.  He called the plaintiff to come and help him with the task, something the plaintiff has assisted with in the past.  While trying to get the heifer to her feet, the plaintiff’s leg was severely injured.  The plaintiff sued for negligence and the defendant motioned for summary judgment, citing the Iowa Domesticated Animal Activity Act (Iowa Code Ch. 673) (Act) as providing him with immunity from suit.  The Act states that “A person, including a domesticated animal professional, domesticated animal activity sponsor, the owner of the domesticated animal, or a person exhibiting the domesticated animal, is not liable for the damages, injury or death suffered by a participant or spectator resulting from the inherent risks of a domesticated animal activity.”  The plaintiff asserted that the Act was inapplicable because standing up a downed heifer is not a “domesticated animal activity.”  The trial court granted summary judgment to the defendant and the plaintiff appealed.  The appellate court reversed, noting that the statute provided a specific list of definitions for “domesticated animal activity” and that standing up a downed heifer was not in the list. 

Conclusion

There’s never a dull moment in agricultural law and taxation.  Stay tuned for more developments in future posts.

Coeur d’ Alene, Idaho, Conference – Twin Track

Overview

On August 7-8 in beautiful Coeur d’ Alene, ID, Washburn Law School the second of its two summer conferences on farm income taxation as well as farm and ranch estate and business planning.  A bonus for the ID conference will be a two-day conference focusing on various ag legal topics.    The University of Idaho College of Law and College of Agricultural and Life Sciences along with the Idaho State Bar and the ag law section of the Idaho State Bar are co-sponsoring.  This conference represents the continuing effort of Washburn Law School in providing practical and detailed CLE to rural lawyers, CPAs and other tax professionals as well as getting law students into the underserved rural areas of the Great Plains and the West.  The conference can be attended online in addition to the conference location in Coeur d’ Alene at the North Idaho College. 

More information on the August Idaho Conference and some topics in ag law – it’s the topic of today’s post.

Idaho Conference

Over two days in adjoining conference rooms the focus will be on providing continuing education for tax professionals and lawyers that represent agricultural clients.  All sessions are focused on practice-relevant topic.  One of the two-day tracks will focus on agricultural taxation on Day 1 and farm/ranch estate and business planning on Day 2.  The other track will be two-days of various agricultural legal issues. 

Here's a bullet-point breakdown of the topics:

Tax Track (Day 1)

• Caselaw and IRS Update
• What is “Farm Income” for Farm Program Purposes?
• Inventory Method – Options for Farmers
• Machinery Trades
• Easement and Rental Issues for Landowners
• Protecting a Tax Practice From Scammers
• Amending Partnership Returns
• Corporate Provided Meals and Lodging
• CRATs
• IC-DISCS
• When Cash Method Isn’t Available
• Accounting for Hedging Transactions
• Deducting a Purchased Growing Crop
• Deducting Soil Fertility

Tax Track (Day 2)

• Estate and Gift Tax Current Developments
• Succession Plans that Work (and Some That Don’t)
• The Use of SLATs in Estate Planning
• Form 1041 and Distribution Deductions
• Social Security as an Investment
• Screening New Clients
• Ethics for Estate Planners

Ag Law Track (Day 1)

• Current Developments and Issues
• Current Ag Economic Trends
• Handling Adverse Decisions on Federal Grazing Allotments
• Getting and Retaining Young Lawyers in Rural Areas
• Private Property Rights and the Clean Water Act – the Aftermath of the Sackett Decision
• Ethics

Ag Law Track (Day 2)

• Foreign Ownership of Agricultural Land
• Immigrant Labor in Ag
• Animal Welfare and the Legal System
• How/Why Farmers and Ranchers Use and Need Ag Lawyers and Tax Pros
• Agricultural Leases

Both tracks will be running simultaneously, and both will be broadcast live online.  Also, you can register for either track.  There’s also a reception on the evening of the first day on August 7.  The reception is sponsored by the University of Idaho College of Law and the College of Agricultural and Life Sciences at the University of Idaho, as well as the Agricultural Law Section of the Idaho State Bar.

Speakers

The speakers for the tax and estate/business planning track are as follows: 

Day 1:  Roger McEowen, Paul Neiffer and a representative from the IRS Criminal Investigation Division.

Day 2:  Roger McEowen; Paul Neiffer; Allan Bosch; and Jonas Hemenway.

The speakers for the ag law track are as follows:

Day 1:  Roger McEowen; Cody Hendrix; Hayden Ballard; Damien Schiff; aand Joseph Pirtle.

Day 2:  Roger McEowen; Joel Anderson; Kristi Running; Aaron Golladay; Richard Seamon; and Kelly Stevenson

Who Should Attend

Anyone that represents farmers and ranchers in tax planning and preparation, financial planning, legal services and/or agribusiness would find the conference well worth the time.  Students attend at a much-reduced fee and should contact me personally or, if you are from Idaho, contract Prof. Rich Seamon (also one of the speakers) at the University of Idaho College of Law.  The networking at the conference will be a big benefit to students in connecting with practitioners from rural areas. 

As noted above, if you aren’t able to attend in-person, attendance is also possible online. 

Sponsorship

If your business would be interested in sponsoring the conference or an aspect of it, please contact me.  Sponsorship dollars help make a conference like this possible and play an important role in the training of new lawyers for rural areas to represent farmers and ranchers, tax practitioners in rural areas as well as legislators. 

For more information about the Idaho conferences and to register, click here: 

Farm Income Tax/Estate and Business Planning Track:  https://www.washburnlaw.edu/employers/cle/farmandranchtaxaugust.html

Ag Law Track:  https://www.washburnlaw.edu/employers/cle/idahoaglaw.html

Sunday Afternoon Random Thoughts on Ag Law and Tax

Overview

I am in the midst of a 10-day traveling and speaking “tour” and have a moment to share a few thoughts of what has been rolling around in my mind (besides what I have been teaching recently).  Some of these thoughts are triggered by questions that I receive, others by cases that I read, yet still others simply from conversations that I have had with other recently.  Those thoughts include liability for guests on the farm; the usefulness of Health Savings Accounts; pre-paid farm expenses and death; putting a plan in place to address long-term health care costs; and custom agreements for direct beef sales from the farm.

Random thoughts in ag law and tax – it’s the topic of today’s blog article.

Direct Beef Sales and Custom Agreements

It seems that the interest in buying beef products directly from cattle producers is on the rise. But direct sales/purchases may trigger some different rules.  In general, if a person wants to buy beef directly from a cattle producer the law treats the transaction differently depending on whether the live animal is sold to the buyer or whether processed beef is sold.  The matter turns on whether the animal owner is the end consumer.  If the cattle producer sells processed beef to the buyer, the processing of the animal must occur in an inspected facility and the producer would also be subject licensing, labeling and insurance requirements.  But if the producer sells the live animal to the buyer then the producer can also do the processing and sell any remaining beef not initially purchased to another buyer.    

This means that a contract should clearly state that the live animal is being sold and in what percentage.  If a specific animal is sold, the animal should be identified.  Also, the calculation of the price should be detailed and how payment is to be made.  Any processing fees should be set forth and the agreement should be clear that the meat can’t be resold or donated.  In addition, it is important to make sure to clearly state when the animal is the buyer’s property.  The key point is that the owner of the animal and the consumer of the beef must be the same. 

The bottom line is to have a good custom harvest agreement to be able to use the custom exempt processing option. 

Handling Long-Term Care Costs

Planning for long-term care costs should be an element of a complete estate plan for many farm and ranch families.  Having a plan can help minimize the risk that the farm assets or land would have to be sold to come up with the funds to pay a long-term care bill.  What are some steps you can take to put a plan in place that will protect the farm assets from being sold to pay a long-term health care bill? 

A ballpark range of the monthly cost of long-term care is $7,000-9,000 in many parts of the country.  If you are planning on covering that expense with Medicaid benefits keep in mind that you can only have very little income and assets to be eligible. 

A good place to start is to estimate your current monthly income sources.  What do you have in rents, royalties, Social Security benefits, investment income, and other income?  You will only need to plug the shortfall between the monthly care cost and your then current monthly income sources.  That difference might be able to be made up with long-term care insurance.  Those policies can differ substantially, so do your homework and examine the terms and conditions closely.    

If a policy can be obtained to cover at least the deficiency that income doesn’t cover, all of the farm assets will be protected. Many insurance agents and financial advisors can provide estimates for policies and help you determine the type of policy that might be best for you. 

When should you be thinking about putting a plan together?  Certainly, before a major medical problem occurs.  If you are in relatively good health, policy premiums will be less.  Certainly, before age 70 would be an excellent time to employ a plan.

Planning to protect assets from depletion paying for long-term health care costs is beset with a complex maize of federal and state rules.  Make sure you get good guidance. 

Pre-Paid Farm Expenses and Death

Many cash-basis farmers pre-pay next-year’s input expenses in the current year and deduct the expense against current year income.  The IRS has specific rules for pre-paying and deducting.  Another issue with pre-paid inputs is what happens if a farmer claims the deduction and then dies before using the inputs that were purchased? 

To be able currently deduct farm inputs that will be used in the next year, three requirements must be met.  The items must be purchased under a binding contract for the purchase of specific goods of a minimum quantity; the pre-purchase must have a business purpose or not be entered into solely for tax avoidance purposes; and the transaction must not materially distort income. 

If the rules are satisfied but the farmer dies before using the inputs that were purchased, what happens?  In Estate of Backemeyer v. Comr., 147 T.C. 526 (2016), a farmer pre-purchased about $235,000 worth of inputs associated with the planting of next year’s crop.  The deduction was taken on the return for the year of purchase, but the farmer died before using the inputs.  The inputs passed to his widow who used them to put the crop in the ground.  She deducted the inputs again on the return for that year.  The IRS objected, but the court said that’s the way the tax rules work.  The value of the inputs was included in his estate, and she could claim a deduction against their cost basis – the fair market value at the time of his death.

Liability for Guests on the Farm

What’s your liability for guests on the farm?  The answer is, “it depends.”  Facts of each situation are paramount, and the outcome of each potential liability event will turn on those facts. For example, in Jones v. Wright, 677 S.W.3d 444 (Tex. Ct. App. 2023), a family who came to the plaintiffs’ property to look at a display of Christmas lights sued the landowner for the death of their child who was killed by a motorist while crossing the road after leaving the premises. 

When they left the property, their minor child was struck and killed by a vehicle while crossing the road to get to the family’s vehicle. The family sued the landowners for wrongful death and negligence claiming that they were owed a duty of care as invitees that was breached by the landowners’ failure to make the premises safe or warn of a dangerous condition.

The court disagreed based on several key factors.  The landowners didn’t charge a fee for viewing the lights; the vehicle that struck the child was being driven at night without lights; there hadn’t been any similar prior accidents on the road; the landowners used loudspeakers to tell visitors not to park on the opposite side of the road; and the accident occurred on property the landowners didn’t own.  Based on those facts, the court said the landowners didn’t breach any duty that was owed to the family.  The child’s death was not a foreseeable risk. 

But slightly different facts could have led to a different outcome.

Health Savings Accounts

One of the best-kept secrets of funding medical costs is a Health Savings Account (HSA).  Surveys indicate that a self-employed farmer pays about $12,000-$15,000 annually for health insurance.  To make matters worse, the policies often come with high deductibles and limited coverage.  An HSA can provide current and future income tax benefits while simultaneously allowing the self-funding of future medical costs. 

An issue for many is that it’s unlikely that medical expenses are deductible for failure to meet the threshold for itemizing deductions.  That threshold is only likely to be met in a year when substantial medical costs are incurred.  An HSA is an option without the deduction restrictions, but it does need to be paired with a high deductible insurance policy.

With an HSA, contributions are deductible up to $7,750 this year for a family, earnings grow tax-free, and distributions to pay for qualified medical expenses are also not taxed. Qualified expenses include Medicare premiums, or any other qualified medical expenses incurred before retirement.  If you’re a farmer that files a Schedule F, an HSA is the simplest and most cost-effective way to receive a deduction for medical costs. 

But you can’t contribute to an HSA once you are enrolled in Medicare. So, it might be a good idea to fully fund an HSA but not take any distributions until retirement.  One downside with an HSA is that if it is inherited, the recipient has one year to cash it in.  If there aren’t any qualified expenses to be reimbursed, income tax will result.

Conclusion

Just some random thoughts this Sunday afternoon.  For you father’s reading this, I trust you have had a very pleasant Father’s Day.  Now it’s time to get some rest for an early morning flight to Georgia.

Summer Seminars (Michigan and Idaho) and Miscellaneous Ag Law Topics

Overview

Later this week is the first of two summer conferences put on by Washburn Law School focusing on farm income taxation as well as farm and ranch estate and business planning.  This week’s conference will be in Petoskey, Michigan, which is near the northernmost part of the lower peninsula of Michigan.  Attendance can also be online.  For more information and registration click here:  https://www.washburnlaw.edu/employers/cle/farmandranchtaxjune.html  On August 7-8, a twin-track conference will be held in Coeur d’Alene, Idaho. 

More information on the August Idaho Conference and some topics in ag law – it’s the topic of today’s post.

Idaho Conference

On August 7-8, Washburn Law School will be sponsoring the a twin-track ag tax and law conference at North Idaho College in Coeur d’ Alene, ID.  Over two days in adjoining conference rooms the focus will be on providing continuing education for tax professionals and lawyers that represent agricultural clients.  All sessions are focused on practice-relevant topic.  One of the two-day tracks will focus on agricultural taxation on Day 1 and farm/ranch estate and business planning on Day 2.  The other track will be two-days of various agricultural legal issues. 

Here's a bullet-point breakdown of the topics:

Tax Track (Day 1)

• Caselaw and IRS Update
• What is “Farm Income” for Farm Program Purposes?
• Inventory Method – Options for Farmers
• Machinery Trades
• Solar Panel Tax Issues – Other Easement and Rental Issues
• Protecting a Tax Practice From Scammers
• Amending Partnership Returns
• Corporate Provided Meals and Lodging
• CRATs
• IC-DISCS
• When Cash Method Isn’t Available
• Accounting for Hedging Transactions
• Deducting a Purchased Growing Crop
• Deducting Soil Fertility

Tax Track (Day 2)

• Estate and Gift Tax Current Developments
• Succession Plans that Work (and Some That Don’t)
• The Use of SLATs in Estate Planning
• Form 1041 and Distribution Deductions
• Social Security as an Investment
• Screening New Clients
• Ethics for Estate Planners

Ag Law Track (Day 1)

• Current Developments and Issues
• Current Ag Economic Trends
• Handling Adverse Decisions on Federal Grazing Allotments
• Getting and Retaining Young Lawyers in Rural Areas
• Private Property Rights and the Clean Water Act – the Aftermath of the Sackett Decision
• Ethics

Ag Law Track (Day 2)

• Foreign Ownership of Agricultural Land
• Immigrant Labor in Ag
• Animal Welfare and the Legal System
• How/Why Farmers and Ranchers Use and Need Ag Lawyers and Tax Pros
• Agricultural Leases

Both tracks will be running simultaneously, and both will be broadcast live online.  Also, you can register for either track.  There’s also a reception on the evening of the first day on August 7.  The reception is sponsored by the University of Idaho College of Law and the College of Life Sciences at the University of Idaho, as well as the Agricultural Law Section of the Idaho State Bar.

For more information about the Idaho conferences and to register, click here:  https://www.washburnlaw.edu/employers/cle/farmandranchtaxaugust.html and here:  https://www.washburnlaw.edu/employers/cle/idahoaglaw.html

Miscellaneous Agricultural Law Topics

Proper Tax Reporting of 4-H/FFA Projects

When a 4-H or FFA animal is sold after the fair, the net income should be reported on the other income line of the 1040.  It’s not subject to self-employment tax if the animal was raised primarily for educational purposes and not for profit and was raised under the rules of the sponsoring organization.  It’s also not earned income for “kiddie-tax” purposes.  But, if the animal was raised as part of an activity that the seller was engaged in on a regular basis for profit, the sale income should be reported on Schedule F.  That’s where the income should be reported if the 4-H or FFA member also has other farming activities.  By being reported on Schedule F, it will be subject to self-employment tax.

There are also other considerations.  For example, if the seller wants to start an IRA with the sale proceeds, the income must be earned.  Also, is it important for the seller to earn credits for Social Security purposes? 

The Importance of Checking Beneficiary Designations

U.S. Bank, N.A. v. Bittner, 986 N.W.2d 840 (Iowa 2023)

It’s critical to make sure you understand the beneficiary designations for your non-probate property and change them as needed over time as your life situation changes.  For example, in one recent case, an individual had over $3.5 million in his IRA when he died, survived by his wife and four children.  His will said the IRA funds were to be used to provide for his widow during her life and then pass to a family trust for the children.  When he executed his will, he also signed a new beneficiary designation form designating his wife as the primary beneficiary.  He executed a new will four years later and said the IRA would be included in the marital trust created under the will if no federal estate tax would be triggered, with the balance passing to the children upon his wife’s death.  He didn’t update his IRA beneficiary designation.

When he died, everyone except one son agreed that the widow got all of the IRA.  The son claimed it should go to the family trust.  Ultimately, the court said the IRA passed to the widow. 

It’s important to pay close attention to details when it comes to beneficiary designations and your overall estate plan.

Liability Release Forms – Do They Work?

Green v. Lajitas Capital Partners, LLC, No. 08-22-00175-CV, 2023 Tex. App. LEXIS 2860 (Tex. Ct. App. Apr. 28, 2023)

Will a liability release form hold up in court?  In a recent Texas case, a group paid to go on a sunset horseback trail ride at a Resort.  They signed liability release forms that waived any claims against the Resort.  After the ride was almost done and the riders were returning to the stable, the group rode next to a golf course.  An underground sprinkler went off, making a hissing sound that spooked the horses.  One rider fell off resulting in bruises and a fractured wrist.  She sued claiming the Resort was negligent and that the sprinklers were a dangerous condition that couldn’t be seen so the liability waiver didn’t apply.

The court disagreed, noting that the liability release form used bold capitalized letters in large font for the key provisions.  The rider had initialed those key provisions.  The court also said the form wasn’t too broad and didn’t’ only cover accidents caused by natural conditions. 

The outcome might not be the same in other states.  But, if a liability release form is clear, and each paragraph is initialed and the document is signed, you have a better chance that it will hold up in court.

Equity Theft

Tyler v. Hennepin County, No. 22-166, 2023 U.S. LEXIS 2201 (U.S. Sup. Ct. May 25, 2023)

The U.S. Supreme Court has ruled that if you lose your home through forfeiture for failure to pay property taxes, that you get to keep your equity.  The case involved a Minnesota county that followed the state’s forfeiture law when the homeowner failed to pay property tax, sold the property and kept the proceeds – including the owner’s equity remaining after the tax debt was satisfied.  The Supreme Court unanimously said the Minnesota law was unconstitutional. The same thing previously happened to the owner of an alpaca farm in Massachusetts, and a farm owner in Nebraska.  The Nebraska legislature later changed the rules for service of notice when applying for a tax deed, but states that still allow the government to retain the equity will have to change their laws.

Equity theft tends to bear more heavily on those that can least afford to hire legal assistance or qualify for legal aid.  Also, all states bar lenders and private companies from keeping the proceeds of a forfeiture sale, so equity forfeiture laws were inconsistent.  Now the Supreme Court has straightened the matter out. 

You won’t lose your equity if you lose your farm for failure to pay property tax.

The Climate, The Congress and Farmers

Farmers in the Netherlands are being told that because of the goal of “net-zero emissions” of greenhouse gases and other so-called “pollutants” by 2050, they will be phased out if they can’t adapt.  Could that happen in the U.S.?  The U.S. Congress is working on a Farm Bill, and last year’s “Inflation Reduction Act” funnels about $20 billion of climate funds into agriculture which could end up in policies that put similar pressures on American farmers.  Some estimates are that agricultural emissions will make up 30 percent of U.S. total greenhouse gas emissions by 2050.  But, fossil fuels are vital to fertilizers and pesticides, which improve crop production and reduce food prices. 

The political leader of Sri Lanka banned synthetic fertilizer and pesticide imports in 2021.  The next year, inflation was at 55 percent, the economy was in shambles, the government fell, and the leader fled the country.

Energy security, ag production and food security are all tied to cheap, reliable and efficient energy sources.  Using less energy will result in higher food prices, and that burden will fall more heavily on those least likely to be able to afford it. 

As the Farm Bill is written, the Congress should keep these things in mind.

Secure Act 2.0 Errors

In late 2019, the Congress passed the SECURE ACT which made significant changes to retirement plans and impacted retirement planning.  Guidance is still needed on some provisions of that law.  In 2022, SECURE ACT 2.0 became law, but it has at least three errors that need to be fixed. 

The SECURE ACT increased the required minimum distribution (RMD) age from 70 and ½ to age 72.  With SECURE ACT 2.0, the RMD increased to age 73 effective January 1, 2023.  It goes to age 75 starting in 2033.  But, for those born in 1959, there are currently two RMD ages in 2033 – it’s either 73 or 75 that year.  Which age is correct?  Congressional intent is likely 75, but te Congress needs to clearly specify. 

Another error involves Roth IRAs.  Starting in 2024, if you earn more than $145,000 (mfj) in 2023, you will have to do non-deductible catch-up contributions in Roth form.  But SECURE ACT 2.0 says that all catch-up contributions starting in 2024 will be disallowed.  This needs to be corrected.

There’s also an issue with SEPs and SIMPLE plans that are allowed to do ROTH contributions and how those contributions impact ROTH limitations. 

Congress needs to fix these issues this year.  If it does, it will likely be late in 2023.

Implications of SCOTUS Union Decision on Farming Businesses

Glacier Northwest, Inc. v. International Board of Teamsters Local Union No. 174, No. 21-1449, 2023 U.S. LEXIS 2299 (U.S. Sup. Ct. Jun. 1, 2023)

The Supreme Court recently issued a ruling that will make it easier for employers to sue labor unions for tort-type damages caused by a work stoppage.   The Court’s opinion has implications for ag employers. 

The Court ruled that an employer can sidestep federal administrative agency procedures of the National Labor Relations Board (NLRB) and go straight to court when striking workers damage the company’s property rather than merely cause economic harm.  The case involved a concrete company that sued the labor union representing its drivers for damages.  The workers filled mixer trucks with concrete ready to pour knowing they were going to walk away.  The company sued for damage to their property – something that’s not protected under federal labor law.  The Union claimed that the matter had to go through federal administrative channels (the NLRB) first. 

The Supreme Court said the case was more like an ordinary tort lawsuit than a federal labor dispute, so the company could go straight to court.  Walking away was inconsistent with accepting a perishable commodity. 

What’s the ag angle?  Where there are labor disputes in agriculture, they are often timed to damage perishable food products such as fruit and vegetables.  Based on the Court’s 8-1 opinion, merely timing a work stoppage during harvest might not be enough to be deemed economic damage, unless the Union has a contract.  But striking after a sorting line has begun would seem to be enough.

Digital Grain Contracts

The U.S. grain marketing infrastructure is quite efficient.  But there are changes that could improve on that existing efficiency.  Digital contracts are starting to replace paper grain contracts.  The benefits could be improved record-keeping, simplified transactions, reduced marketing costs and expanded market access. 

Grain traveling in barges down the Ohio and Mississippi Rivers is usually bought and sold many times between river and export terminals.  That means that each transaction requires a paper bill of lading that must be transferred when the barge was sold.  But now those bills of lading are being moved to an online platform.  Grain exporters are also using digital platforms. 

These changes to grain marketing could save farmers and merchandisers dollars and make the supply chain more efficient.  But a problem remains in how the various platforms are to be connected.  Verification issues also loom large.  How can a buyer verify that a purchased commodity meets the contract criteria?  That will require information to be shared up the supply chain.  And, of course, anytime transactions become digital, the digital network can be hacked.  In that situation, what are the safeguards that are in place and what’s the backup plan if the system goes down? 

Clearly, there have been advancements in digital grain trading, but there is still more work to be done.  In addition, not all farmers may be on board with a digital system. 

Bibliography – First Quarter of 2023

The following is a listing by category of my blog articles for the first quarter of 2023.

Bankruptcy

Failure to Execute a Written Lease Leads to a Lawsuit; and Improper Use of SBA Loan Funds

https://lawprofessors.typepad.com/agriculturallaw/2023/02/failure-to-execute-a-written-lease-leads-to-a-lawsuit-and-improper-use-of-sba-loan-funds.html

Chapter 12 Bankruptcy – Proposing a Reorganization Plan in Good Faith

https://lawprofessors.typepad.com/agriculturallaw/2023/02/chapter-12-bankruptcy-proposing-a-reorganization-plan-in-good-faith.html

Business Planning

Summer Seminars

https://lawprofessors.typepad.com/agriculturallaw/2023/03/summer-seminars.html

Registration Now Open for Summer Conference No. 1 – Petoskey, Michigan (June 15-16)

https://lawprofessors.typepad.com/agriculturallaw/2023/04/registration-now-open-for-summer-conference-no-1-petoskey-michigan-june-15-16.html

Civil Liabilities

Top Ag Law and Tax Developments of 2022 – Part 1

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ag-law-and-tax-developments-of-2022-part-1.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 8 and 7

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-8-and-7.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 2 and 1

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-2-and-1.html

Contracts

Top Ag Law and Developments of 2022 – Part 2

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ag-law-and-developments-of-2022-part-2.html

Failure to Execute a Written Lease Leads to a Lawsuit; and Improper Use of SBA Loan Funds

https://lawprofessors.typepad.com/agriculturallaw/2023/02/failure-to-execute-a-written-lease-leads-to-a-lawsuit-and-improper-use-of-sba-loan-funds.html

Double Fractions in Oil and Gas Conveyances and Leases – Resulting Interpretive Issues

https://lawprofessors.typepad.com/agriculturallaw/2023/03/double-fractions-in-oil-and-gas-conveyances-and-leases-resulting-interpretive-issues.html

Environmental Law

Here Come the Feds: EPA Final Rule Defining Waters of the United States – Again

https://lawprofessors.typepad.com/agriculturallaw/2023/01/here-come-the-feds-epa-final-rule-defining-waters-of-the-united-states-again.html

Top Ag Law and Developments of 2022 – Part 2

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ag-law-and-developments-of-2022-part-2.html

Top Ag Law and Developments of 2022 – Part 3

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ag-law-and-tax-developments-of-2022-part-3.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 10 and 9

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-nos-10-and-9.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 6 and 5

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-6-and-5.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 4 and 3

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-4-and-3.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 2 and 1

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-2-and-1.html

Estate Planning

Tax Court Opinion – Charitable Deduction Case Involving Estate Planning Fraudster

https://lawprofessors.typepad.com/agriculturallaw/2023/02/tax-court-opinion-charitable-deduction-case-involving-estate-planning-fraudster.html

Happenings in Agricultural Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2023/03/happenings-in-agricultural-law-and-tax.html

Summer Seminars

https://lawprofessors.typepad.com/agriculturallaw/2023/03/summer-seminars.html

RMD Rules Have Changed – Do You Have to Start Receiving Payments from Your Retirement Plan?

https://lawprofessors.typepad.com/agriculturallaw/2023/03/rmd-rules-have-changed-do-you-have-to-start-receiving-payments-from-your-retirement-plan.html

Common Law Marriage – It May Be More Involved Than What You Think

https://lawprofessors.typepad.com/agriculturallaw/2023/04/common-law-marriage-it-may-be-more-involved-than-what-you-think.html

The Marital Deduction, QTIP Trusts and Coordinated Estate Planning

https://lawprofessors.typepad.com/agriculturallaw/2023/04/the-marital-deduction-qtip-trusts-and-coordinated-estate-planning.html

Registration Now Open for Summer Conference No. 1 – Petoskey, Michigan (June 15-16)

https://lawprofessors.typepad.com/agriculturallaw/2023/04/registration-now-open-for-summer-conference-no-1-petoskey-michigan-june-15-16.html

Income Tax

Top Ag Law and Developments of 2022 – Part 3

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ag-law-and-tax-developments-of-2022-part-3.html

Top Ag Law and Developments of 2022 – Part 4

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-agricultural-law-and-tax-developments-of-2022-part-4.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 8 and 7

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-8-and-7.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 2 and 1

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-2-and-1.html

Tax Court Opinion – Charitable Deduction Case Involving Estate Planning Fraudster

https://lawprofessors.typepad.com/agriculturallaw/2023/02/tax-court-opinion-charitable-deduction-case-involving-estate-planning-fraudster.html

Deducting Residual (Excess) Soil Fertility

https://lawprofessors.typepad.com/agriculturallaw/2023/02/deducting-residual-excess-soil-fertility.html

Deducting Residual (Excess) Soil Fertility – Does the Concept Apply to Pasture/Rangeland? (An Addendum)

https://lawprofessors.typepad.com/agriculturallaw/2023/02/deducting-residual-excess-soil-fertility-does-the-concept-apply-to-pasturerangeland-an-addendum.html

Happenings in Agricultural Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2023/03/happenings-in-agricultural-law-and-tax.html

Summer Seminars

https://lawprofessors.typepad.com/agriculturallaw/2023/03/summer-seminars.html

RMD Rules Have Changed – Do You Have to Start Receiving Payments from Your Retirement Plan?

https://lawprofessors.typepad.com/agriculturallaw/2023/03/rmd-rules-have-changed-do-you-have-to-start-receiving-payments-from-your-retirement-plan.html

Registration Now Open for Summer Conference No. 1 – Petoskey, Michigan (June 15-16)

https://lawprofessors.typepad.com/agriculturallaw/2023/04/registration-now-open-for-summer-conference-no-1-petoskey-michigan-june-15-16.html

Real Property

Equity “Theft” – Can I Lose the Equity in My Farm for Failure to Pay Property Taxes?

https://lawprofessors.typepad.com/agriculturallaw/2023/03/equity-theft-can-i-lose-my-farm-for-failure-to-pay-property-taxes.html

Happenings in Agricultural Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2023/03/happenings-in-agricultural-law-and-tax.html

Adverse Possession and a “Fence of Convenience”

https://lawprofessors.typepad.com/agriculturallaw/2023/03/adverse-possession-and-a-fence-of-convenience.html

Double Fractions in Oil and Gas Conveyances and Leases – Resulting Interpretive Issues

https://lawprofessors.typepad.com/agriculturallaw/2023/03/double-fractions-in-oil-and-gas-conveyances-and-leases-resulting-interpretive-issues.html

Abandoned Rail Lines – Issues for Abutting Landowners

https://lawprofessors.typepad.com/agriculturallaw/2023/03/abandoned-rail-lines-issues-for-abutting-landowners.html

Regulatory Law

Top Ag Law and Developments of 2022 – Part 2

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ag-law-and-developments-of-2022-part-2.html

Top Ag Law and Developments of 2022 – Part 4

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-agricultural-law-and-tax-developments-of-2022-part-4.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 10 and 9

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-nos-10-and-9.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 8 and 7

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-8-and-7.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 6 and 5

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-6-and-5.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 4 and 3

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-4-and-3.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 2 and 1

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-2-and-1.html

Foreign Ownership of Agricultural Land

https://lawprofessors.typepad.com/agriculturallaw/2023/02/foreign-ownership-of-agricultural-land.html

Abandoned Rail Lines – Issues for Abutting Landowners

https://lawprofessors.typepad.com/agriculturallaw/2023/03/abandoned-rail-lines-issues-for-abutting-landowners.html

Secured Transactions

Priority Among Competing Security Interests

https://lawprofessors.typepad.com/agriculturallaw/2023/02/priority-among-competing-security-interests.html

Water Law

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 2 and 1

https://lawprofessors.typepad.com/agriculturallaw/2023/01/top-ten-agricultural-law-and-tax-developments-of-2022-numbers-2-and-1.html

Happenings in Agricultural Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2023/03/happenings-in-agricultural-law-and-tax.html

Bibliography - July Through December 2022

Overview

 After the first half of 2022, I posted a blog article of a bibliography of my blog articles for the first half of 2022.  You can find that bibliography here:  Bibliography – January through June of 2022

https://lawprofessors.typepad.com/agriculturallaw/2022/09/bibliography-january-through-june-of-2022.html.

Bibliography of articles for that second half of 2022 – you can find it in today’s post.

Alphabetical Topical Listing of Articles (July 2022 – December 2022)

Bankruptcy

More Ag Law Developments – Potpourri of Topics

https://lawprofessors.typepad.com/agriculturallaw/2022/10/more-ag-law-developments-potpourri-of-topics.html

Business Planning

Durango Conference and Recent Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/07/durango-conference-and-recent-developments-in-the-courts.html

Is a C Corporation a Good Entity Choice For the Farm or Ranch Business?

https://lawprofessors.typepad.com/agriculturallaw/2022/07/whats-the-best-entity-structure-for-the-farm-or-ranch-business.html

What is a “Reasonable Compensation”?

https://lawprofessors.typepad.com/agriculturallaw/2022/08/what-is-reasonable-compensation.html

Federal Farm Programs: Organizational Structure Matters – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2022/08/federal-farm-programs-organizational-structure-matters-part-three.html

LLCs and Self-Employment Tax – Part One

https://lawprofessors.typepad.com/agriculturallaw/2022/08/llcs-and-self-employment-tax-part-one.html

LLCs and Self-Employment Tax – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2022/08/llcs-and-self-employment-tax-part-two.html

Civil Liabilities

Durango Conference and Recent Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/07/durango-conference-and-recent-developments-in-the-courts.html

Dicamba Spray-Drift Issues and the Bader Farms Litigation

https://lawprofessors.typepad.com/agriculturallaw/2022/07/dicamba-spray-drift-issues-and-the-bader-farms-litigation.html

Tax Deal Struck? – and Recent Ag-Related Cases

https://lawprofessors.typepad.com/agriculturallaw/2022/07/tax-deal-struck-and-recent-ag-related-cases.html

Ag Law and Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/09/ag-law-and-tax-developments.html

More Ag Law Developments – Potpourri of Topics

https://lawprofessors.typepad.com/agriculturallaw/2022/10/more-ag-law-developments-potpourri-of-topics.html

Ag Law Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/12/ag-law-developments-in-the-courts.html

Contracts

Minnesota Farmer Protection Law Upheld

https://lawprofessors.typepad.com/agriculturallaw/2022/09/minnesota-farmer-protection-law-upheld.html

Criminal Liabilities

Durango Conference and Recent Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/20Ag Law Summit

https://lawpr22/07/durango-conference-and-recent-developments-in-the-courts.html

Environmental Law

Constitutional Limit on Government Agency Power – The “Major Questions” Doctrine

https://lawprofessors.typepad.com/agriculturallaw/2022/07/constitutional-limit-on-government-agency-power-the-major-questions-doctrine.html

More Ag Law Developments – Potpourri of Topics

https://lawprofessors.typepad.com/agriculturallaw/2022/10/more-ag-law-developments-potpourri-of-topics.html

Court Says COE Acted Arbitrarily When Declining Jurisdiction Over Farmland

https://lawprofessors.typepad.com/agriculturallaw/2022/10/court-says-coe-acted-arbitrarily-when-declining-jurisdiction-over-farmland.html

Ag Law Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/12/ag-law-developments-in-the-courts.html

Estate Planning

Farm/Ranch Tax, Estate and Business Planning Conference August 1-2 – Durango, Colorado (and Online)

https://lawprofessors.typepad.com/agriculturallaw/2022/07/farmranch-tax-estate-and-business-planning-conference-august-1-2-durango-colorado-and-online.html

IRS Modifies Portability Election Rule

https://lawprofessors.typepad.com/agriculturallaw/2022/07/irs-modifies-portability-election-rule.html

Modifying an Irrevocable Trust – Decanting

https://lawprofessors.typepad.com/agriculturallaw/2022/09/modifying-an-irrevocable-trust-decanting.html

Farm and Ranch Estate Planning in 2022 (and 2023)

https://lawprofessors.typepad.com/agriculturallaw/2022/09/farm-and-ranch-estate-planning-in-2022-and-2023.html

Social Security Planning for Farmers and Ranchers

https://lawprofessors.typepad.com/agriculturallaw/2022/11/social-security-planning-for-farmers-and-ranchers.html

How NOT to Use a Charitable Remainder Trust

https://lawprofessors.typepad.com/agriculturallaw/2022/12/how-not-to-use-a-charitable-remainder-trust.html

Recent Cases Involving Decedents’ Estates

https://lawprofessors.typepad.com/agriculturallaw/2022/12/recent-cases-involving-decedents-estates.html

Medicaid Estate Recovery and Trusts

https://lawprofessors.typepad.com/agriculturallaw/2022/12/medicaid-estate-recovery-and-trusts.html

Income Tax

What is the Character of Land Sale Gain?

https://lawprofessors.typepad.com/agriculturallaw/2022/07/what-is-the-character-of-land-sale-gain.html

Deductible Start-Up Costs and Web-Based Businesses

https://lawprofessors.typepad.com/agriculturallaw/2022/07/deductible-start-up-costs-and-web-based-businesses.html

Using Farm Income Averaging to Deal With Economic Uncertainty and Resulting Income Fluctuations

https://lawprofessors.typepad.com/agriculturallaw/2022/07/using-farm-income-averaging-to-deal-with-economic-uncertainty-and-resulting-income-fluctuations.html

Tax Deal Struck? – and Recent Ag-Related Cases

https://lawprofessors.typepad.com/agriculturallaw/2022/07/tax-deal-struck-and-recent-ag-related-cases.html

What is “Reasonable Compensation”?

https://lawprofessors.typepad.com/agriculturallaw/2022/08/what-is-reasonable-compensation.html

LLCs and Self-Employment Tax – Part One

https://lawprofessors.typepad.com/agriculturallaw/2022/08/llcs-and-self-employment-tax-part-one.html

LLCs and Self-Employment Tax – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2022/08/llcs-and-self-employment-tax-part-two.html

USDA’s Emergency Relief Program (Update on Gain from Equipment Sales)

https://lawprofessors.typepad.com/agriculturallaw/2022/08/usdas-emergency-relief-program-update-on-gain-from-equipment-sales.html

Declaring Inflation Reduced and Being Forgiving – Recent Developments in Tax and Law

https://lawprofessors.typepad.com/agriculturallaw/2022/09/declaring-inflation-reduced-and-being-forgiving-recent-developments-in-tax-and-law.html

Ag Law and Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/09/ag-law-and-tax-developments.html

Extended Livestock Replacement Period Applies in Areas of Extended Drought – IRS Updated Drought Areas

https://lawprofessors.typepad.com/agriculturallaw/2022/09/extended-livestock-replacement-period-applies-in-areas-of-extended-drought-irs-updated-drought-areas.html

More Ag Law Developments – Potpourri of Topics

https://lawprofessors.typepad.com/agriculturallaw/2022/10/more-ag-law-developments-potpourri-of-topics.html

IRS Audits and Statutory Protection

https://lawprofessors.typepad.com/agriculturallaw/2022/10/irs-audits-and-statutory-protection.html

Handling Expenses of Crops with Pre-Productive Periods – The Uniform Capitalization Rules

https://lawprofessors.typepad.com/agriculturallaw/2022/10/handling-expenses-of-crops-with-pre-productive-periods-the-uniform-capitalization-rules.html

When Can Depreciation First Be Claimed?

https://lawprofessors.typepad.com/agriculturallaw/2022/10/for-depreciation-purposes-what-does-placed-in-service-mean.html

Tax Treatment of Crops and/or Livestock Sold Post-Death

https://lawprofessors.typepad.com/agriculturallaw/2022/11/tax-treatment-of-crops-andor-livestock-sold-post-death.html

Social Security Planning for Farmers and Ranchers

https://lawprofessors.typepad.com/agriculturallaw/2022/11/social-security-planning-for-farmers-and-ranchers.html

Are Crop Insurance Proceeds Deferrable for Tax Purposes?

https://lawprofessors.typepad.com/agriculturallaw/2022/11/are-crop-insurance-proceeds-deferrable-for-tax-purposes.html

Tax Issues Associated With Easement Payments – Part 1

https://lawprofessors.typepad.com/agriculturallaw/2022/11/tax-issues-associated-with-easement-payments-part-1.html

Tax Issues Associated With Easement Payments – Part 2

https://lawprofessors.typepad.com/agriculturallaw/2022/11/tax-issues-associated-with-easement-payments-part-2.html

How NOT to Use a Charitable Remainder Trust

https://lawprofessors.typepad.com/agriculturallaw/2022/12/how-not-to-use-a-charitable-remainder-trust.html

Does Using Old Tractors Mean You Aren’t a Farmer? And the Wind Energy Production Tax Credit – Is Subject to State Property Tax?

https://lawprofessors.typepad.com/agriculturallaw/2022/12/does-using-old-tractors-mean-you-arent-a-farmer-and-the-wind-energy-production-tax-credit-is-it-subject-to-state-prop.html

Insurance

Tax Deal Struck? – and Recent Ag-Related Cases

https://lawprofessors.typepad.com/agriculturallaw/2022/07/tax-deal-struck-and-recent-ag-related-cases.html

Real Property

Tax Deal Struck? – and Recent Ag-Related Cases

https://lawprofessors.typepad.com/agriculturallaw/2022/07/tax-deal-struck-and-recent-ag-related-cases.html

Ag Law Summit

https://lawprofessors.typepad.com/agriculturallaw/2022/08/ag-law-summit.html

Ag Law and Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/09/ag-law-and-tax-developments.html

More Ag Law Developments – Potpourri of Topics

https://lawprofessors.typepad.com/agriculturallaw/2022/10/more-ag-law-developments-potpourri-of-topics.html

Ag Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/12/ag-law-developments-in-the-courts.html

Regulatory Law

Constitutional Limit on Government Agency Power – The “Major Questions” Doctrine

https://lawprofessors.typepad.com/agriculturallaw/2022/07/constitutional-limit-on-government-agency-power-the-major-questions-doctrine.html

The Complexities of Crop Insurance

https://lawprofessors.typepad.com/agriculturallaw/2022/07/the-complexities-of-crop-insurance.html

Federal Farm Programs – Organizational Structure Matters – Part One

https://lawprofessors.typepad.com/agriculturallaw/2022/08/federal-farm-programs-organizational-structure-matters-part-one.html

Federal Farm Programs – Organizational Structure Matters – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2022/08/federal-farm-programs-organizational-structure-matters-part-two.html

Federal Farm Programs: Organizational Structure Matters – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2022/08/federal-farm-programs-organizational-structure-matters-part-three.html

USDA’s Emergency Relief Program (Update on Gain from Equipment Sales)

https://lawprofessors.typepad.com/agriculturallaw/2022/08/usdas-emergency-relief-program-update-on-gain-from-equipment-sales.html

Minnesota Farmer Protection Law Upheld

https://lawprofessors.typepad.com/agriculturallaw/2022/09/minnesota-farmer-protection-law-upheld.html

Ag Law and Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/09/ag-law-and-tax-developments.html

Animal Ag Facilities and Free Speech – Does the Constitution Protect Saboteurs?

https://lawprofessors.typepad.com/agriculturallaw/2022/10/animal-ag-facilities-and-free-speech-does-the-constitution-protect-saboteurs.html

Court Says COE Acted Arbitrarily When Declining Jurisdiction Over Farmland

https://lawprofessors.typepad.com/agriculturallaw/2022/10/court-says-coe-acted-arbitrarily-when-declining-jurisdiction-over-farmland.html

Ag Law Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/12/ag-law-developments-in-the-courts.html

Water Law

More Ag Law Developments – Potpourri of Topics

https://lawprofessors.typepad.com/agriculturallaw/2022/10/more-ag-law-developments-potpourri-of-topics.html

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 2 and 1

Overview

Today’s article concludes my look at the top ag law and tax developments of 2022 with what I view as the top two developments.  I began this series by looking at those developments that were significant, but not quite big enough to make the “Top Ten.”  Then I started through the “Top Ten.”

The top two ag law and tax developments in 2022 – it’s the topic of today’s post.

Recap

Here’s a bullet-point recap of the top developments of 2022 that I have written about:

• Nuisance law (the continued developments in Iowa) - Garrison v. New Fashion Pork LLP, 977 N.W.2d 67 (Iowa Sup. Ct. 2022).
• Minnesota farmer protection law - Pitman Farms v. Kuehl Poultry, LLC, et al., 48 F.4th 866 (8th Cir. 2022).
• Regulation of ag activities on wildlife refuges - Tulelake Irrigation Dist. v. United States Fish & Wildlife Serv., 40 F.4th 930 (9th Cir. 2022).
• Corps of Engineers jurisdiction over “wetland” - Hoosier Environmental Council, et al. v. Natural Prairie Indiana Farmland Holdings, LLC, et al., 564 F. Supp. 3d 683 (N.D. Ind. 2021).
• U. S. Tax Court’s jurisdiction to review collection due process determination - Boechler, P.C. v. Commissioner, 142 S. Ct. 1493 (2022).
• IRS Failure to Comply with the Administrative Procedure Act - Mann Construction, Inc. v. United States, 27 F.4th 1138 (6th Cir. 2022); Green Valley Investors, LLC v. Commissioner, 159 T.C. No. 5 (2022).
• State law allowing unconstitutional searches unconstitutional - Rainwaters, et al. v. Tennessee Wildlife Resources Agency, No. 20-CV-6 (Benton Co. Ten. Dist. Ct. Mar. 22, 2022).
• No. 10 – USDA’s Emergency Relief Program and the definition of “farm income.”
• No. 9 - USDA decision not to review wetland determination upheld - Foster v. United States Department of Agriculture, No. 4:21-CV-04081-RAL, 2022 U.S. Dist. LEXIS 117676 (D. S.D. Jul. 1, 2022).
• No. 8 - Dicamba drift damage litigation - Hahn v. Monsanto Corp., 39 F.4th 954 (8th Cir. 2022), reh’g. den., 2022 U.S. App. LEXIS 25662 (8th Cir. Sept. 2, 2022).
• No. 7 – The misnamed “Inflation Reduction Act.”
• No. 6 – Caselaw and legislative developments concerning “ag gag” provisions.
• No. 5 - WOTUS final rule.
• No. 4 – Economic issues
• No. 3 – Endangered Species Act regulations

No. 2 – California Proposition 12

National Pork Producers Council, et al. v. Ross, 6 F.4th 1021 (9th Cir. Jul. 28, 2021), cert. granted, 142 S. Ct. 1413 (2022)

In a huge blow to pork producers (and consumers of pork products) nationwide, the U.S. Court of Appeals for the Ninth Circuit has upheld California’s Proposition 12 in 2021.  Proposition 12 requires any pork sold in California to be raised in accordance with California’s housing requirements for hogs.  This means that any U.S. hog producer, by January 1, 2022, was required to upgrade existing facilities to satisfy California’s requirements if desiring to market pork products in California. In early 2022, the U.S. Supreme Court announced that it would review the Ninth Circuit’s opinion. 

While each state sets its own rules concerning the regulation of agricultural production activities, the legal question presented in this case is whether one state can override other states’ rules. The answer to that question involves an analysis of the Commerce Clause and the “Dormant” Commerce Clause.

The Commerce Clause.  Article I Section 8 of the U.S. Constitution provides in part, “the Congress shall have Power...To regulate Commerce with foreign Nations and among the several states, and with the Indian Tribes.”  The Commerce Clause, on its face, does not impose any restrictions on states in the absence of congressional action.  However, the U.S. Supreme Court has interpreted the Commerce Clause as implicitly preempting state laws that regulate commerce in a manner that disrupts the national economy.  This is the judicially-created doctrine known as the “dormant” Commerce Clause. 

The “Dormant” Commerce Clause.  The dormant Commerce Clause is a constitutional law doctrine that says Congress's power to "regulate Commerce ... among the several States" implicitly restricts state power over the same area.  In general, the Commerce Clause places two main restrictions on state power – (1) Congress can preempt state law merely by exercising its Commerce Clause power by means of the Supremacy Clause of Article VI, Clause 2 of the Constitution; and (2) the Commerce Clause itself--absent action by Congress--restricts state power.  In other words, the grant of federal power implies a corresponding restriction of state power.  This second limitation has come to be known as the "Dormant" Commerce Clause because it restricts state power even though Congress's commerce power lies dormant. Willson v. Black Bird Creek Marsh Co., 27 U.S. 245 (1829).  The label of “Dormant Commerce Clause” is really not accurate – the doctrine applies when the Congress is dormant, not the Commerce Clause itself.

Rationale.  The rationale behind the Commerce Clause is to protect the national economic market from opportunistic behavior by the states - to identify protectionist actions by state governments that are hostile to other states.  Generally, the dormant Commerce Clause doctrine prohibits states from unduly interfering with interstate commerce.  State regulations cannot discriminate against interstate commerce.  If they do, the regulations are per se invalid.  See, e.g., City of Philadelphia v. New Jersey, 437 U.S. 617 (1978).  Also, state regulations cannot impose undue burdens on interstate commerce.  See, e.g., Kassel v. Consolidated Freightways Corp., 450 U.S. 662 (1981).  Under the “undue burden” test, state laws that regulate evenhandedly to effectuate a local public interest are upheld unless the burden imposed on commerce is clearly excessive in relation to the local benefits.     

The Court has never held that discrimination between in-state and out-of-state commerce, without more, violates the dormant Commerce Clause.  Instead, the Court has explained that the dormant Commerce Clause is concerned with state laws that both discriminate between in-state and out-of-state actors that compete with one another, and harm the welfare of the national economy.  Thus, a discriminatory state law that harms the national economy is permissible if in-state and out-of-state commerce do not compete.  See, e.g., General Motors Corp. v. Tracy, 117 S. Ct. 811, 824-26 (1997).  Conversely, a state law that discriminates between in-state and out-of-state competitors is permissible if it does not harm the national economy. H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525 (1949). 

California Proposition 12 Litigation

In 2018, California voters passed Proposition 12.  Proposition 12 bans the sale of whole pork meat (no matter where produced) from animals confined in a manner inconsistent with California’s regulatory standards.  Proposition 12 established minimum requirements on farmers to provide more space for egg-laying hens, breeding pigs, and calves raised for veal. Specifically, the law requires that covered animals be housed in confinement systems that comply with specific standards for freedom of movement, cage-free design and minimum floor space. The law identifies covered animals to include veal calves, breeding pigs and egg-laying hens. The implementing regulations prohibit a farm owner or operator from knowingly causing any covered animal to be confined in a cruel manner, as specified, and prohibits a business owner or operator from knowingly engaging in the sale within the state of shell eggs, liquid eggs, whole pork meat or whole veal meat, as defined, from animals housed in a “cruel manner.”  In addition to general requirements that prohibit animals from being confined in a manner that prevents lying down, standing up, fully extending limbs or turning around freely, the measure added detailed confinement space standards for farms subject to the law. The alleged reason for the law was to protect the health and safety of California consumers and decrease the risk of foodborne illness and the negative fiscal impact on California. 

In late 2019, several national farm organizations challenged Proposition 12 and sought a declaratory judgment that the law was unconstitutional under the dormant Commerce Clause.  The plaintiffs also sought a permanent injunction preventing Proposition 12 from taking effect.  The plaintiffs claimed that Proposition 12 impermissibly regulated out-of-state conduct by compelling non-California producers to change their operations to meet California’s standards.  The plaintiffs also alleged that Proposition 12 imposed excessive burdens on interstate commerce without advancing any legitimate local interest by significantly increasing operation costs without any connection to human health or foodborne illness.  The trial court dismissed the plaintiffs’ complaint.  National Pork Producers Council, et al. v. Ross, No. 3:19-cv-02324-W-AHG (S.D. Cal. Apr. 27, 2020). 

On appeal, the plaintiffs focused their argument on the allegation that Proposition 12 has an impermissible extraterritorial effect of regulating prices in other states and, as such, is per se unconstitutional.  This was a tactical mistake for the plaintiffs.  The appellate court noted that existing Supreme Court precedent on the extraterritorial principle applied only to state laws that are “price control or price affirmation statutes.”  National Pork Producers Council, et al. v. Ross, No. 20-55631, 2021 U.S. App. LEXIS 22337 (9th Cir. Jul. 28, 2021).  Thus, the extraterritorial principle does not apply to a state law that does not dictate the price of a product and does not tie the price of its in-state products to out-of-state prices.  Because Proposition 12 was neither a price control nor a price-affirmation statute (it didn’t dictate the price of pork products or tie the price of pork products sold in California to out-of-state prices) the law didn’t have the extraterritorial effect of regulating prices in other states. 

The appellate court likewise rejected the plaintiffs’ claim that Proposition 12 has an impermissible indirect “practical effect” on how pork is produced and sold outside California.  Id.  Upstream effects (e.g., higher production costs in other states) the appellate court concluded, do not violate the dormant Commerce Clause.   The appellate court pointed out that a state law is not impermissibly extraterritorial unless it regulates conduct that is wholly out of state.  Id.  Because Proposition 12 applied to California and non-California pork production the higher cost of production was not an impermissible effect on interstate commerce.

The appellate court also concluded that inconsistent regulation from state-to-state was permissible because the plaintiffs had failed to show a compelling need for national uniformity in regulation at the state level.  Id.  In addition, the appellate court noted that the plaintiffs had not alleged that Proposition 12 had a discriminatory effect on interstate commerce. 

Simply put, the appellate court rejected the plaintiffs’ challenge to Proposition 12 because a law that increases compliance costs (projected at a 9.2 percent increase in production costs that would e passed on to consumers) is not a substantial burden on interstate commerce in violation of the dormant Commerce Clause. 

As noted above, the U.S. Supreme court decided to review the Ninth Circuit’s opinion.  Unfortunately, the Supreme Court has been careless in applying the anti-discrimination test, and in many cases, neither of the two requirements--interstate competition or harm to the national economy--is ever mentioned.  See, e.g., Hughes v. Oklahoma, 441 U.S. 322 (1979). The reason interstate competition goes unstated is obvious – in most cases the in-state and out-of-state actors compete in the same market.  But, the reason that the second requirement, harm to the national economy, goes unstated is because the Court simply assumes the issue away.  The Supreme Court’s decision in 2023 is a highly anticipated one for agriculture and the dormant Commerce Clause analysis and application in general.

No. 1 – The “Major Questions” Doctrine

West Virginia, et al. v. Environmental Protection Agency, et al., 142 S. Ct. 2587 (2022)

Clearly, the biggest development of 2022 that has the potential to significantly impact agriculture and the economy in general is the Supreme Court’s opinion involving the Environmental Protection Agency’s (EPA’s) regulatory authority under the Clean Air Act (CAA).  The Court invoked the “major question” doctrine to pair back unelected bureaucratic agency authority and return policy-making power to citizens through their elected representatives.  The future impact of the Court’s decision is clear.  When federal regulations amount to setting nationwide policy and when state regulations do the same at the state level, the regulatory bodies may be successfully challenged in court.

The case involved the U.S. Supreme Court’s review of the EPA’s authority to regulate greenhouse gas emissions from existing power plants under the CAA. The case arose from the EPA’s regulatory development of the Clean Power Plan (CPP) in 2015 which, in turn, stemmed from then-President Obama’s 2008 promise to establish policy that would bankrupt the coal industry.  The EPA claimed it had authority to regulate CO2 emissions from coal and natural-gas-fired power plants under Section 111 of the CAA.  Under that provision, the EPA determines emission limits.  But EPA took the position that Section 111 empowered it to shift energy generation at the plants to “renewable” energy sources such as wind and solar.  Under the CPP, existing power plants could meet the emission limits by either reducing electricity production or by shifting to “cleaner” sources of electricity generation.  The EPA admitted that no existing coal plant could satisfy the new emission standards without a wholesale movement away from coal, and that the CPP would impose billions in compliance costs, raise retail electricity prices, require the retirement of dozens of coal plants and eliminate tens of thousands of jobs.  In other words, the CPP would keep President Obama’s 2008 promise by bypassing the Congress through the utilization of regulatory rules set by unelected, unaccountable bureaucrats. 

The U.S. Supreme Court stayed the CPP in 2016 preventing it from taking effect.  The EPA under the Trump Administration repealed the CPP on the basis that the Congress had not clearly delegated regulatory authority “of this breadth to regulate a fundamental sector of the economy.”  The EPA then replaced the CPP with the Affordable Clean Energy (ACE) rule.  Under the ACE rule, the focus was on regulating power plant equipment to require upgrades when necessary to improve operating practices.  Numerous states and private parties challenged the EPA’s replacement of the CPP with the ACE.  The D.C. Circuit Court vacated the EPA’s repeal of the CPP, finding that the CPP was within the EPA’s purview under Section 7411 of the CAA – the part of the CAA that sets standards of performance for new sources of air pollution.  American Lung Association v. Environmental Protection Agency, 985 F.3d 914 (D.C. Cir. 2021).  The Circuit Court also vacated the ACE and purported to resurrect the CPP.  In the fall of 2021, the U.S. Supreme Court agreed to hear the case.

The Supreme Court reversed, framing the issue as whether the EPA had the regulatory authority under Section 111 of the CAA to restructure the mix of electricity generation in the U.S. to transition from 38 percent coal to 27 percent coal by 2030.  The Supreme Court said EPA did not, noting that the case presented one of those “major questions” because under the CPP the EPA would tremendously expand its regulatory authority by enacting a regulatory program that the Congress had declined to enact.  While the EPA could establish emission limits, the Supreme Court held that the EPA could not force a shift in the power grid from one type of energy source to another.  The Supreme Court noted that the EPA admitted that did not have technical expertise in electricity transmission, distribution or storage.  Simply put, the Supreme Court said that devising the “best system of emission reduction” was not within EPA’s regulatory power.

 Clearly, the Congress did not delegate administrative agencies the authority to establish energy policy for the entire country.  While the Supreme Court has never precisely defined the boundaries and scope of the major question doctrine, when the regulation is more in line with what should be legislative policymaking, it will be struck down.  The Supreme Court’s decision is also broad enough to have long-lasting consequences for rulemaking by all federal agencies including the USDA/FSA.  The decision could also impact the Treasury Department’s promulgation of tax regulations. 

The Supreme Court’s decision returns power to the Congress that it has ceded over the years to administrative agencies and the Executive branch concerning matters of “vast economic and political significance.”  But it’s also likely that the Executive branch and the unelected bureaucrats of the administrative state will likely attempt to push the envelope and force the courts to push back.  It’s rare that the Executive branch and administrative agencies voluntarily return power to elected representatives as was done in numerous instances from 2017 through 2020. 

Conclusion

Agricultural law and tax issues were many and varied in 2022.  In 2023, the U.S. Supreme Court will issue opinions in the California Proposition 12 case and the Sackett case involving the scope of the federal government’s jurisdiction over wetlands.  Also, there has been a major development in the Tax Court involving tax issues associated with deferred grain contracts that has resulted in a settlement with IRS, the terms of which cannot be disclosed at this time.  If 2022 showed a trend with USDA it is that the USDA will continue several “hardline” positions against farmers – a narrow definition of farm income; broad regulatory control over wet areas in fields; and ceding regulatory authority to the EPA and the COE.  The U.S. Supreme Court is also anticipated to issue on opinion with potentially significant implications for Medicaid planning. 

Of course, the expanding war against Russia being fought in Ukraine will continue to dominate ag markets throughout 2023.  At home, the general economic data is not good and that will have implications in 2023 for farmers and ranchers.  On January 26, the U.S Bureau of Economic Analysis issued a report (https://www.bea.gov/) showing that the U.S. economy grew by 2.9 percent in the fourth quarter of 2022 and 2.1 percent for all of 2022.  But, the report also showed that economic growth in the economy is slowing.  Business investment grew by a mere 1.4 percent in the fourth quarter of 2022, consisting almost entirely of inventory growth.  That will mean that businesses will be forced to sell off inventories at discounts, which will lower business profits and be a drag on economic growth in 2023.  Nonresidential investment was down 26.7 percent due to the increase in home prices, increased interest rates and a drop in real income.  On that last point, real disposable income dropped $1 trillion in 2022, the largest drop since 1932 - the low point of the Great Depression.  Personal savings also dropped by $1.6 trillion in 2022.  This is a "ticking timebomb" that is not sustainable because it means that consumers are depleting cash reserves.  This indicates that spending will continue to slow in 2023 and further stymie economic growth - about two-thirds of GDP is based on consumer spending.  Relatedly, the Dow was down 8.8 percent for 2022, the worst year since 2008.   2022 also saw a reduction in the pace of international trade.  Imports dropped more than exports which increases GDP, giving the illusion that the economy is better off.  

Certainly, 2023 will be another very busy year for rural practitioners and those dealing with legal and tax issues for farmers and ranchers. 

Top Ten Agricultural Law and Tax Developments of 2022 – Numbers 8 and 7

Overview

Today I continue the journey through what I believe to be the Top 10 developments in agricultural law and agricultural taxation of 2022.  Today, I look at developments number eight and seven.

No. 8 – Dicamba Drift Damage Litigation

Hahn v. Monsanto Corp., 39 F.4th 954 (8th Cir. 2022), reh’g. den., 2022 U.S. App. LEXIS 25662 (8th Cir. Sept. 2, 2022)

Damage from the drift of Dicamba has been an issue in certain parts of the country for the past two years.  Over that time, I have written on the technical aspects  of Dicamba and the underlying problems associated with Dicamba application.  In 2022, the Dicamba saga continued with litigation involving Missouri’s largest peach farm. 

In Bader Farms, Inc. v. Monsanto Co., et al., No. MDL No. 1:18md2820-SNLJ, 2019 U.S. Dist. LEXIS 114302 (E.D. Mo. July 10, 2019), the plaintiff is Missouri’s largest peach farming operation and is located in the southeast part of the state.  claimed that his peach orchard was destroyed after the defendants (Monsanto and BASF) allegedly conspired to develop and market Dicamba-tolerant seeds and Dicamba-based herbicides. The suit alleged that the two companies collaborated on Xtend (herbicide resistant cotton seed) that was intended for use with a less volatile form of Dicamba with less drift potential.  But, as of 2015 neither Monsanto nor BASF had produced the new, less volatile, form of Dicamba.  That fact led the plaintiff to claim that the defendants released the Dicamba-tolerant seed with no corresponding Dicamba herbicide that could be safely applied.  As a result, the plaintiff claimed, farmers illegally sprayed an old formulation of Dicamba that was unapproved for in-crop, over-the-top, use and was highly volatile and prone to drift.    The plaintiff claimed its annual peach crop revenue exceeded $2 million before the drift damage, and an expert at trial asserted that the drift caused the plaintiff to lose over $20 million in profits.  While many cases had previously been filed on the dicamba drift issue, the plaintiff did not join the other litigation because it focused on damages to soybean crops.  The plaintiff’s suit also involved claims for failure to warn; negligent training; violation of the Missouri Crop Protection Act (MCPA); civil conspiracy; and joint liability for punitive damages. 

Monsanto moved to dismiss the claims for failure to warn; negligent training; violation of the MCPA; civil conspiracy; and joint liability for punitive damages.  BASF moved to dismiss those same counts except the claims for failure to warn. The trial court granted the motion to dismiss in part.  Monsanto argued that the failure to warn claims were preempted by the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), but the plaintiff claimed that no warning would have prevented the damage to the peaches. The trial court determined that the plaintiff had adequately plead the claim and denied the motion to dismiss this claim.  Both Monsanto and BASF moved to dismiss the negligent training claim, but the trial court refused to do so. However, the trial court did dismiss the MCPA claims.  The trial court noted that civil actions under the MCPA are limited to “field crops” which did not include peaches.   The trial court, however, did not dismiss the civil conspiracy claim based on concerted action by agreement, but did dismiss the aiding and abetting portion of the claim because that cause of action is not recognized under Missouri tort law.  The parties agreed to a separate jury determination of punitive damages for each defendant.

Note:  The case went to trial in early 2020 and was one of more than 100 similar Dicamba lawsuits.  Bayer, which acquired Monsanto in 2018 for $63 billion, announced in June of 2020 that it would settle dicamba lawsuits for up to $400 million.

At trial, the jury found that Monsanto had negligently designed or failed to warn for 2015 and 2016 and that both defendants had done so for 2017 to the time of trial.  The jury awarded the plaintiff $15 million in compensatory damages and $250 million in punitive damages against Monsanto for 2015 and 2016.  The jury also found that the defendants were acting in a joint venture and in a conspiracy.  The plaintiff submitted a proposed judgment that both defendants were responsible for the $250 million punitive damages award.  BASF objected, but the trial court found the defendants jointly liable for the full verdict considering the jury’s finding that the defendants were in a joint venture.  Bader Farms, Inc. v. Monsanto Co., et al., MDL No. 1:18-md-02820-SNJL, 2020 U.S. Dist. LEXIS 34340 (E.D. Mo. Feb. 28, 2020). 

BASF then moved for a judgment as a matter of law on punitive damages or motion for a new trial or remittitur (e.g., asking the court to reduce the damage award), and Monsanto moved for a judgment as a matter of law or a new trial.  The trial court, however, found both defendants jointly liable, although the court lowered the punitive damages to $60 million (from $250 million) after determining a lack of actual malice.  The trial court did uphold the $15 million compensatory damage award upon finding that the correct standard under Missouri law was applied to the farm’s damages.  Bader Farms, Inc. v. Monsanto Co, et al., MDL No. 1:18md2820-SNLJ, 2020 U.S. Dist. LEXIS 221420 (E.D. Mo. Nov. 25, 2020).  The defendants filed a notice of appeal on December 22, 2020.     

In Hahn v. Monsanto Corp., 39 F.4th 954 (8th Cir. 2022), reh’g. den., 2022 U.S. App. LEXIS 25662 (8th Cir. Sept. 2, 2022), the appellate court partially affirmed the trial court, partially reversed, and remanded the case.  The appellate court determined that the trial court incorrectly instructed the jury to assess punitive damages for Bayer (i.e., Monsanto) and BASF together, rather than separately, and that a new trial was needed to determine punitive damages for each company.  Indeed, the appellate court vacated the punitive damages award and remanded the case to the trial court with instructions to hold a new trial only on the issue of punitive damages. 

However, the appellate court did not disturb the trial court’s jury verdict of $15 million in compensatory damages.  On the compensatory damages issue, the appellate court held that the trial court properly refused to find intervening cause as a matter of law for the damage to the plaintiff’s peaches.  On that point, the appellate court determined that the spraying of Dicamba on a nearby farm did not interrupt the chain of events which meant that the question of proximate cause of the damage was proper for the jury to determine.  The appellate court also held that the was an adequate basis for the plaintiff’s lost profits because the award was not based on speculation.  The appellate court noted that the peach orchard had been productive for decades, and financial statements along with expert witness testimony calculated approximately $20.9 million in actual damages.  The appellate court also determined that the facts supported the jury’s determination that the defendants engaged in a conspiracy via unlawful means – knowingly enabling the widespread use of Dicamba during growing season to increase seed sales.

No. 7 – The Misnamed “Inflation Reduction Act”

If ever there has been a deceptively misnamed piece of legislation, this is it.  An Act with $750 billion of newly minted money to will not reduce inflation.  Words have no meaning.  I suppose that we are supposed to believe that the following provisions of the bill will reduce inflation:

• $3 billion for the U.S. Postal Service to buy new electric mail trucks;
• $3 billion for the EPA to oversee block grants for “environmental justice;”
• $40 billion total to the EPA which includes $30 billion for “disadvantaged communities” (keep in mind that the total annual budget of the EPA is about $10 billion);
• $750 million to the Interior Department for new hires;
• $10 million to the USDA to be spent on “equity commissions” to “combat” racism;
• $25 million to the Government Accountability Office to determine, “whether the economic, social and environmental impacts of the funds described in this paragraph are equitable;”
• Via a budget gimmick to keep the amount outside of the Act’s price tag are amounts to the Energy Department for existing “green” energy loan programs and a new energy loan-guarantee program.

Ag Program Spending

The Act contains a great deal of spending on ag conservation-related programs.  Here are the primary provisions:

• EQIP - $8.45 billion additional funding over Fiscal Years 2023-2026. Prioritizes funding for reduction of methane emissions from cattle (e.g., cattle passing gas) and nutrient management activities (e.g., diets to reduce bloating in cows).
• CSP - $3.25 billion additional funding over same time frame.
• Ag Conservation Easement Program (ACEP) - $1.4 billion over same time frame for easements or interests in land that will reduce, capture, avoid or sequester carbon dioxide, or methane oxide emissions with land eligible for the program. ACEP incorporates the Wetlands Reserve Program, the Grasslands Reserve Program and the Farm and Ranch Lands Protection Program. 
• Regional Conservation Partnership Program - $4.95 billion over same timeframe for cover cropping, nutrient management, and watershed improvement.
• $4 billion for drought relief that prioritizes the CO basin.
• The U.S. Forest Service gets $1.8 billion for hazardous fuels reduction projects on USFS land.
• $14 billion for rural development and lending projects.
• $3.1 billion to USDA to provide payments to distressed borrowers.
• $2.2 billion to USDA for farmers, ranchers and forest landowners that have been discriminated against in USDA lending programs (i.e., reparations).
• $5 billion to USDA for National Forest System to fund forest reforestation and wildfire prevention.

The IRS gets approximately $80 billion in IRS funding (over next 10 years) to hire 87,000 agents.  The IRS currently has 78,000 agents, but 50,000 are set to retire in the next few years.  $46 billion is to be dedicated to enforcement and is anticipated to increase the number of audits by $1.2 million annually.  $25 billion is earmarked for IRS operations, $5 billion for business systems modernization. IRS taxpayer services, which many tax practitioners would say as the most in need of funding, gets the short end of the stick with $4 billion.

Conclusion

I will continue looking at the biggest developments of 2022 in ag law and tax in the next post.

Top Ag Law and Tax Developments of 2022 – Part 1

Overview

At the beginning of each year for about the past 25 years, I have made a point to catalogue the immediately prior year’s top developments in agricultural law and taxation.  It’s important to look back at what the major issues were because they can also provide insight into what might be the big issues in the coming year.  Insight into trends in the law and taxation impacting farmers, ranchers, rural landowners and agribusiness is important because it can aid planning to avoid legal issues in the future.  The law and taxation can have a significant economic impact on a farming operation, or on a family legacy.  While it is very true that issues involving agronomy or animal science or horticulture or other similar disciplines are important and each have their role in the success of a farming business, where “the rubber meets the road” is in the law and taxation.  The law and tax rules set the framework within which all other disciplines must operate.  A deviation outside those boundaries can result in costly litigation, family disputes and an inefficiently run operation that might not survive into the next generation.

With that in mind, today’s article is the beginning of several that highlight the major legal and tax issues of 2022 that were significant for agriculture.  Some are important developments at that state level that could spill over to other states, but the major developments, of course, are those at the federal level – in the federal courts all the way up to the U.S. Supreme Court and with the IRS.

The major developments in ag law and tax from 2022 – the “Almost Top Ten.”  It’s the first in a multi-part series.

Nuisance Law

The first development that was significant in 2022, but not important enough nationally to make the Top Ten, involves a nuisance lawsuit in Iowa that resulted in a significant Iowa Supreme Court decision.  But, first a bit of background on the issue of ag nuisance 

In general.  An issue that is of significance to agriculture is that of nuisance.  Nuisance law prohibits land uses that unreasonably and substantially interfere with another individual's quiet use and enjoyment of property.  It’s based on two interrelated concepts: (1) landowners have the right to use and enjoy property free of unreasonable interferences by others; and (2) landowners must use property so as not to injure adjacent owners.  Because each claim of nuisance depends on the fact of the case, there are no easy rules to determine when an activity will be considered a nuisance. 

Defenses.  There are no common law defenses that an agricultural operation may use to shield itself from liability arising from a nuisance action.  However, courts do consider a variety of factors.  Of primary importance are priority of location and reasonableness of the operation.  Together, these two factors have led courts to develop a “coming to the nuisance” defense.  This means that if people move to an area they know is not suited for their intended use, they should be prohibited from claiming that the existing uses are nuisances. 

While there are no common law defenses to a nuisance suit, every state has enacted a right-to-farm law that is designed to protect existing agricultural operations by giving farmers and ranchers who meet the legal requirements a defense in nuisance suits.  The basic thrust of a particular state's right-to-farm law is that it is unfair for a person to move to an agricultural area knowing the conditions which might be present and then ask a court to declare a neighboring farm a nuisance.  Thus, the basic purpose of a right-to-farm law is to create a legal and economic climate in which farm operations can be continued. 

The continued Iowa saga of ag nuisance and “right-to-farm” legislation.  Iowa has had a lengthy history of litigation involving animal confinement operations and nuisance suits.  In 2004, the Iowa Supreme Court, in Gacke v. Pork XTRA, L.L.C., 684 N.W.2d 168 (Iowa 2004) addressed the constitutionality of the Iowa right-to-farm law.  Under the facts of the case, the defendant built a confinement hog facility 1,300 feet to the north of the plaintiffs’ farmstead which the plaintiffs had occupied since 1974.  In the summer of 2000, the plaintiffs filed a nuisance action against the defendant claiming damages for personal injury, emotional distress and a decrease in the value of their property, and seeking a permanent injunction, compensatory and punitive damages.  The defendant raised the Iowa right-to-farm statute as a defense.  The pertinent part of the statute provides:

“An animal feeding operation…shall not be found to be a…nuisance under this chapter or under principles of common law, and the animal feeding operation shall not be found to interfere with another person’s comfortable use and enjoyment of the person’s life or property under any other cause of action.”  Iowa Code §657.11.

Importantly, the statutory protection applies regardless of whether the animal feeding operation was established (or expanded) before or after the complaining party was present in the area.  However, the protection of the statute does not apply if the animal feeding operation is not in compliance with all applicable federal and state laws for operation of the facility, or the facility unreasonably and for substantial periods of time interferes with the plaintiff’s comfortable use and enjoyment of the plaintiff’s life or property and failed to use generally accepted best management practices. 

The plaintiffs claimed that the statute was an unconstitutional taking of their private property without just compensation in violation of both the Federal and Iowa constitutions.  The trial court held that the statute did amount to an unconstitutional taking of the plaintiffs’ property, determined that the value of their property had been reduced by $50,000, and that the plaintiffs should be awarded $46,500 to compensate them for their past inconvenience, emotional distress and pain and suffering. However, the court refused to award any future special or punitive damages or injunctive relief. 

On appeal, the Iowa Supreme Court held the right-to-farm law unconstitutional, but only to the extent that it denied the plaintiffs compensation for the decreased value of their property.  In essence, the Court held that the statute gave the defendant an easement to produce odors over the plaintiffs’ property, for which compensation had to be paid.  Importantly, the Court did not opine that right-to-farm laws are not a legitimate purpose of state government. To the contrary, the Court noted the Iowa legislature’s objective of promoting animal agriculture in the state and that the right-to-farm law bore a reasonable relationship to that legitimate objective.  The Court also seemed to indicate that the statute would not be constitutionally defective had the plaintiffs “come to the nuisance” (i.e., moved next door to the defendant’s existing hog operation).

Note:  Post Gacke, the Iowa right-to-farm law could be found to be unconstitutional on a case-by-case basis as determined by a three-part test with the burden on the plaintiff of establishing each element: 1) that the plaintiff personally had not benefitted from the right-to-farm law beyond what the general public enjoyed; 2) that the plaintiff suffered significant hardship; and 3) that the plaintiff lived on their property before the defendant’s operation began and that both the plaintiff and the defendant spent considerable funds in property improvements.

2022 development. In 2022, the Iowa Supreme Court again issued an opinion involving a nuisance suit against a confined animal feeding operation (CAFO).  In Garrison v. New Fashion Pork LLP, 977 N.W.2d 67 (Iowa Sup. Ct. 2022), the plaintiff claimed that the defendant’s neighboring confined animal feeding operation (CAFO) violated both the Clean Water Act and the Resource Conservation Recovery Act due to manure runoff that caused excessive nitrate levels in the plaintiff’s water sources.  The federal court dismissed the suit on summary judgment for lack of expert testimony to establish the plaintiff’s claim, finding that the alleged violations where wholly past violations, and that water test results showed no ongoing violation of either statute, but rather a slight decrease in nitrate levels since the start of the defendant’s confined animal feeding operation (CAFO).  The federal court also declined supplemental jurisdiction over the plaintiff’s state law claims.  The plaintiff then sued the defendant in state court for nuisance, trespass and violation of state drainage law.  The defendant moved for summary judgment based on statutory immunity of Iowa Code § 657.11 and the plaintiff’s lack of evidence or expert testimony. 

The plaintiff, relying on Gacke, claimed that Iowa Code §657.11 as applied to him was unconstitutional under Iowa’s inalienable rights clause.  The trial court, noting that the plaintiff’s own CAFO (raising of 500 ewes, and at times over 1,000 ewes and lambs, on his property for over 40 years, along with a six-foot tall manure pile) had benefited from immunity, rejected the plaintiff’s constitutional challenge for failure to satisfy Gacke’s three-part test.  The trial court then granted the defendant’s summary judgment motion based on the plaintiff’s failure to provide any expert testimony or other evidence to support any exception to the statutory immunity defense or to prove causation or damages. 

On further review, the Iowa Supreme Court affirmed, overruled the three-part test of Gacke and applied rational basis review to reject the plaintiff’s constitutional challenge to Iowa Code §657.11.  The court noted that the statue did not eliminate nuisance claims against CAFOs, but rather established reasonable limitations on recovery rights.  The Iowa Supreme Court concluded that the plaintiff failed to preserve error on his takings claim under article I, section 18 of the Iowa Constitution and failed to generate a question of fact precluding summary judgment on statutory nuisance immunity or causation for his trespass and drainage claims. Specifically, the Iowa Supreme Court noted that without accompanying expert testimony, the plaintiff’s water tests showed neither an increase in nitrate levels nor a spike in nitrate levels that would correlate with manure spreading. The Supreme Court further noted that even assuming an increase in nitrate levels, the plaintiff lacked expert testimony to attribute or correlate any increase in nitrate levels in the stream to the defendants’ actions. Thus, without expert witness testimony that tied the defendant’s alleged misapplication or over-application of manure to the nitrate levels in the plaintiff’s stream, the plaintiff could not, as a matter of law, satisfy his burden of proving that any trespass or drainage violation proximately caused his damages.  Ultimately, the Supreme Court concluded, “balancing the competing interests of CAFO operators and their neighbors is a quintessentially legislative function involving policy choices…[belonging] with the elected branches.” 

Note:   The Iowa Supreme Court’s opinion didn’t explain how the attorneys for the plaintiff failed to preserve error on the plaintiff’s takings claim and failed to provide expert witness testimony on the tort claims for trespass and drainage issues.  However, the Iowa Supreme Court clearly focused on those deficiencies in its opinion. 

Going forward, if a jury finds that a nuisance exists the ag operation can use the nuisance defense if the operation is in full compliance with state and federal regulations, exercises generally accepted management practices, and has for substantial periods of time not interfered with the use and enjoyment of the complaining party’s property. The nuisance defense will apply regardless of the established date or expansion of the operation.  In other words, there is no “first-in-time” requirement. 

Conclusion

There have been several significant developments over the past couple of years either legislatively or in the courts involving ag nuisances in several states.  Expect that to continue and also expect that the 2022 development in Iowa to have an impact on other state legislatures and courts grappling with the ag nuisance issue.   

Ag Law Developments in the Courts

Overview

It’s been a while since I did a blog article on recent court developments involving farmers, ranchers rural landowners and agribusinesses.  I have been on the road just about continuously for the last couple of months and nine more events remain between now and Christmas.  But, let me take a moment today (and later this week) to provide a summary of some recent court cases involving agriculture.

Recent court opinions involving agriculture – it’s the topic of today’s post.

Jumping Mouse Habitat Designation Upheld

Northern New Mexico Stockman’s Association, et al. v. United States Fish and Wildlife Service, 494 F.Supp.3d 850 (D. N.M. 2020), aff’d., 30 F.4th 1210 (10th Cir. 2022)

In 2014, the U.S. Fish and Wildlife Service (USFWS) listed the New Mexico Meadow Jumping Mouse as an endangered species based on substantial habitat loss and fragmentation from grazing, water management, drought and wildfire.  Accordingly, in 2016, the USFWS designated 14,000 acres along 170 miles of streams and waterways in New Mexico, Arizona and Colorado as critical habitat for the mouse.  The U.S. Forest Service erected fencing around some streams and watering holes in the Santa Fe and Lincoln National Forests that were in the designated area   The plaintiffs, two livestock organizations, with members that graze cattle in those national forests, sued in 2018 claiming that the USFWS failed to sufficiently consider the economic impact of the critical habitat designation.  The trial court dismissed the case, finding that the USFWS was justified in its decision.  The trial court also determined that the USFWS need not compensate the plaintiffs for the reduction in value of the plaintiffs’ water rights.  The trial court reasoned that the USFWS need not consider all of the economic impacts associated with the mouse’s listing when designating critical habitat, only the incremental costs of the designation itself.  The court cited the nine-month annual hibernation period of the mouse giving it only a short time to breed and gain weight for the winter and, as such, the mouse’s habitat needed to remain ideal with tall, dense grass and forage around flowing streams in the designated area.  On appeal, the appellate court affirmed.  The appellate court held that the assessment method of the USFWS for determining the economic impacts of the critical habitat designation on the water rights of the plaintiffs’ members was adequately considered, and that the USFWS had reasonably supported its decision not to exclude certain areas from the critical habitat designation.  

Court Reduces Dicamba Drift Damage Award; Case Continues on Punitive Damages Issue

Hahn v. Monsanto Co., 39 F.4th 954 (8th Cir. 2022)

The plaintiff claimed that his peach orchard was destroyed after the defendants (Monsanto and BASF) conspired to develop and market dicamba-tolerant seeds and dicamba-based herbicides. The plaintiff claimed that the damage to the peaches occurred when dicamba drifted from application to neighboring fields.  The plaintiff claimed that the defendants released the dicamba-tolerant seed with no corresponding dicamba herbicide that could be safely applied.  As a result, farmers illegally sprayed an old formulation of dicamba herbicide that was unapproved for in-crop, over-the-top, use and was "volatile," or prone to drift.  While many cases had previously been filed on the dicamba drift issue, the plaintiff did not join the other litigation because it focused on damages to soybean crops.  Monsanto moved to dismiss the claims for failure to warn; negligent training; violation of the Missouri Crop Protection Act; civil conspiracy; and joint liability for punitive damages.  BASF moved to dismiss those same counts except the claims for failure to warn. The trial court granted the motion to dismiss in part.  Monsanto argued that the failure to warn claims were preempted by the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), but the plaintiff claimed that no warning would have prevented the damage to the peaches. The trial court determined that the plaintiff had adequately plead the claim and denied the motion to dismiss this claim.  Both Monsanto and BASF moved to dismiss the negligent training claim, but the trial court refused to do so. However, the trial court did dismiss the claims based on the Missouri Crop Protection Act, noting that civil actions under this act are limited to “field crops” which did not include peaches.   The trial court did not dismiss the civil conspiracy claim based on concerted action by agreement but did dismiss the aiding and abetting portion of the claim because that cause of action is no recognized under Missouri tort law.  The parties agreed to a separate jury determination of punitive damages for each defendant.  Bader Farms, Inc. v. Monsanto Co., et al., No. MDL No. 1:18md2820-SNLJ, 2019 U.S. Dist. LEXIS 114302 (E.D. Mo. July 10, 2019).  The jury found that Monsanto had negligently designed or failed to warn for 2015 and 2016 and the both defendants had done so for 2017 to the present.  The jury awarded the plaintiff $15 million in compensatory damages and $250 million in punitive damages against Monsanto for 2015 and 2016.  The jury also found that the defendants were acting in a joint venture and in a conspiracy.  The plaintiff submitted a proposed judgment that both defendants were responsible for the $250 million punitive damages award.  BASF objected, but the trial court found the defendants jointly liable for the full verdict in light of the jury’s finding that the defendants were in a joint venture.  Bader Farms, Inc. v. Monsanto Co., et al., MDL No. 1:18-md-02820-SNJL, 2020 U.S. Dist. LEXIS 34340 (E.D. Mo. Feb. 28, 2020).  BASF then moved for a judgment as a matter of law on punitive damages or motion for a new trial or remittitur (e.g., asking the court to reduce the damage award), and Monsanto moved for a judgment as a matter of law or a new trial.  The trial court, however, found both defendants jointly liable, although the court lowered the punitive damages to $60 million after determining a lack of actual malice.  The trial court did uphold the $15 million compensatory damage award upon finding that the correct standard under Missouri law was applied to the farm’s damages.  Bader Farms, Inc. v. Monsanto Co, et al., MDL No. 1:18md2820-SNLJ, 2020 U.S. Dist. LEXIS 221420 (E.D. Mo. Nov. 25, 2020).  The defendants filed a notice of appeal on December 22, 2020.     

On appeal, the appellate court affirmed the trial court on the causation issue noting that the defendant retained direct contact with the farmers and exercised some degree of control over their actions.  As such, the defendant was aware of the foreseeable consequences that could come from not controlling the farmers’ actions more closely. On the compensatory damage issue, the defendant argued that compensatory damages should be measured by the difference in the value of the orchard before and after the damage.  The appellate court disagreed, noting that such a calculation only applied when the victim is the owner of the land and not a tenant as was the plaintiff.  Thus, compensatory damages were properly measured by lost profits.   The defendant argued the damages were speculative, but the court found that Bader Farms had provided years of financial statements to show the usual costs and profits associated with farming the orchard. The appellate court determined that there was no doubt the defendant had full control over the critical aspects of the project. In 2007, BASF had relinquished their rights to the seed technology to the defendant, so they could not control something they had no rights to. The appellate court also affirmed the finding that BASF and Monsanto had engaged in a civil conspiracy by agreeing to sell products unlawfully and enabling the widespread use of a product that was illegal to spray during the growing season. As members of the civil conspiracy, BASF was correctly found to be severally liable for the damages. The appellate court also found that Bader Farms provided clear and convincing evidence that the companies had acted with reckless indifference, but the two had different degrees of culpability. The trial court should have assessed the punitive damages of the Monsanto and BASF separately. Thus, the appellate court affirmed in part and reversed and remanded the punitive damages judgment to the trial court.

Court Decides to Resolve Property Dispute by Requiring Parties to Use the Existing Property Line

Barlow v. Saxon Holdings Trust, No. SD37361, 2022 Mo. App. LEXIS 657 (Mo. Ct. App. Oct. 21, 2022)

The plaintiff and her husband purchased land in 1987 by warranty deed that included the language, “running thence Southwesterly along the fence 40 rods.” At the time the plaintiff purchased the property, a fence that ran north to south existed and the plaintiff believed and acted like she owned the land up to that fence. The defendant purchased the neighboring land in 2011 and executed a warranty deed that included the language, “beginning at the NE corner of the NE ¼ of said Section 23 and running SW 40 rods.” In the spring of 2020, the defendant hired a surveyor who informed the defendant that his property extended onto the plaintiff’s property to the “40-rod line.” The defendant put up an electric fence on the disputed property to claim it.  In response the plaintiff hired a surveyor who determined the property line was on the original fence line. The plaintiff sued to quiet title. The trial court found ambiguity between the deeds and resolved the ambiguity in favor of the plaintiff and held the plaintiff had adversely possessed the land. The defendant appealed. The appellate court recognized that the deeds individually did not show patent ambiguity, but the difference between the two on the location of property line did create an ambiguity. The appellate court determined that one way to resolve the ambiguity would be to have the parties continue to occupy the land the way they had in accordance with one of the deeds or constructions. This was the trial court’s approach, and the appellate court affirmed the trial court on this point.  The appellate court also noted that the trial court had found the plaintiff’s surveyor credible, and that credibility of a witness was a determination to be left to the trial court’s discretion that the appellate court would not disturb.  The appellate court affirmed the trial court’s resolution of the deed in favor of the plaintiff and determined it need not address the adverse possession claim.

Oil and Gas Lease on Disputed Property Invalidates Adverse Possession

Cottrill v. Quarry Enterprises, LLC, No. 2022 CA 00011, 2022 Ohio App. LEXIS 3191 (Ohio Ct. App. Sept. 27, 2022)

The plaintiff claimed that she had successfully adversely possessed the defendant’s property by receiving title to the property in 1971 from her mother and caring for the land by mowing and maintaining it and using it for recreational events for herself and family. The trial court granted summary judgment for the defendant, finding that the plaintiff failed to establish exclusive possession over the land due to an existing oil and gas lease that the defendant had executed. The plaintiff appealed, claiming that the lease did not invalidate her exclusive use. To show exclusive use, the plaintiff did not have to be the only person who used the land but needed to be the only person who asserted their right to possession over the land. The appellate court found that the oil and gas that existed on the property began in 1958. For the entirety of the time that the plaintiff claimed she had adversely possessed the property, the oil and gas company had the right of possession over the land in dispute, invalidating the plaintiff’s claim.

More Ag Law Developments – Potpourri of Topics

Overview

The courts have continued to issue decisions of relevance to farmers, ranchers and rural landowners.  In today’s post, I take a look at some of them from around the country.  From property rights to income tax to bankruptcy to herbicide crop damage and landowners disputing over drainage – it’s covered below.

Court Says Public Has Right to Use Private Riverbeds

Adobe Whitewater Club of N.M. v. N.M. State Game Comm'n., No. S-1-SC-38195, 2022 N.M. LEXIS 34 (N.M. Sup. Ct. Sept. 1, 2022)

 The plaintiffs, various environmental and recreation groups, sued the New Mexico State Gaming Commission (Commission), claiming a regulation of the Commission violated the public’s right to use parts of New Mexico’s rivers.  In 2017, the Commission, promulgated a regulation that outlined a process for landowners to obtain a certificate allowing them to close public access to segments of public water flowing over private property.  The plaintiffs challenged the regulation as unconstitutional. Article XVI, Section 2 of the New Mexico state constitution states, “the unappropriated water of every natural stream, perennial or torrential, within the state of New Mexico, is hereby declared to belong to the public.” The issue was whether the public’s right to use the public waters included the right to use the privately owned waterbeds. The New Mexico Supreme Court determined that riverbeds were considered navigable waterways and were subject to the “public trust doctrine.”  The private landowners along the riverbed intervened in the lawsuit and claimed the public would be considered trespassers on their land and they could exclude the trespassers. The Court disagreed, finding that the public has the right to use private land when reasonably necessary to gain access to or enjoy public rivers. The Court stated, “A determination of navigability only goes to who has title to the bed below the public water, not to the scope of the public use.”  As such the court concluded that the public had access to such rivers to float, wade, fish and engage in other recreational activities that would have a minimal impact on the rights of private property owners.   In addition, the Court held that such waters are and always have been public.  Accordingly, the Court invalidated the Commission’s regulation. 

Retained Ownership of Minable Surface Negates Conservation Easement Deduction.

C.C.A. 202236010 (Sept. 9, 2022)

The Chief Counsel’s office of IRS has taken the position that a conservation easement donation is invalid if the donor owns both the surface estate of the land burdened by the easement as well as a qualified mineral interest that has never been separated from the surface estate, and the deed retains any possibility of surface mining to extract subsurface minerals.  In that instance, the conservation easement doesn’t satisfy I.R.C. §170(h).  The IRS said the result would be the same even if the donee would have to approve the surface-mining method because the donated easement would not be donated exclusively for conservation purposes in accordance with I.R.C. §170(h)(5).  The IRS pointed out that Treas. Reg. §1.170A-14(g)(4) states that a donated easement does not protect conservation purposes in perpetuity if any method of mining that is inconsistent with the particular conservation purposes of the contribution is permitted at any time.  But, the IRS pointed out that a deduction is allowed if the mining method at issue has a limited, localized impact on the real estate and does not destroy significant conservation interests in a manner that can’t be remedied.  Surface mining, however, is specifically prohibited where the ownership of the surface estate and the mineral interest has never been separated.  On the specific facts involved, the IRS determined that the donated easement would not be treated at being made exclusively for conservation purposes because the donee could approve surface mining of the donor’s subsurface minerals.  

Family Farms Not Part of Bankruptcy Estate.

Ries v. Archer (In re Archer), Nos. 17-20045-RLJ-7, 19-02001, 2022 Bankr. LEXIS 2250 (Bankr. N.D. Tex. Aug. 12, 2022)

A chapter 7 trustee sought a declaration that certain farm ground was a part of the bankrupt estate. The debtors, a married couple, had eight children, who all but one became medical doctors. The debtors had funded their children’s education throughout their lives with funds derived from the family farm. They owned 14 sections of land in Moore County, Texas, (northwest Texas) comprising what was referred to as the “Moore County Farm.”  Although, the deed from 1988 for the land listed the defendant’s children’s IRA as the grantee-buyer of the land, the children did not have IRAs at the time or played any part in purchasing the land. The children were not given any right to manage or operate the Moore County Farm so long as the debtors were mentally competent. Beginning in 1998, the USDA and CRP program began making payments to some of the defendant’s children and in 2007 farmers who rented land from the Moore County Farm began to pay some of the children. The children began to open accounts and lines of credit associated with the expenses of the Moore County Farm. From 2005 to 2017, the debtors instructed some of their children to apply as “New Producers” to the Federal Crop Insurance Program. Through this program they were provided with favorable crop insurance as “managers” of a farm, but none of the children had managerial control. Ultimately, the children were charged with and convicted of insurance fraud. Along with the 1988 deed, the debtors executed a warranty deed for the Moore County Farm to some of the children in 2006 and later transferred the farm to the children’s IRAs. In 2008, one of the defendant’s children purchased 670 acres in Randall County, referred to as the “Randall County Farm”. The debtors ultimately had primary authority and control of the farming operations of the Randall County Farm along with the Moore County Farm and had full control over the finances and accounting of the farms. The children did pay for some of the expenses on the Randall County Farm, but overall, the debtors operated the two farms as one entity.  There were no further legal issues until 2011 when one of the debtors’ cows was hit by a motorist who sustained serious injuries because of the accident and filed suit. The court awarded the man $8.95 million in damages to be paid by the debtors. The debtors then filed Chapter 7 bankruptcy. The bankruptcy court noted that the children had shared significant responsibilities over the Moore County Farm with their father and that their father wanted to pass the property to his children through the deeds. The court concluded that just because the debtors continued to run the farm did not mean they did not want to ultimately gift the land to the children. The bankruptcy trustee argued this was another scam set up by the family, but the court was not convinced given the common desire of parents to devise property to their children. The evidence showed that the debtors’ intent was for the children to own the farms and operate them for enjoyment.  Based on these considerations, the court concluded that the Moore County Farm was not part of the bankruptcy estate. The trustee claimed that the Randall County Farm should have been a part of the estate. Because one of the children who purchased the land negotiated a conservation plan with the USDA, received CRP payments, and paid for the farm expenses, the child was the true owner of the Randall County Farm and could not be considered part of the bankruptcy estate. 

FIFRA Doesn’t Preempt State-Based Warranty Claims

Kissan Berry Farm v. Whatcom Farmers Cooperative, et al., No. 82774-0-I, 2022 Wash. App. LEXIS 1766 (Wash. Ct. App. Sept. 6, 2022)

The plaintiffs, five state of Washington red raspberry farms, claimed that the use of herbicide Callisto in 2012 killed their berry plants causing more than $2.5 million in lost production for 2012 and two following crop years.  Callisto’s use was recommended by an agronomist working on behalf of. the defendant. Callisto’s maker, Syngenta was also named in the suit.  Callisto’s label stated that it was safe for use on red raspberries. The label also indicated that usage could result in some crop damage and that compensation for crop damage was limited to the price of the herbicide.  The plaintiffs asserted that Syngenta and the agronomist had made various warranties that Callisto was safe for use on red raspberries.  Syngenta’s position that the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) preempted the farmers’ claims.  The trial court agreed on the basis that the plaintiffs’ claims would have required Syngenta to change the product label due to state law.  The appellate court reversed based on Bates v. Dow Agrosciences LLC, 544 U.S. 431 (2005). Under Bates, state law cannot require a change to a federally approved label, but state-based claims for breach of warranty are not preempted.   the Supreme Court found that a pesticide manufacturer who is found liable for state law breach of express warranty claims is not then induced to change their federally registered pesticide label.

Comparative Fault for Unmaintained Waterway

Watters v. Medinger, No. 21-1076, 2022 Iowa App. LEXIS 667 (Iowa Ct. App. Aug. 31, 2022)

The parties had been in various legal spats involving farmland for over a decade.  The plaintiff owned farmland adjacent to the defendant that contained waterways.  The plaintiff sued the defendant claiming the defendant altered his land in various ways causing extreme degradation and erosion along the plaintiff’s waterways.  The trial court determined that the plaintiff was contributorily negligent for failing to maintain or mow around the waterways, which allowed for ragweed to grow. The ragweed destroyed the grass along the waterway, which meant the water would flood quicker than it would have if grass could absorb some of the moisture. The trial court found that the defendant’s construction of a new cattle shed and addition of drain tiles did cause damage to the plaintiff’s property, but the at that time the plaintiff had already stopped properly maintaining the waterway. The trial court awarded the plaintiff $2,000 in damages to repair the damage caused by the erosion. The plaintiff appealed claiming that the damage award was insufficient.  The appellate court reviewed the plaintiff’s argument that the jury instruction was improper regarding comparative fault. The plaintiff tried to argue that he could not repair any part of the erosion until the drainage issues were solved. The appellate court held the plaintiff failed to address the failure to maintain the waterway before the draining issues arose. A farm tenant testified that the plaintiff’s property was already in “tough shape” before the defendant made any changes to his property. The appellate court held the comparative fault instruction was proper, because there was “a causal connection between the plaintiff’s fault and the claimed damages.”  Further, the appellate court held the award of damages was sufficient because the jury settled on an amount within the range of evidence based on expert testimony. Just because the amount was at the low end of the range did not mean the amount was insufficient. The appellate court affirmed the trial court’s decision to deny the plaintiff’s motion for a new trial.

Conclusion

Agricultural law and taxation is a very dynamic discipline.  There is never a dull moment -more fodder for my radio shows and TV interviews, and content for my books and seminars.

Ag Law and Tax Developments

Overview

It’s been a while since I last did an case and ruling update. So, today’s post is one of several that I will post in the coming weeks. 

Some recent developments in the courts and IRS – it’s the topic of today’s post.

Retained Ownership of Minable Surface Negates Conservation Easement Deduction

C.C.A. 202236010 (Sept. 9, 2022)

The Chief Counsel’s office of IRS has taken the position that a conservation easement donation is invalid if the donor owns both the surface estate of the land burdened by the easement as well as a qualified mineral interest that has never been separated from the surface estate, and the deed retains any possibility of surface mining to extract subsurface minerals.  In that instance, the conservation easement doesn’t satisfy I.R.C. §170(h).  The IRS said the result would be the same even if the donee would have to approve the surface-mining method because the donated easement would not be donated exclusively for conservation purposes in accordance with I.R.C. §170(h)(5).  The IRS pointed out that Treas. Reg. §1.170A-14(g)(4) states that a donated easement does not protect conservation purposes in perpetuity if any method of mining that is inconsistent with the particular conservation purposes of the contribution is permitted at any time.  But, the IRS pointed out that a deduction is allowed if the mining method at issue has a limited, localized impact on the real estate and does not destroy significant conservation interests in a manner that can’t be remedied.  Surface mining, however, is specifically prohibited where the ownership of the surface estate and the mineral interest has never been separated.  On the specific facts involved, the IRS determined that the donated easement would not be treated at being made exclusively for conservation purposes because the donee could approve surface mining of the donor’s subsurface minerals.

Use of Pore Space Without Permission Unconstitutional

Northwest Landowners Association v. State, 2022 ND 150 (2022)

North Dakota law provides that a landowner’s subsurface pore space can be used for oil and gas waste without requiring the landowner’s permission or the payment of any compensation. The plaintiffs challenged the law as an unconstitutional taking under the Fourth and Fifth Amendments. The trial court held that the law was unconstitutional on its face and awarded attorney’s fees to the plaintiff.  On further review, the North Dakota Supreme Court determined that the plaintiffs had a property interest in subsurface pore space and that the section of the law specifying that the landowners did not have to provide consent to the trespassers to use the land unconstitutionally deprived them of their property rights as a per se taking.  However, the Supreme Court determined that the section of the law allowing oil and gas producers to inject carbon dioxide into subsurface pore space was constitutional.  The Supreme Court upheld the award of attorney fees. 

Net Operating Loss Couldn’t Be Carried Forward

Villanueva v. Comr., T.C. Memo. 2022-27

The petitioner sustained a loss from the disposition of a condominium he owned as a rental property. He reported the date of the loss as August 2013, but a mortgage lender had foreclosed on the condo in May 2009 and the taxpayer lost possession on that date. The IRS denied the deduction on the basis that the petitioner had not claimed the loss on either an original or amended return which meant that there was no loss that could be carried forward. The Tax Court agreed with the IRS, noting that the Treasury Regulations for I.R.C. §165 provide that a loss is treated as sustained during the tax year in which the loss occurs as evidenced by a closed and completed transaction and fixed by identifiable events occurring in such taxable year.  A loss resulting from a foreclosure sale is typically sustained in the year in which the property is disposed of, and the debt is discharged from the proceeds of the foreclosure sale.  Thus, the Tax Court determined that the loss had occurred in 2009 and should have been claimed at that time where it could have then been carried forward. 

Overtime Pay Rate Not Applicable to Construction Work on Farm

Vanegas v. Signet Builders, Inc., No. 21-2644, 2022 U.S. App. LEXIS 23206 (7th Cir. Aug. 19, 2022)

The plaintiff, the defendant’s employee, worked overtime in building a livestock fence for the defendant.  The defendant refused to pay the plaintiff time and a half for overtime. The plaintiff sued the defendant to recover the extra wages. The defendant’s refusal was based on the plaintiff being an agricultural worker not entitled to overtime.  The trial court agreed and dismissed the plaintiff’s claim.  The plaintiff appealed. The appellate court looked to the language of 29 U.S.C. § 213(b)(12) and the work of the plaintiff to determine if the plaintiff would be considered an agricultural employee. The appellate court found the plaintiff’s work was carried out as a separately organized activity outside of the defendant’s agricultural operations. The plaintiff worked for the defendant, but he built the fence on his own without any aid from any of the farm employees. The appellate court noted that another indication the work would not be considered exempt is whether farmers typically hire someone out for the work at issue. If so, it could be an indication the work is separate from agricultural work and would qualify for overtime pay. The appellate court found the defendant failed to provide much evidence to show that the plaintiff worked with agricultural employees and did not show the work was commonly done by a farmer. The appellate court also reasoned that just because the plaintiff was given a visa for agricultural work did not mean his work for the defendant was agricultural. The appellate court reversed the trial court’s decision to dismiss the complaint.

Early Distribution “Penalty” is a “Tax” and Does Not Require Supervisor Approval

Grajales v. Comr., No. 21-1420, 2022 U.S. App. LEXIS 23695 (4th Cir. Aug. 24, 2022), aff’g., 156 T.C. 55 (2021)     

The petitioner borrowed money from her pension account at age 42.  She received an IRS Form 1099-R reporting the gross distributions from the pension of $9,025.86 for 2015.  She didn’t report any of the amount as income in 2015.  The IRS issued her a notice of deficiency for $3,030.00 and an additional 10 percent penalty tax of $902.00.  The parties later stipulated to a taxable distribution of $908.62 and a penalty of $90.86.  The petitioner claimed that she was not liable for the additional penalty tax because the IRS failed to obtain written supervisory approval for levying it under I.R.C. §6751(b). The Tax Court determined that the additional 10 percent tax of I.R.C. §72(t) was a “tax” and not an IRS penalty that required supervisor approval before it would be levied.  The Tax Court noted that I.R.C. §72(t) specifically refers to it as a “tax” rather than a penalty and that other Code sections also refer to it as a tax.  The appellate court affirmed. 

U.S. Fish & Wildlife Service Can Regulate Ag Practices on Leased Land

Tulelake Irrigation Dist. v. United States Fish & Wildlife Serv., 40 F.4th 930 (9th Cir. 2022)

The plaintiffs sued the defendant, U.S. Fish and Wildlife Service, claiming the defendant violated environmental laws by regulating leased farmland in the Tule Lake and Klamath Refuge. The trial court granted summary judgment in favor of the defendant.  The plaintiff appealed.  The appellate court noted that the Kuchel Act and the Refuge Act allow the defendant to determine the proper land management practices to protect the waterfowl management of the area.  Under the Refuge Act, the defendant was required to issue an Environmental Impact Statement (EIS) and Comprehensive Conservation Plan (CCP). The defendant did issue an EIS and CCP for the Tule Lake and Klamath Refuge area, which included modifications to the agricultural use on the leased land within the region. The EIS/CCP required the leased lands to be flooded post-harvest, restricted some harvesting methods, and prohibited post-harvest field work, which the plaintiffs claimed violated their right to use the leased land. The plaintiffs argued that the language, “consistent with proper waterfowl management,” within the Kuchel Act was “nonrestrictive” and was not essential to the meaning of the Act. The appellate court held it was improper to read just that portion of the Act without considering the rest of the Act to understand the intent. The appellate court found the Kuchel Act was unambiguous and required the defendant to regulate the leased land to ensure proper waterfowl management. The Refuge Act allows the defendant to regulate the uses of the leased land, but the plaintiffs argued the agricultural practices were a “purpose” rather than a “use” so the defendant could not regulate it under the Refuge Act. The appellate court found the agriculture on the leased land was not a “purpose” equal to waterfowl management. The appellate court also held the language of the act was unambiguous and determined that agricultural activities on the land was to be considered a use that the defendant could regulate.   The appellate court affirmed the trial court’s award of summary judgment for the defendant.

Crop Salesman Sued for Ruining Relationship with Landowner

Walt Goodman Farms, Inc. v. Hogan Farms, LLC, No. 1:22-cv-01004-JDB-jay, 2022 U.S. Dist. LEXIS 134192 (W.D. Tenn. Jul. 28, 2022)

The plaintiff, a farm tenant, sued the defendant landlord and a third-party ag salesman.  The plaintiff claimed that the salesman wrongly advised the landlord and encouraged the landlord to complain about the plaintiff’s farming practices.  Specifically, the plaintiff’s claims against the salesman were for interference with contract, interference with business relationship, and fraud.  The salesman moved to dismiss each claim, but the trial court denied the motion with respect to the contract interference and interference with business relationship claims.  The trial court, however, dismissed the fraud claim involving the efficacy of corn seed.

Standard Default Interest Rate Not Unconscionable

Savibank v. Lancaster, No. 82880-1-I, 2022 Wash. App. LEXIS 1558 (Wash. Ct. App. Aug. 1, 2022)

The defendant obtained a loan from the plaintiff to purchase his father’s farm before the virus outbreak. The loan agreement stated that the interest rate would increase to 18 percent upon default. The defendant did default when the pandemic hit, and the plaintiff filed a foreclosure and repossession action against the plaintiff. The trial court ruled in favor the plaintiff. The defendant appealed and asserted the 18 percent default interest rate was unconscionable during a pandemic. During the appeal, the defendant claimed the plaintiff should have alerted the defendant to any better loan alternatives but failed to do so. The appellate court, affirmed, finding that the plaintiff had no contractual obligation to make the defendant aware of any better financing agreement.  The appellate court also upheld the trial court’s finding that the 18 percent default interest rate was not unconscionable and was common for agricultural loans with other banks in the area.  The appellate court also noted that the defendant had the opportunity to consult with a lawyer about the loan terms before signing.  The loan terms were standard and straightforward, and the defendant failed to show any evidence as to how the virus caused his default or how it made the default interest rate unconscionable.  In addition, the court noted that the defendant had stopped making loan payments before the virus began to impact the United States. The appellate court also held that the defendant failed to provide any evidence for an unconscionability defense. 

Conclusion

I’ll post additional developments in a subsequent post.

September 30 Ag Law Summit in Omaha (and Online)

Overview

On September 30, Washburn Law School with cooperating partner Creighton Law School will conduct the second annual Ag Law Summit.  The Summit will be held on the Creighton University campus in Omaha, Nebraska.  Last September Washburn Law School conducted it’s first “Ag Law Summit” and held it at Mahoney State Park in Nebraska. This year the Summit returns in collaboration with Creighton University School of Law.  The Summit will be held at Creighton University on September 30 and will also be broadcast live online.

The Summit will cover various topics of relevance to agricultural producers and the tax and legal counsel that represent them. 

The 2022 Ag Law Summit – it’s the topic of today’s post.

Agenda

Developments in agricultural law and taxation.  I will start off the day with a session surveying the major recent ag law and tax developments.  This one-hour session will update attendees on the big issues facing ag clients and provide insight concerning the issues that look to be on the horizon in the legal and tax world.  There have been several major developments involving agricultural that have come through the U.S Supreme Court in recent months.  I will discuss those decisions and the implications for the future.  Several of them involve administrative law and could have a substantial impact on the ability of the federal government to micro-manage agricultural activities.  I will also get into the big tax developments of the past year, including the tax provisions included in the recent legislation that declares inflation to be reduced!

Death of a farm business owner.  After my session, Prof. Ed Morse of Creighton Law School will examine the tax issues that arise when a farm business owner dies.  Income tax basis and the impact of various entity structures will be the focus of this session along with the issues that arise upon transitioning ownership to the next generation and various tax elections.  The handling of tax attributes after death will be covered as will some non-tax planning matters when an LLC owner dies.  There are also entity-specific issues that arise when a business owner dies, and Prof. Morse will address those on an entity-by-entity basis.  The transition issue for farmers and ranchers is an important one for many.  This session will be a good one in laying out the major tax and non-tax considerations that need to be laid out up front to help the family achieve its goals post-death.

Governing documents for farm and ranch business entities.  After a morning break Dan Waters with Lamson Dugan & Murray in Omaha will take us up to lunch with a technical session on the drafting of critical documents for farm and ranch entities.  What should be included in the operative agreements?  What is the proper wording?  What provisions should be included and what should be avoided?  This session picks up on Prof. Morse’s presentation and adds in the drafting elements that are key to a successful business succession plan for the farm/ranch operation.

Fence law issues.  After a provided lunch, Colten Venteicher who practices in Gothenburg, NE, will address the issues of fence line issues when ag land changes hands.  This is an issue that seems to come up over and over again in agriculture.  The problems are numerous and varied.  This session provides a survey of applicable law and rules and practical advice for helping clients resolve existing disputes and avoid future ones. 

Farm economics.  Following the afternoon break, a presentation on the current economy and economic situation facing ag producers, ag businesses and consumers will be presented by Darrell Holaday.  Darrell is an ag economist and his firm, Advanced Market Concepts, provides marketing plans for ag producers.   What are the economic projections for the balance of 2022 and into 2023 that bear on tax and estate planning for farmers and ranchers?  How will the war in Ukraine continue to impact agriculture in the U.S.?  This will be a key session, especially with the enactment of legislation that will add fuel to the current inflationary fire – unless of course, the tax increases in the legislation slow the economy enough to offset the additional spending. 

Ethics.  I return to close out the day with a session of ethics focused on asset protection planning.  There’s a right way and a wrong way to do asset protection planning.  This session guides the practitioner through the proper approach to asset protection planning, client identification, and the pitfalls if the “stop signs” are missed.

Online.  The Summit will be broadcast live online and will be interactive to allow you the ability to participate remotely. 

Reception

For those attending in person, a reception will follow in the Harper Center Ballroom on the Creighton Campus. 

Conclusion

If your tax or legal practice involves ag clients, the Ag Law Summit is for you.  As noted, you can also attend online if you can’t be there in person.  If you are a student currently in law school or thinking about it, or are a student in accounting, you will find this seminar beneficial. 

I hope to see you in Omaha on September 30 or see that you are with us online.

You can learn more about the Summit and get registered at the following link:  https://www.washburnlaw.edu/employers/cle/aglawsummit.html

Bibliography – January through June of 2022

Overview 

Periodically I post an article containing the links to all of my blog articles that have been recently published.  Today’s article is a bibliography of my articles from the beginning of 2022 through June.  Hopefully this will aid your research of agricultural law and tax topics.

A bibliography of articles for the first half of 2022 – it’s the content of today’s post.

Bankruptcy

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 8 and 7

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-8-and-7.html

Other Important Developments in Agricultural Law and Taxation

https://lawprofessors.typepad.com/agriculturallaw/2022/01/other-important-developments-in-agricultural-law-and-taxation.html

Recent Court Cases of Importance to Agricultural Producers and Rural Landowners

https://lawprofessors.typepad.com/agriculturallaw/2022/06/recent-court-cases-of-importance-to-agricultural-producers-and-rural-landowners.html

Business Planning

Summer 2022 Farm Income Tax/Estate and Business Planning Conferences

https://lawprofessors.typepad.com/agriculturallaw/2022/03/summer-2022-farm-income-taxestate-and-business-planning-conferences.html

Should An IDGT Be Part of Your Estate Plan?

https://lawprofessors.typepad.com/agriculturallaw/2022/03/should-an-idgt-be-part-of-your-estate-plan.html

Farm Wealth Transfer and Business Succession – The GRAT

https://lawprofessors.typepad.com/agriculturallaw/2022/03/farm-wealth-transfer-and-business-succession-the-grat.html

Captive Insurance – Part One

https://lawprofessors.typepad.com/agriculturallaw/2022/03/captive-insurance-part-one.html

Captive Insurance – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2022/03/captive-insurance-part-two.html

Captive Insurance – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2022/04/captive-insurance-part-three.html

Pork Production Regulations; Fake Meat; and Tax Proposals on the Road to Nowhere

https://lawprofessors.typepad.com/agriculturallaw/2022/04/pork-production-regulations-fake-meat-and-tax-proposals-on-the-road-to-nowhere.html

Farm Economic Issues and Implications

https://lawprofessors.typepad.com/agriculturallaw/2022/04/farm-economic-issues-and-implications.html

Intergenerational Transfer of the Farm/Ranch Business – The Buy-Sell Agreement

https://lawprofessors.typepad.com/agriculturallaw/2022/04/intergenerational-transfer-of-the-farmranch-business-the-buy-sell-agreement.html

IRS Audit Issue – S Corporation Reasonable Compensation

https://lawprofessors.typepad.com/agriculturallaw/2022/04/irs-audit-issue-s-corporation-reasonable-compensation.html

Summer 2022 Farm Income Tax/Estate and Business Planning Conferences

https://lawprofessors.typepad.com/agriculturallaw/2022/05/summer-2022-farm-income-taxestate-and-business-planning-conferences.html

Wisconsin Seminar and…ERP (not Wyatt) and ELRP

https://lawprofessors.typepad.com/agriculturallaw/2022/06/wisconsin-seminar-anderp-not-wyatt-and-elrp.html

S Corporation Dissolution – Part 1

https://lawprofessors.typepad.com/agriculturallaw/2022/06/s-corporation-dissolution-part-1.html

S Corporation Dissolution – Part Two; Divisive Reorganization Alternative

https://lawprofessors.typepad.com/agriculturallaw/2022/06/s-corporation-dissolution-part-two-divisive-reorganization-alternative.html

Farm/Ranch Tax, Estate and Business Planning Conference August 1-2 – Durango, Colorado (and Online)

https://lawprofessors.typepad.com/agriculturallaw/2022/07/farmranch-tax-estate-and-business-planning-conference-august-1-2-durango-colorado-and-online.html

Durango Conference and Recent Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/07/durango-conference-and-recent-developments-in-the-courts.html

Civil Liabilities

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 8 and 7

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-8-and-7.html

Agritourism

https://lawprofessors.typepad.com/agriculturallaw/2022/03/agritourism.html

Animal Ag Facilities and the Constitution

https://lawprofessors.typepad.com/agriculturallaw/2022/03/animal-ag-facilities-and-the-constitution.html

When Is an Agricultural Activity a Nuisance?

https://lawprofessors.typepad.com/agriculturallaw/2022/04/when-is-an-agricultural-activity-a-nuisance.html

Ag Law-Related Updates: Dog Food Scam; Oil and Gas Issues

https://lawprofessors.typepad.com/agriculturallaw/2022/06/ag-law-related-updates-dog-food-scam-oil-and-gas-issues.html

Durango Conference and Recent Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/07/durango-conference-and-recent-developments-in-the-courts.html

Dicamba Spray-Drift Issues and the Bader Farms Litigation

https://lawprofessors.typepad.com/agriculturallaw/2022/07/dicamba-spray-drift-issues-and-the-bader-farms-litigation.html

Tax Deal Struck? – and Recent Ag-Related Cases

https://lawprofessors.typepad.com/agriculturallaw/2022/07/tax-deal-struck-and-recent-ag-related-cases.html

 

Contracts

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 6 and 5

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-6-and-5.html

What to Consider Before Buying Farmland

https://lawprofessors.typepad.com/agriculturallaw/2022/02/what-to-consider-before-buying-farmland.html

Elements of a Hunting Use Agreement

https://lawprofessors.typepad.com/agriculturallaw/2022/02/elements-of-a-hunting-use-agreement.html

Ag Law (and Medicaid Planning) Court Developments of Interest

https://lawprofessors.typepad.com/agriculturallaw/2022/05/ag-law-and-medicaid-planning-court-developments-of-interest.html

Cooperatives

The Agricultural Law and Tax Report

https://lawprofessors.typepad.com/agriculturallaw/2021/05/the-agricultural-law-and-tax-report.html

Criminal Liabilities

Animal Ag Facilities and the Constitution

https://lawprofessors.typepad.com/agriculturallaw/2022/03/animal-ag-facilities-and-the-constitution.html

Is Your Farm or Ranch Protected From a Warrantless Search?

https://lawprofessors.typepad.com/agriculturallaw/2022/04/is-your-farm-or-ranch-protected-from-a-warrantless-search.html

Durango Conference and Recent Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/07/durango-conference-and-recent-developments-in-the-courts.html

Environmental Law

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 6 and 5

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-6-and-5.html

“Top Tan” Agricultural Law and Tax Developments of 2021 – Numbers 2 and 1

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-2-and-1.html

The “Almost Top Ten” (Part 3) – New Regulatory Definition of “Habitat” under the ESA

https://lawprofessors.typepad.com/agriculturallaw/2022/01/the-almost-top-ten-new-regulatory-definition-of-habitat-under-the-esa.html

Ag Law and Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2022/02/ag-law-and-tax-potpourri.html

Farm Economic Issues and Implications

https://lawprofessors.typepad.com/agriculturallaw/2022/04/farm-economic-issues-and-implications.html

Constitutional Limit on Government Agency Power – The “Major Questions” Doctrine

https://lawprofessors.typepad.com/agriculturallaw/2022/07/constitutional-limit-on-government-agency-power-the-major-questions-doctrine.html

Estate Planning

Other Important Developments in Agricultural Law and Taxation

https://lawprofessors.typepad.com/agriculturallaw/2022/01/other-important-developments-in-agricultural-law-and-taxation.html

Other Important Developments in Agricultural Law and Taxation (Part 2)

https://lawprofessors.typepad.com/agriculturallaw/2022/01/other-important-developments-in-agricultural-law-and-taxation-part-2.html

The “Almost Top Ten” (Part 4) – Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/01/the-almost-top-ten-part-4-tax-developments.html

The “Almost Top 10” of 2021 (Part 7) [Medicaid Recovery and Tax Deadlines]

https://lawprofessors.typepad.com/agriculturallaw/2022/02/the-almost-top-10-of-2021-part-7-medicaid-recovery-and-tax-deadlines.html

Nebraska Revises Inheritance Tax; and Substantiating Expenses

https://lawprofessors.typepad.com/agriculturallaw/2022/02/recent-developments-in-ag-law-and-tax.html

Tax Consequences When Farmland is Partitioned and Sold

https://lawprofessors.typepad.com/agriculturallaw/2022/02/tax-consequences-when-farmland-is-partitioned-and-sold.html

Summer 2022 Farm Income Tax/Estate and Business Planning Conferences

https://lawprofessors.typepad.com/agriculturallaw/2022/03/summer-2022-farm-income-taxestate-and-business-planning-conferences.html

Should An IDGT Be Part of Your Estate Plan?

https://lawprofessors.typepad.com/agriculturallaw/2022/03/should-an-idgt-be-part-of-your-estate-plan.html

Farm Wealth Transfer and Business Succession – The GRAT

https://lawprofessors.typepad.com/agriculturallaw/2022/03/farm-wealth-transfer-and-business-succession-the-grat.html

Family Settlement Agreement – Is it a Good Idea?

https://lawprofessors.typepad.com/agriculturallaw/2022/03/family-settlement-agreement-is-it-a-good-idea.html

Registration Open for Summer 2022 Farm Income Tax/Estate and Business Planning Conferences

https://lawprofessors.typepad.com/agriculturallaw/2022/03/registration-open-for-summer-2022-farm-income-taxestate-and-business-planning-conferences.html

Captive Insurance – Part One

https://lawprofessors.typepad.com/agriculturallaw/2022/03/captive-insurance-part-one.html

Captive Insurance – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2022/03/captive-insurance-part-two.html

Captive Insurance Part Three

https://lawprofessors.typepad.com/agriculturallaw/2022/04/captive-insurance-part-three.html

Pork Production Regulations; Fake Meat; and Tax Proposals on the Road to Nowhere

https://lawprofessors.typepad.com/agriculturallaw/2022/04/pork-production-regulations-fake-meat-and-tax-proposals-on-the-road-to-nowhere.html

Farm Economic Issues and Implications

https://lawprofessors.typepad.com/agriculturallaw/2022/04/farm-economic-issues-and-implications.html

Proposed Estate Tax Rules Would Protect Against Decrease in Estate Tax Exemption

https://lawprofessors.typepad.com/agriculturallaw/2022/04/proposed-estate-tax-rules-would-protect-against-decrease-in-estate-tax-exemption.html

Summer 2022 Farm Income Tax/Estate and Business Planning Conferences

https://lawprofessors.typepad.com/agriculturallaw/2022/05/summer-2022-farm-income-taxestate-and-business-planning-conferences.html

Ag Law (and Medicaid Planning) Court Developments of Interest

https://lawprofessors.typepad.com/agriculturallaw/2022/05/ag-law-and-medicaid-planning-court-developments-of-interest.html

Joint Tenancy and Income Tax Basis At Death

https://lawprofessors.typepad.com/agriculturallaw/2022/05/joint-tenancy-and-income-tax-basis-at-death.html

More Ag Law Court Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/06/more-ag-law-court-developments.html

Farm/Ranch Tax, Estate and Business Planning Conference August 1-2 – Durango, Colorado (and Online)

https://lawprofessors.typepad.com/agriculturallaw/2022/07/farmranch-tax-estate-and-business-planning-conference-august-1-2-durango-colorado-and-online.html

IRS Modifies Portability Election Rule

https://lawprofessors.typepad.com/agriculturallaw/2022/07/irs-modifies-portability-election-rule.html

Income Tax

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 10 and 9

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-10-and-9.html

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 8 and 7

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-8-and-7.html

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 2 and 1

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-2-and-1.html

The “Almost Top Ten” (Part 4) – Tax Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/01/the-almost-top-ten-part-4-tax-developments.html

The “Almost Top 10” of 2021 (Part 7) [Medicaid Recovery and Tax Deadlines]

https://lawprofessors.typepad.com/agriculturallaw/2022/02/the-almost-top-10-of-2021-part-7-medicaid-recovery-and-tax-deadlines.html

Purchase and Sale Allocations Involving CRP Contracts

https://lawprofessors.typepad.com/agriculturallaw/2022/02/purchase-and-sale-allocations-involving-crp-contracts.html

Ag Law and Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2022/02/ag-law-and-tax-potpourri.html

What’s the Character of the Gain From the Sale of Farm or Ranch Land?

https://lawprofessors.typepad.com/agriculturallaw/2022/02/whats-the-character-of-the-gain-from-the-sale-of-farm-or-ranch-land.html

Proper Tax Reporting of Breeding Fees for Farmers

https://lawprofessors.typepad.com/agriculturallaw/2022/02/proper-tax-reporting-of-breeding-fees-for-farmers.html

Nebraska Revises Inheritance Tax; and Substantiating Expenses

https://lawprofessors.typepad.com/agriculturallaw/2022/02/recent-developments-in-ag-law-and-tax.html

Tax Consequences When Farmland is Partitioned and Sold

https://lawprofessors.typepad.com/agriculturallaw/2022/02/tax-consequences-when-farmland-is-partitioned-and-sold.html

Expense Method Depreciation and Leasing- A Potential Trap

https://lawprofessors.typepad.com/agriculturallaw/2022/02/expense-method-depreciation-and-leasing-a-potential-trap.html

Summer 2022 Farm Income Tax/Estate and Business Planning Conferences

https://lawprofessors.typepad.com/agriculturallaw/2022/03/summer-2022-farm-income-taxestate-and-business-planning-conferences.html

income Tax Deferral of Crop Insurance Proceeds

https://lawprofessors.typepad.com/agriculturallaw/2022/03/income-tax-deferral-of-crop-insurance-proceeds.html

What if Tax Rates Rise?

https://lawprofessors.typepad.com/agriculturallaw/2022/03/what-if-tax-rates-rise.html

Registration Open for Summer 2022 Farm Income Tax/Estate and Business Planning Conferences

https://lawprofessors.typepad.com/agriculturallaw/2022/03/registration-open-for-summer-2022-farm-income-taxestate-and-business-planning-conferences.html

Captive Insurance – Part One

https://lawprofessors.typepad.com/agriculturallaw/2022/03/captive-insurance-part-one.html

Captive Insurance – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2022/03/captive-insurance-part-two.html

Captive Insurance – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2022/04/captive-insurance-part-three.html

Pork Production Regulations; Fake Meat; and Tax Proposals on the Road to Nowhere

https://lawprofessors.typepad.com/agriculturallaw/2022/04/pork-production-regulations-fake-meat-and-tax-proposals-on-the-road-to-nowhere.html

Farm Economic Issues and Implications

https://lawprofessors.typepad.com/agriculturallaw/2022/04/farm-economic-issues-and-implications.html

IRS Audit Issue – S Corporation Reasonable Compensation

https://lawprofessors.typepad.com/agriculturallaw/2022/04/irs-audit-issue-s-corporation-reasonable-compensation.html

Missed Tax Deadline & Equitable Tolling

https://lawprofessors.typepad.com/agriculturallaw/2022/04/missed-tax-deadline-equitable-tolling.html

Summer 2022 Farm Income Tax/Estate and Business Planning Conferences

https://lawprofessors.typepad.com/agriculturallaw/2022/05/summer-2022-farm-income-taxestate-and-business-planning-conferences.html

Joint Tenancy and Income Tax Basis At Death

https://lawprofessors.typepad.com/agriculturallaw/2022/05/joint-tenancy-and-income-tax-basis-at-death.html

Tax Court Caselaw Update

https://lawprofessors.typepad.com/agriculturallaw/2022/05/tax-court-caselaw-update.html

Deducting Soil and Water Conservation Expenses

https://lawprofessors.typepad.com/agriculturallaw/2022/05/deducting-soil-and-water-conservation-expenses.html

Correcting Depreciation Errors (Including Bonus Elections and Computations)

https://lawprofessors.typepad.com/agriculturallaw/2022/05/correcting-depreciation-errors-including-bonus-elections-and-computations.html

When Can Business Deductions First Be Claimed?

https://lawprofessors.typepad.com/agriculturallaw/2022/05/when-can-business-deductions-first-be-claimed.html

Recent Court Decisions Involving Taxes and Real Estate

https://lawprofessors.typepad.com/agriculturallaw/2022/05/recent-court-decisions-involving-taxes-and-real-estate.html

Wisconsin Seminar and…ERP (not Wyatt) and ELRP

https://lawprofessors.typepad.com/agriculturallaw/2022/06/wisconsin-seminar-anderp-not-wyatt-and-elrp.html

Tax Issues with Customer Loyalty Reward Programs

https://lawprofessors.typepad.com/agriculturallaw/2022/06/tax-issues-with-customer-loyalty-reward-programs.html

S Corporation Dissolution – Part 1

https://lawprofessors.typepad.com/agriculturallaw/2022/06/s-corporation-dissolution-part-1.html

S Corporation Dissolution – Part Two; Divisive Reorganization Alternative

https://lawprofessors.typepad.com/agriculturallaw/2022/06/s-corporation-dissolution-part-two-divisive-reorganization-alternative.html

Farm/Ranch Tax, Estate and Business Planning Conference August 1-2 – Durango, Colorado (and Online)

https://lawprofessors.typepad.com/agriculturallaw/2022/07/farmranch-tax-estate-and-business-planning-conference-august-1-2-durango-colorado-and-online.html

What is the Character of Land Sale Gain?

https://lawprofessors.typepad.com/agriculturallaw/2022/07/what-is-the-character-of-land-sale-gain.html

Deductible Start-Up Costs and Web-Based Businesses

https://lawprofessors.typepad.com/agriculturallaw/2022/07/deductible-start-up-costs-and-web-based-businesses.html

Using Farm Income Averaging to Deal with Economic Uncertainty and Resulting Income Fluctuations

https://lawprofessors.typepad.com/agriculturallaw/2022/07/using-farm-income-averaging-to-deal-with-economic-uncertainty-and-resulting-income-fluctuations.html

Tax Deal Struck? – and Recent Ag-Related Cases

https://lawprofessors.typepad.com/agriculturallaw/2022/07/tax-deal-struck-and-recent-ag-related-cases.html

Insurance

Tax Deal Struck? – and Recent Ag-Related Cases

https://lawprofessors.typepad.com/agriculturallaw/2022/07/tax-deal-struck-and-recent-ag-related-cases.html

Real Property

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 4 and 3

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-4-and-3.html

Ag Law and Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2022/02/ag-law-and-tax-potpourri.html

What to Consider Before Buying Farmland

https://lawprofessors.typepad.com/agriculturallaw/2022/02/what-to-consider-before-buying-farmland.html

Elements of a Hunting Use Agreement

https://lawprofessors.typepad.com/agriculturallaw/2022/02/elements-of-a-hunting-use-agreement.html

Animal Ag Facilities and the Constitution

https://lawprofessors.typepad.com/agriculturallaw/2022/03/animal-ag-facilities-and-the-constitution.html

Recent Court Decisions Involving Taxes and Real Estate

https://lawprofessors.typepad.com/agriculturallaw/2022/05/recent-court-decisions-involving-taxes-and-real-estate.html

Recent Court Cases of Importance to Agricultural Producers and Rural Landowners

https://lawprofessors.typepad.com/agriculturallaw/2022/06/recent-court-cases-of-importance-to-agricultural-producers-and-rural-landowners.html

More Ag Law Court Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/06/more-ag-law-court-developments.html

Ag Law-Related Updates: Dog Food Scam; Oil and Gas Issues

https://lawprofessors.typepad.com/agriculturallaw/2022/06/ag-law-related-updates-dog-food-scam-oil-and-gas-issues.html

Tax Deal Struck? – and Recent Ag-Related Cases

https://lawprofessors.typepad.com/agriculturallaw/2022/07/tax-deal-struck-and-recent-ag-related-cases.html

Regulatory Law

The “Almost Top 10” of 2021 (Part 5)

https://lawprofessors.typepad.com/agriculturallaw/2022/01/the-almost-top-10-of-2021-part-5.html

The “Almost Top 10” of 2021 (Part 6)

https://lawprofessors.typepad.com/agriculturallaw/2022/02/the-almost-top-10-of-2021-part-6.html

Ag Law and Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2022/02/ag-law-and-tax-potpourri.html

Animal Ag Facilities and the Constitution

https://lawprofessors.typepad.com/agriculturallaw/2022/03/animal-ag-facilities-and-the-constitution.html

Pork Production Regulations; Fake Meat; and Tax Proposals on the Road to Nowhere

https://lawprofessors.typepad.com/agriculturallaw/2022/04/pork-production-regulations-fake-meat-and-tax-proposals-on-the-road-to-nowhere.html

Farm Economic Issues and Implications

https://lawprofessors.typepad.com/agriculturallaw/2022/04/farm-economic-issues-and-implications.html

Ag Law (and Medicaid Planning) Court Developments of Interest

https://lawprofessors.typepad.com/agriculturallaw/2022/05/ag-law-and-medicaid-planning-court-developments-of-interest.html

Wisconsin Seminar and…ERP (not Wyatt) and ELRP

https://lawprofessors.typepad.com/agriculturallaw/2022/06/wisconsin-seminar-anderp-not-wyatt-and-elrp.html

More Ag Law Court Developments

https://lawprofessors.typepad.com/agriculturallaw/2022/06/more-ag-law-court-developments.html

Ag Law-Related Updates: Dog Food Scam; Oil and Gas Issues

https://lawprofessors.typepad.com/agriculturallaw/2022/06/ag-law-related-updates-dog-food-scam-oil-and-gas-issues.html

Constitutional Limit on Government Agency Power – The “Major Questions” Doctrine

https://lawprofessors.typepad.com/agriculturallaw/2022/07/constitutional-limit-on-government-agency-power-the-major-questions-doctrine.html

The Complexities of Crop Insurance

https://lawprofessors.typepad.com/agriculturallaw/2022/07/the-complexities-of-crop-insurance.html

Secured Transactions

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 6 and 5

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-6-and-5.html

Water Law

“Top Ten” Agricultural Law and Tax Developments of 2021 – Numbers 4 and 3

https://lawprofessors.typepad.com/agriculturallaw/2022/01/top-ten-agricultural-law-and-tax-developments-of-2021-numbers-4-and-3.html

Durango Conference and Recent Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2022/07/durango-conference-and-recent-developments-in-the-courts.html

Ag Law Summit

Overview

Last September Washburn Law School conducted it’s first “Ag Law Summit” and held it at Mahoney State Park in Nebraska. This year the Summit returns in collaboration with Creighton University School of Law.  The Summit will be held at Creighton University on September 30, and will also be broadcast live online.

The Summit will cover various topics of relevance to agricultural producers and the tax and legal counsel that represent them. 

The 2022 Ag Law Summit – it’s the topic of today’s post.

Agenda

Survey of ag law and tax.  I will start off the day with a session surveying the major recent ag law and tax developments.  This one-hour session will update attendees on the big issues facing ag clients and provide insight concerning the issues that look to be on the horizon in the legal and tax world. 

Tax issues upon death of a farmer.  After my session, Prof. Ed Morse of Creighton Law School will examine the tax issues that arise when a farm business owner dies.  Income tax basis and the impact of various entity structures will be the focus of this session along with the issues that arise upon transitioning ownership to the next generation and various tax elections.

Farm succession planning drafting language.  After a morning break Dan Waters, and estate planning attorney in Omaha, NE, will take us up to lunch with a technical session on the drafting of critical documents for farm and ranch entities.  What should be included in the operative agreements?  What is the proper wording?  What provisions should be included and what should be avoided?  This session picks up on Prof. Morse’s presentation and adds in the drafting elements that are key to a successful business succession plan for the farm/ranch operation.

Fences and boundaries.  After a provided lunch, Colten Venteicher who practices in Gothenburg, NE, will address the issues of fence line issues when ag land changes hands.  This is an issue that seems to come up over and over again in agriculture.  The problems are numerous and varied.  This session provides a survey of applicable law and rules and practical advice for helping clients resolve existing disputes and avoid future ones. 

The current farm economy and future projections.  Following the afternoon break, a presentation on the current economy and economic situation facing ag producers, ag businesses and consumers will be presented by Darrell Holaday.  Darrell is an economist and his firm, Advanced Market Concepts, provides marketing plans for ag producers.   What are the economic projections for the balance of 2022 and into 2023 that bear on tax and estate planning for farmers and ranchers?  This will be a key session, especially with the enactment of legislation that will add fuel to the current inflationary fire – unless of course, the tax increases in the legislation slow the economy enough to offset the additional spending. 

Ethics.  I return to close out the day with a session of ethics focused on asset protection planning.  There’s a right way and a wrong way to do asset protection planning.  This session guides the practitioner through the proper approach to asset protection planning, client identification, and the pitfalls if the “stop signs” are missed.

Reception

For those attending in person, a reception will follow in the Harper Center Ballroom on the Creighton Campus. 

Conclusion

If your tax or legal practice involves ag clients, the Ag Law Summit is for you.  As noted, you can also attend online if you can’t be there in person.  If you are a student currently in law school or thinking about it, or are a student in accounting, you will find this seminar beneficial. 

I hope to see you in Omaha on September 30 or see that you are with us online.

You can learn more about the Summit and get registered at the following link:  https://www.washburnlaw.edu/employers/cle/aglawsummit.html

Tax Deal Struck? – and Recent Ag-Related Cases

Overview

Reports are that Senator Joe Manchin has come to an agreement with Senate leadership on tax legislation that is part of a larger package, termed the “Inflation Reduction Act of 2022.”  It’s apparently part of the 2022 budget reconciliation bill which only requires a simple majority of the Senate to pass.  What are the tax provisions that have been agreed to? 

Proposed tax provisions apparently agreed to, and some recent ag-related court decisions – it’s the topic of today’s post.

Tax Agreement

Reports are that the agreed upon tax package includes a 15 percent corporate alternative minimum tax (AMT) applied to adjusted financial statement income of corporations with profits exceeding $1 billion.  A corporation subject to the AMT would be able to claim net operating losses and tax credits against the AMT.  In addition, a corporation subject to the AMT would be able to claim tax credits against the AMT as well as regular corporate tax for AMT paid in prior years to the extent the regular tax liability in any year exceeds 15 percent of the corporation’s adjusted financial statement income.  The provision would be effective for tax years after 2022.

Also included in the agreement is a change in the tax treatment of carried interest (e.g., the share of profit that general partners receive to compensate them for managing a venture capital fund). 

Another proposal would apply the net investment income tax (NIIT) of I.R.C. §1411 to all income.  Presently this 3.8 percent tax (which was created as part of Obamacare) applies only to passive income above a threshold.  Under the proposal, the additional 3.8 percent tax would apply to adjusted gross income over $400,000 (single) and $500,000 (mfj).  This means that there is a substantial “marriage penalty.”  In addition, the qualified business income deduction (QBID) of I.R.C. §199A is not part of a taxpayer’s AGI computation.  In other words, AGI is not reduced by the 20 percent QBID – AGI is computed before accounting for the QBID. Thus, for a taxpayer that has taxable income at or below the threshold for application of the NIIT as a result of the QBID, the NIIT would be computed on AGI first. 

Note:  Applying the NIIT to adjusted gross income (including income from both passive and active sources) could result in a sizeable tax increase for many farmers – particularly dairy operations.

There are other tax provisions reported to be in the agreement, including those dealing with “renewable” energy credits.  The projected additional revenue from the tax increases is to fund certain “green energy” initiative.  The actual text of the legislation is presently slated for the Senate parliamentarian to review on August 3.  Full Senate consideration would occur after that date. 

Note:  There presently is no word on how Senator Sinema views the proposal, although she has stated in the past that she will not support legislation that increases corporate or personal tax rates.  While the proposals don’t increase actual rates, they do increase effective rates on certain corporations and individuals. 

Also, Senate Finance Committee Chairman Charles Grassley has introduced legislation that would index certain tax benefits to adjust for inflation.  The indexed provisions include certain tax credits and deductions such as the Child Tax Credit and the Non-Child Dependent Credit.  The bill, known as the “Family and Community Inflation Relief Act,” would also adjust for inflation the American Opportunity Tax Credit, Lifetime Learning Credit, and the Student Loan Interest Deduction.  The proposal would also extent the current $10,000 limitation on state and local taxes through 2026. 

 Recent Ag-Related Court Opinions

Child Support Obligation Computed Based on All Income and Loss from Farming. 

Gerving v. Gerving, 969 N.W.2d 184 (N.D. 2022) 

The issue in this case was the proper way to calculate a father’s child support obligation.  The father conducted a farming operation, and a primary issue was whether only income and gains from farming should count for purposes of child support, or whether losses should also be accounted for. Under child support guidelines, the court must determine the payor’s net income and use that amount to calculate the child support obligation.  The trial court calculated the father’s income based only on gains and did not include any related losses incurred from equipment trades and other farm-related transactions.  The appellate court held that the trial court erred by not including the farm losses to calculate the father’s self-employment income because those losses must be considered to show actual profit from the farming operation.  The appellate court also determined that the father had no income from subleases of farmland.  

Deduction for Full Amount of C Corporate Shareholder Compensation Not Deductible 

Clary Hood, Inc. v. Comr., T.C. Memo. 2022-15

A big audit issue for farming (and other) corporations is reasonable compensation.  This case illustrates that point in a non-farm context.  Here, a married couple were the sole shareholders of the petitioner, a corporation engaged in the construction business that graded and prepared land.  The petitioner’s growth was irregular from 2000 on. The principal took a relatively modest salary between 2000 and 2012 but took a big increase in the years 2013 to 2016, ostensibly to compensate for earlier years. The company had an outside consulting firm perform an analysis to determine what the principal's compensation should be. The IRS challenged the amount in 2015 and 2016.

The Tax Court examined the usual factors considered in such a case including the employee's qualifications; the nature, extent, and scope of the employee's work; the size and complexities of the business; a comparison of salaries paid with gross income and net income; the prevailing general economic conditions; comparison of salaries with distributions to stockholders; the prevailing rates of compensation for comparable positions in comparable concerns; and the salary policy of the taxpayer as to all employees. The Tax Court denied a deduction for the full amount of the compensation. In addition, the IRS assessed an accuracy-related penalty for both years. The taxpayer was able to show that he relied in good faith on the advice of the accounting firm and the Tax Court did not sustain the penalty. However, for the second year the taxpayer could not substantiate its reliance on the outside adviser. 

Homeowner’s Policy Doesn’t Cover Farming Injury

Mills v. CSAA General Insurance. Co., No. 21-CV-0479-CVE-JFJ, 2022 U.S. Dist. LEXIS 114741 (N.D. Okla. Jun. 29, 2022)

It’s always good to make sure you understand the extent of coverage you have under an insurance policy, and what is excluded from coverage.  This case illustrates that point.  Here, the plaintiff became pinned between a trailer and barn while loading cattle, and was hospitalized for several days as a result of his resulting injuries.  The plaintiff had a homeowner’s insurance policy with the defendant and filed a claim for coverage under the policy for his injuries.  The defendant denied coverage on the basis that the policy only covered claims for bodily or personal injury brought by third parties against the plaintiff, and that the farming endorsement did not extend coverage for the plaintiff’s own bodily injury and incorporated the policy’s exclusion for bodily injury into the farming endorsement. 

The plaintiff sued, claiming that he intended to purchase coverage for personal injuries he might suffer while operating his farm and that he had a reasonable expectation of coverage under the policy.  He also claimed that the exclusions were “buried in the more than 100 pages of the policy.”  The trial court disagreed, determining that the policy’s liability provisions applied only to claims for bodily or personal injury brought by third parties against the plaintiff.   The trial court also determined that the policy language was not ambiguous and was not “buried deep” into the policy documents. 

Gross Acres, not Tillable Acres, Used for Partition-in-Kind

Mueggenberg v. Mueggenberg, No. 21-0887, 2022 Iowa App. LEXIS 510 (Iowa Ct. App. Jun. 29, 2022)

The two parties were comprised of five siblings, who each had an undivided one-fifth interest in 179.61 acres of farmland. The plaintiffs, three of the siblings, filed for a partition in kind. The court appointed an appraiser to analyze and equally divide the farmland between the three parties. The appraiser determined that partitioning the land into five equal sections would be unworkable because the land’s topography varied greatly. The appraiser recommended the defendants should receive an approximate share of 40 percent comprised of 62 gross acres and all the future easement payments from the energy company that operated a windmill on the land. The appraiser allocated 117.61 gross acres to the plaintiffs. The defendants claimed that they were entitled to 68.64 tillable acres. The appraiser explained that while the acre division was not necessarily 40/60, the land awarded to the defendants was overall more desirable and expensive as it had a higher CSR2 rating.

The trial court agreed with the appraiser and assessed fees and costs to the defendants.  On appeal, the appellate court found the defendants’ calculations for a different split were inaccurate as the defendants used tillable acres when they should have used gross acres in the calculation. The defendants also failed to account for the difficulty of dividing the land caused by a non-uniform property line and the existence of terraces. The appellate court affirmed the trial court’s decision to adopt the appraiser’s division but reversed the trial court’s award of attorney’s fees and costs. Accordingly, the appellate court vacated the trial court’s assessment of costs and remanded the case with instructions that only costs arising from the contested matter be assessed to the defendants.  The parties were to share all remaining costs proportionately. 

Conclusion

Keep your eyes on what, if any, tax proposals come out of the Senate.  Increasing taxes on individuals whether via the NIIT or the corporate tax in a recessionary economy (despite the changed definition from the White House) is not a good idea.  It’s particularly a bad idea when any additional revenue is to be used to fund inefficient and costly energy proposals to further energy policies that are the driver to the current inflationary problems in the economy. 

On the ag law front, make sure to understand how child support is computed in the context of a farmer’s divorce; pay reasonable compensation to shareholder/offices for services rendered; know what is and what is not covered under an insurance policy; and avoid partition actions – they rarely end up in family harmony. 

Dicamba Spray-Drift Issues and the Bader Farms Litigation

Overview

Dicamba is a broad-spectrum herbicide that was first registered in 1967.  But, over the past several years, spray-drift issues associated with Dicamba have been happening.  Around 2016, Dicamba's use came under significant scrutiny due to its tendency to vaporize from treated fields and spread to neighboring crops.  Incidents in which dicamba affected neighboring fields led to complaints from farmers and fines in some states. A lower volatility formulation, M1768, was approved by the EPA in November 2016.  Dicamba formulations, including those registered in the late 2010s, can be especially prone to volatility, temperature inversions and drift.

Much of the problem has been with the use of XtendiMax with VaporGrip (Monsanto (now Bayer)) and Engenia (BASF) herbicides for use with Xtend soybeans and cotton as Dicamba usage increased in an attempt to control weeds in fields planted with crops that are engineered to withstand it.  Monsanto began offering crops resistant to Dicamba before a reformulated and drift resistant herbicide had gained Environmental Protection Agency (EPA) approval.  The drift issues became bad enough that some states (e.g., Missouri and Arkansas) banned Dicamba because of drift-related damage issues.  The U.S. Environmental Protection Agency imposed restrictions on the use of dicamba in November 2018.

What factors help determine the proper application of Dicamba?  If drift occurs and damages crops in an adjacent field, how should the problem be addressed?  Can the matter be settled privately by the parties involved?  If not, what legal standard applies in resolving the matter – negligence or strict liability?  Will punitive damages be awarded?  If so, will a large jury verdict awarding punitive damages be upheld?

Issues associated with Dicamba drift – that’s the focus of today’s post.

Uniqueness of Dicamba

In many instances, spray drift is a straightforward matter.  The typical scenario involves either applying chemicals in conditions that are unfavorable (such as high wind), or a misapplication (such as not following recommended application instructions).  But, Dicamba is a unique product with its own unique application protocol. 

Consider the following observations: 

• Dicamba is a very volatile chemical and is rarely sprayed in the summer months. This is because when the temperature reaches approximately 90 degrees Fahrenheit, dicamba will vaporize such that it can be carried by wind for several miles.  This can occur even days after application.
• The typical causes of spray drift are application when winds are too strong or a misapplication of the chemical.
• For the newer Dicamba soybeans, chemical manufacturers reformulated the active ingredient to minimize the chance that it would move off-target due to it volatility.
• Studies have concluded that the new formulations are safe when applied properly, but if a user mixes-in unapproved chemicals, additives or fertilizer, the safe formulations revert to the base dicamba formulation with the attendant higher likelihood of off-target drift.
• Soybeans have an inherit low tolerance to dicamba. As low as 1/20,000 of an application rate can cause a reaction.  A 1/1000 of rate can cause yield loss.
• The majority of damaged crops are may not actually result in yield loss. That’s particularly the case if drift damage occurs before flowering.  However, if the drift damage occurs post-flowering the likelihood of yield loss increases. 

Damage Claims – Building a Case

Negligence.  For a person to be deemed legally negligent, certain elements must exist. These elements can be thought of as links in a chain. Each element must be present before a finding of negligence can be obtained.  The first element is that of a legal duty giving rise to a standard of care.  To be liable for a negligent tort, the defendant's conduct must have fallen below that of a “reasonable and prudent person” under the circumstances.  A reasonable and prudent person is what a jury has in mind when they measure an individual's conduct in retrospect - after the fact, when the case is in court. The conduct of a particular tortfeasor (the one causing the tort) who is not held out as a professional is compared with the mythical standard of conduct of the reasonable and prudent person in terms of judgment, knowledge, perception, experience, skill, physical, mental and emotional characteristics as well as age and sanity. For those held out as having the knowledge, skill, experience or education of a professional, the standard of care reflects those factors. For example, the standard applicable to a farmer applying chemicals to crops is what a reasonably prudent farmer would have done under the circumstances, not what a reasonably prudent person would do.

If a legal duty exists, it is necessary to determine whether the defendant's conduct fell short of the conduct of a “reasonable and prudent person (or professional) under the circumstances.”  This is called a breach, and is the second element of a negligent tort case.

Once a legal duty and breach of that duty are shown to exist, a causal connection (the third element) must be established between the defendant's act and (the fourth element) the plaintiff's injuries (whether to person or property).  In other words, the resulting harm to the plaintiff must have been a reasonably foreseeable result of the defendant's conduct at the time the conduct occurred. Reasonable foreseeability is the essence of causality (also known as proximate cause).

For a plaintiff to prevail in a negligence-type tort case, the plaintiff bears the burden of proof to all four elements by a preponderance of the evidence (just over 50 percent).

Typical drift case.  In a straightforward drift case, the four elements are typically satisfied – the defendant misapplied the chemical or did so in high winds (breach of duty to apply chemicals in a reasonable manner in accordance with industry standards/requirements) resulting in damages to another party’s crops.  In addition, the plaintiff is able to pin-down where the drift came from by weather reports for the day of application combined with talking with neighbors to determine the source of the drift (causation).  In many of these situations, a solution is worked out privately between the parties.  In other situations, the disaffected farmer could file a complaint with the state and the state would begin an investigation which could result in a damage award or litigation.

Generally, what are contributing factors to ag chemical drift?  For starters, the liquid spray solution of all herbicides can physically drift off-target.   This often occurs due to misapplication including such things as applying when wind speed exceeds the recommended velocity, improper spray pressure, and not setting the nozzle height at the proper level above the canopy of the intended plant target.  Clearly, not shielding sprayers and aerial application can result in an increased chance of off-site drift.  Also, the possibility of drift to an unintended field can be influenced by droplet size if the appropriate nozzle is not utilized. 

Dicamba drift cases.  As noted above, dicamba is a different product that is more volatile than other crop chemicals.  That volatility and the increased likelihood of drift over a broader geographic area makes it more difficult for a plaintiff to determine the source of the drift.  Thus, the causation element of the plaintiff’s tort claim is more difficult to establish.  In addition, soybeans are inherently sensitive to extremely low dicamba concentrations, thus elevating the potential for damages. 

Dicamba manufacturers have protocols in place to aid in the safe application of the products.  Thus, in quantifiable damage cases, it is likely that an application protocol was not followed.  But, establishing that breach to the satisfaction of a jury could be steep uphill climb for a plaintiff.  That’s particularly the case with dicamba given its heightened volatility.  Damages could be caused by physical drift, temperature, volatility or temperature inversions.  Is a particular cause tied to the defendant’s breach of a duty owed to the plaintiff? 

Clear patterns of injury indicate physical drift which could make the causation element easier to satisfy.  Wind speed at time of application, sprayer speed, sprayer boom height above the plant canopy and nozzle height are also factors that are within the applicator’s control.  Failure to meet common industry standards or manufacturer guidance on any of those points could point toward the breach of a duty and could also weigh on the causation element of a tort claim.

Relatedly, another factor with dicamba, as noted above, is whether it was applied on a hot day.  The chemistry of dicamba has a “vapor curve” that rises with the temperature.  While I have not seen that vapor curve, it would be interesting to see whether that curve has a discernibly steeper slope at a particular temperature.  If so, that would indicate the point at which dicamba becomes very volatile and should not be applied.  To the extent any particular defendant can establish would be able to establish application beyond that temperature, the duty and breach elements of the plaintiff’s tort claim would be easier to satisfy.

Strict liability.  Most pesticide drift cases not involving aerially-applied chemicals are handled under the negligence standard.  However, a strict liability approach is sometimes utilized for aerially applied chemicals.  See, e.g., Langan v. Valicopters, Inc., 567 P.2d 218 (Wash. 1977); but see Mangrum v. Pique, et al., 359 Ark. 373, 198 S.W.3d 496 (2006)(the aerial application of chemicals commonly used in farming communities that are available for sale to the general public is not an ultrahazardous activity triggering application of strict liability).  In such a situation, liability results from damages to others as a result of the chemicals.  It makes no difference whether the applicator followed all applicable rules for applying the chemicals and did so without negligence.  The strict liability rule is harsh, and is normally reserved for ultra-hazardous activities.

The Bader Farms Litigation

The lawsuit – claims and motions.  In Bader Farms, Inc. v. Monsanto Co., et al., No. MDL No. 1:18md2820-SNLJ, 2019 U.S. Dist. LEXIS 114302 (E.D. Mo. July 10, 2019), the plaintiff is Missouri’s largest peach farming operation and is located in the southeast part of the state.  claimed that his peach orchard was destroyed after the defendants (Monsanto and BASF) allegedly conspired to develop and market Dicamba-tolerant seeds and Dicamba-based herbicides. The suit alleged that the two companies collaborated on Xtend (herbicide resistant cotton seed) that was intended for use with a less volatile form of Dicamba with less drift potential.  But, as of 2015 neither Monsanto nor BASF had produced the new, less volatile, form of Dicamba.  That fact led the plaintiff to claim that the defendants released the Dicamba-tolerant seed with no corresponding Dicamba herbicide that could be safely applied.  As a result, the plaintiff claimed, farmers illegally sprayed an old formulation of Dicamba that was unapproved for in-crop, over-the-top, use and was highly volatile and prone to drift.    The plaintiff claimed its annual peach crop revenue exceeded $2 million before the drift damage, and an expert at trial asserted that the drift caused the plaintiff to lose over $20 million in profits.  While many cases had previously been filed on the dicamba drift issue, the plaintiff did not join the other litigation because it focused on damages to soybean crops.  The plaintiff’s suit also involved claims for failure to warn; negligent training; violation of the Missouri Crop Protection Act (MCPA); civil conspiracy; and joint liability for punitive damages. 

Monsanto moved to dismiss the claims for failure to warn; negligent training; violation of the MCPA; civil conspiracy; and joint liability for punitive damages.  BASF moved to dismiss those same counts except the claims for failure to warn. The trial court granted the motion to dismiss in part.  Monsanto argued that the failure to warn claims were preempted by the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), but the plaintiff claimed that no warning would have prevented the damage to the peaches. The trial court determined that the plaintiff had adequately plead the claim and denied the motion to dismiss this claim.  Both Monsanto and BASF moved to dismiss the negligent training claim, but the trial court refused to do so. However, the trial court did dismiss the MCPA claims.  The trial court noted that civil actions under the MCPA are limited to “field crops” which did not include peaches.   The trial court, however, did not dismiss the civil conspiracy claim based on concerted action by agreement, but did dismiss the aiding and abetting portion of the claim because that cause of action is not recognized under Missouri tort law.  The parties agreed to a separate jury determination of punitive damages for each defendant

Note:  The case went to trial in early 2020 and was one of more than 100 similar Dicamba lawsuits.  Bayer, which acquired Monsanto in 2018 for $63 billion, announced in June of 2020 that it would settle dicamba lawsuits for up to $400 million.

The jury trial.  At trial, the jury found that Monsanto had negligently designed or failed to warn for 2015 and 2016 and that both defendants had done so for 2017 to the time of trial.  The jury awarded the plaintiff $15 million in compensatory damages and $250 million in punitive damages against Monsanto for 2015 and 2016.  The jury also found that the defendants were acting in a joint venture and in a conspiracy.  The plaintiff submitted a proposed judgment that both defendants were responsible for the $250 million punitive damages award.  BASF objected, but the trial court found the defendants jointly liable for the full verdict considering the jury’s finding that the defendants were in a joint venture.  Bader Farms, Inc. v. Monsanto Co., et al., MDL No. 1:18-md-02820-SNJL, 2020 U.S. Dist. LEXIS 34340 (E.D. Mo. Feb. 28, 2020). 

BASF then moved for a judgment as a matter of law on punitive damages or motion for a new trial or remittitur (e.g., asking the court to reduce the damage award), and Monsanto moved for a judgment as a matter of law or a new trial.  The trial court, however, found both defendants jointly liable, although the court lowered the punitive damages to $60 million (from $250 million) after determining a lack of actual malice.  The trial court did uphold the $15 million compensatory damage award upon finding that the correct standard under Missouri law was applied to the farm’s damages.  Bader Farms, Inc. v. Monsanto Co, et al., MDL No. 1:18md2820-SNLJ, 2020 U.S. Dist. LEXIS 221420 (E.D. Mo. Nov. 25, 2020).  The defendants filed a notice of appeal on December 22, 2020.     

Appellate decision.  In Hahn v. Monsanto Corp., No. 20-3663, 2021 U.S. App. LEXIS 18621 (8th Cir. Jul. 7, 2022), the appellate court partially affirmed the trial court, partially reversed, and remanded the case.  The appellate court determined that the trial court incorrectly instructed the jury to assess punitive damages for Bayer (i.e., Monsanto) and BASF together, rather than separately, and that a new trial was needed to determine punitive damages for each company.  Indeed, the appellate court vacated the punitive damages award and remanded the case to the trial court with instructions to hold a new trial only on the issue of punitive damages. 

However, the appellate court did not disturb the trial court’s jury verdict of $15 million in compensatory damages.  On the compensatory damages issue, the appellate court held that the trial court properly refused to find intervening cause as a matter of law for the damage to the plaintiff’s peaches.  On that point, the appellate court determined that the spraying of Dicamba on a nearby farm did not interrupt the chain of events which meant that the question of proximate cause of the damage was proper for the jury to determine.  The appellate court also held that the was an adequate basis for the plaintiff’s lost profits because the award was not based on speculation.  The appellate court noted that the peach orchard had been productive for decades, and financial statements along with expert witness testimony calculated approximately $20.9 million in actual damages.  The appellate court also determined that the facts supported the jury’s determination that the defendants engaged in a conspiracy via unlawful means – knowingly enabling the widespread use of Dicamba during growing season to increase seed sales.

Conclusion

The Dicamba drift issue has been an important one in agriculture for a few years, particularly with respect to soybean and cotton crops.  But, as the Bader Farms litigation shows, Dicamba drift can also impact other crops.  While the new Dicamba formulations will not eliminate the problem of physical drift, proper application procedures can go a long way to minimizing it.  Likewise, drift issues can also be minimized by communication among farmers to help determine the planting location of particular crops, their relative sensitivities to Dicamba and the necessary setbacks.