Agricultural Law and Taxation Blog

Contracts; Insurance and Property Rights - Impacts for Your Farming/Ranching Operation

Merger Clauses in Contracts

Normally the terms of a written contract define the parameters of a deal.  That’s particularly the case if the contract contains a “merger” clause.  That’s a clause that says the terms of the written agreement constitute the entire understanding of the parties. But, without a merger clause, it might be possible to introduce evidence of additional terms or agreements that the parties entered into that might be contrary to the contract’s written terms. 

For example, assume you agree to sell three acres so the buyer can build a house and the contract says that the buyer gets possession after you harvest your growing crop.  But you and the buyer agree orally that the buyer can get possession early by paying you for the amount of lost net crop income if possession is taken before crop harvest.  The buyer wants possession early and you provide an invoice for your estimated lost income.  The buyer then pays for building materials, but you then change your mind and want to stick to the contact language on possession occurring after harvest.  Without a merger clause in the written sales contract, the buyer will have a good argument that payment of your invoice for crop damage is enough to trigger early possession.

Tort Liability and Installment Land Contracts

Sometimes agricultural land is sold by an installment sale contract.  It’s a method for the long-term financing of farmland purchases.  The buyer gets possession and equitable title, but legal title stays with the seller until a specified part of the principal and interest has been paid.  But does that mean that the seller has liability for damage to the property or persons on the property while holding legal title?  I’ll be back in a moment to discuss.

The seller finances the purchase of farmland under an installment sale contract and retains legal title until a certain amount of principal and interest has been paid.  The down payment is usually low which helps beginning farmers and others with minimal amounts of cash. The buyer is also normally given possession, even though the general rule is that possession follows legal title.  In most cases, the party in possession pays real property taxes and assessments, and the buyer typically has an obligation to insure the premises either at the time the contract is entered into or at the time of possession.  That’s an important point. 

A purchaser’s status as an equitable owner means that the seller under an installment land contract is not liable for torts on the property once it has been conveyed to the buyer.  It’s the buyer’s possession of the property that is the key.  And, that’s why it’s important that the buyer carry insurance even though the seller still has legal title.

Liability Insurance

Liability insurance is part of the overall risk-management program for a farm or ranch.  But, when the farming or ranching activity changes, it’s a good idea to double-check to make sure existing coverage is adequate or whether a policy rider needs to be obtained.

In a recent case the insured’s homeowner’s policy provided coverage to others “caused by an animal owned by or in the care of an insured.”  The insured then bought 10 black heifers and penned them inside a barbed-wire enclosure behind his home.  But the heifers got out and onto the adjacent road where a motorist hit them.  The motorist sued for damages and the insurance company denied coverage under a policy exclusion for “bodily injury or property damage arising out of business or farming engaged in by an insured.”  The policy defined “farming” as “the operation of an agricultural… enterprise…” but did not define the term “enterprise.” 

Despite the somewhat unclear policy language, the trial court concluded that the insured’s purchase and ownership of the cattle constituted an “enterprise” within the exclusion’s scope.  The appellate court affirmed. 

Make sure you evaluate your coverage when circumstances change. While it’s common to evaluate liabilities at insurance renewals, periodic checks on exposures can avoid coverage gaps like the one in this case.

The case is Clark v. Alfa Insurance Corporation, No. 2022-CA-01251-COA, 2024 Miss. App. LEXIS 296 (Miss. Ct. App. Jul. 23, 2024).

Property Rights

Property rights are a fundamental constitutional right.  But recently the executive branch and certain administrative agencies have ventured into the realm of property rights in a negative way for rural landowners. Involved is a global agenda couched in altruism – saving people from the ravages of “climate change.”   

A 2012 Earth Summit established a goal of setting aside 50 percent of the world’s land and water for conservation by 2050.  In late January 2021, the President issued an Executive Order establishing a goal of putting 30 percent of U.S. land and water under permanent government control by 2030. That’s in addition to the 36 percent of U.S. land that is already owned or controlled by federal and state governments. At the same time, the Interior Department issued an order removing state and local control over federal land acquisitions.

Lawsuits have been filed challenging government control of private land that would curtail mining, ranching and other activities, and one State passed a law allowing it to overrule some federal directives.  Historically, courts deferred to administrative agency efforts to withdraw land and natural resources from private use, but that deferential standard has now changed.  It will take some time to see how that works out in the courts.

Also, some legal commentators are asserting that the U.S. Constitution should be used to negatively impact private property rights because of “climate change.”  They’re calling for a “constitutional revolution.”  That’s worth keeping an eye on.  Land is the number one asset for farmers and ranchers and to the extent the government controls the land or farming and ranching activities, it controls the means of food production.

Stay tuned.

More Legal and Tax Issues Involving Farmers and Ranchers

Overview

With today’s article I look at more legal and tax issues that farmers and ranchers need to know about.  Being aware of legal and tax issues is a means of overall risk management for the operation. 

More discussion of legal and tax issues – it’s the topic of today’s post.

Getting Sued in Another State – The Personal Jurisdiction Issue

Walters v. Lima Elevator Co., 84 N.E.3d 1218 (Ind. Ct. App. 2017)

If you engage in a business transaction involving your farm or ranch in another state and a lawsuit is filed based on that transaction, does that state’s legal system have jurisdiction over you?  In 1945, the U.S. Supreme Court said that a party (particularly a corporation or a business) could be sued in a state if the party had “minimum contacts” with that state.  International Shoe Company v. State of Washington, 326 U.S. 310 (1945).  Over time, many courts have wrestled with the meaning of “minimum contacts,” but it basically comes down to whether the party is deriving the benefit of doing business with that particular state or is sufficiently using the resources of that state.  That’s oversimplifying the application of the Court’s reasoning, but I think you get the point.

In terms of applying the “minimum contacts” theory to farm businesses, a recent case provides a good illustration.  In the case, a Michigan farmer ordered seed from an Indiana elevator about 20 miles away.  It was the third time he had done this.  He bought the seed on credit, and when it was ready he went to the elevator to pick it up.  When he didn’t pay for the seed, the elevator sued him in the local court in Indiana.  He sought to dismiss the case on the basis that the Indiana court didn’t have jurisdiction over him. He claimed that he lacked sufficient minimum contacts with Indiana to be sued there.  The court disagreed.  The Michigan farmer had “purposely availed” himself of the privilege of conducting business in Indiana.  Because of that, the court reasoned, he could have reasonably anticipated being subject to the Indiana judicial system if he didn’t pay his bill.  His due process rights were also not violated – his farm was less than 20 miles away from the Indiana elevator.

If you intentionally conduct business in a state and are sued as a result of your contacts and actions with that state, that state’s courts will likely have personal jurisdiction over you.

Social Security Planning for Farmers

Introduction

Part of retirement planning for a farmer includes Social Security benefits.  Relatedly, if you are nearing retirement age you might be asking yourself when you should start drawing Social Security benefits. The answer is, “it depends.”  But there are a few principles to keep in mind.

The first point to keep in mind is that maximum Social Security benefits can be received if you don’t withdraw benefits until you reach full retirement age – that’s presently between ages 66 and 67.  Additional benefits can be achieved for each year of postponement until you reach age 70.  Another point is that some Social Security benefits are reduced once certain income thresholds are reached.  For 2024, if you haven’t reached full retirement age and earn more than $22,320, benefits get reduced $1 for every $2 above the limit.  During the year in which you reach full retirement age, the earnings limit is $59,520 with a $1 dollar reduction for every $3 dollars over the limit. Once you hit full retirement age, the limit on earning drops off. 

In-kind wages count toward the earnings limitation test, but employer-provided health insurance benefits don’t.  Also, federal farm program payments are not earnings for years other than the first year you apply for Social Security benefits. 

So, when should you start drawing benefits?  It depends on your particular situation and your retirement plan.  The Social Security Administration has some useful online calculators that can help.  Check out ssa.gov.

Common Estate Planning Mistakes of Farmers

What are some common mistakes that farmers and ranchers make when it comes to estate planning? 

Consider the following:

• Not ensuring title ownership of property complies with your overall estate planning goals and objectives. This includes the proper use of jointly held property, as well as IRAs and other documents that have beneficiary designations. 
• Not knowing what the language in a deed means for purposes of passage of the property at death.
• Leaving everything outright to a surviving spouse when the family wealth is potentially subject to federal estate tax.
• Thinking that “fair” means “equal.” If you have both “on-farm” and “off-farm” heirs, the control of the family business should pass to the “on-farm” heirs, and the “off-farms” heirs should get an income interest that is roughly balanced in value to that of the “on-farm” heirs’ control interest.  Leaving the farm to all the kids equally is rarely a good idea in that situation.
• Letting tax issues drive the process.
• Not preserving records and key documents in a secure place where the people that will need to find them know where they are. 
• And not routinely reviewing your plan. Life events may have changed your goals or objectives.

I could list more, but these are some big ones.  Try to avoid these mistakes with your estate plan.

When is a Partnership Formed?

Farmers and ranchers often do business informally.  That informality can raise a question of whether the business arrangement has created a partnership.  If that is determined to be the case, numerous legal issues might be created. 

A big potential issue is that of unlimited liability.  Partners are jointly and severally liable for the debts of the partnership that arise out of partnership business.  Also, a partnership files its taxes differently than do individuals, and assets that are deemed to be partnership assets could pass differently upon the death of someone deemed to be a partner.

So how do you know if your informal arrangement is a partnership?  From a tax standpoint, if you’re splitting net income from the activity rather than gross, IRS could claim the activity is a partnership.  While simply jointly owning assets is not enough, by itself, to constitute a partnership, if you refer to you and your co-worker as “partners” or create a partnership bank account or fill out FSA documents as a “partnership,” a court could conclude the activity is a partnership.  Most crop-share or livestock share leases are not partnerships, but you must be careful.  It’s best to execute a written lease and clearly state that no partnership is intended if you don’t want questions to come up.

The IRS missed asserting that an informal partnership arrangement had been created by a mother and her daughter in a Tax Court case last year involving an Oklahoma ranch, and also lost on a hobby loss argument.  Carson v. Comr., 2024 U.S. Tax Ct. LEXIS 1624 (U.S. Tax Ct. May 18, 2023).  Don't count on IRS missing the same arguments in your situation.

Conclusion

There will be more issues to discuss next time.

FBAR; Read Before Signing; Reporting 4-H Income and Attorney-Client Privilege

Overview

One of the things that my law students learn shortly into a new semester is that agricultural law covers a wide array of topic matters and will address many areas of the law that they have yet to be exposed to.  That is on display in today’ blog article.

Post-death FBAR penalties, reading contracts, proper reporting of 4-H Fair income, and a limitation on the attorney-client privilege – these are the topics of today’s post.

FBAR Penalties Post-Death

In recent years some American farmers have started farming operations in foreign countries, particularly in South America.  For these farmers, a provision of the Bank Secrecy Act is important, and the penalties are harsh if the rule is violated. 

If you have a foreign account containing $10,000 or more, you must report it to the IRS by the annual tax filing deadline.  In a United States v. Gaynor, No. 2:21-cv-00382-JLB-KCD, 2023 U.S. Dist. LEXIS 157733 (M.D. Fla. Sept. 6, 2023), a surviving spouse inherited her husband’s foreign bank and investment accounts when he died in 2003.  She didn’t learn about the accounts for some time and, as a result, didn’t make the required filings with the financial crimes network – a branch of the IRS.  She eventually got everything reported. When she died in 2021, the IRS came after the estate for almost $20 million in penalties for a willful failure to file the required forms for several years.  But the court said her failure to file wasn’t willful.  So, the estate escaped having to pay the enormous amount. 

If you have farming activities outside the U.S. and have foreign bank accounts, make sure you file Form FinCen 114 and report those accounts each year to the IRS.  The penalties can be huge – especially if the failure to file was willful.  And, they can be imposed on your estate post-death. 

If this reporting requirement might apply to you, ask your tax professional about it.

The Necessity of Reading Contracts Before Signing

I am sure you have heard it said that you shouldn’t sign anything before reading it.  We’ve all violated that rule in some fashion.  Most of the time, there might not be any consequences, but sometimes those consequences can be significant.  That’s especially true when it comes to financial documents.In a recent case, a farmer consolidated loans with a local bank in return for a 30-year installment note.  Or so he thought.  Actually, the note said that he had 30 years to pay it off with annual payments unless the bank decided to demand payment in full at any time.  He didn’t read that part.  He also thought the interest rate was a fixed 4.25 percent, but that was only for the first five years.  After that the rate became variable.  He signed the note and the associated paperwork and was current on the payments through the first three years, when the bank demanded payment in full in 14 days.

Local banks don’t normally sell these types of instruments on a secondary market.  That should be a tip that you won’t get a long-term fixed rate. What happened in this situation was that the bank was looking at recently submitted financials and determined that while the farmer was able to make the current annual payment, that wouldn’t be the case when the interest rate became a much higher variable rate.  So, the bank called the loan. 

That left the farmer with limited options – either pay the note in full immediately, get the bank to sign a forbearance agreement and get a loan from another bank with better terms, mediate the dispute or file Chapter 12 bankruptcy.  None of those are great options. 

Make sure you read and understand what you sign.  The legal consequences of not doing so can be significant.

Proper Reporting of 4-H Fair Sale Income

Members of 4-H clubs or FFA Chapters often raise livestock as part of the educational program.  When that livestock is sold at the end of the fair, what are the tax issues that are involved?

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 also true if the 4-H or FFA member 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? 

Raising livestock as a 4-H or FFA project can provide valuable life-lessons in responsibility.  By understanding the tax rules associated with the project sales, it can also teach a valuable lesson in business.

Crime-Fraud Exception to the Attorney-Client Privilege

Communications between an attorney and client are protected by the attorney-client privilege.  But if the legal advice given leads to you engaging in an illegal or fraudulent activity, the advice may not be protected, and serious consequences could result.  I’ll be back in a moment to discuss.

Normally, communications with your attorney are protected from disclosure.  But an exception applies if your attorney provides legal advice that leads to you committing a fraudulent act or crime.  See, e.g., United States v. Zolin, 491 U.S. 554 (1989).  For the rural attorney the exception can come up in bankruptcy planning as well as estate planning where asset protection is involved.  There are legitimate strategies to utilize, but others are not and can be challenged as fraudulent or illegal.    This area of the law requires careful attention to detail both by the attorney and the client and the rules can be complex. 

Make sure you get sound planning advice from your attorney and maybe have a second set of eyes in the firm look over a proposed plan.  If you are working with a solo practitioner, get permission to have the plan reviewed.  The law does allow a degree of asset protection when it comes to estate planning as well as farm bankruptcy.  But it must be done properly.  If you get good advice and don’t follow it, you could end up in serious legal trouble and maybe even as a target of a grand jury investigation.  

Those would not be pleasant experiences.

Conclusion

There are many ways that the law intersects agriculture.  Again, this just is a brief sample of some of the ways.

Rural Practice Digest - Substack

Overview

I have started a new Substack that contains the “Rural Practice Digest.”  You can access it at mceowenaglawandtax.substack.com.  While I will post other content from time-to-time that is available without a paid subscription, the Digest is for paid subscribers.  The inaugural edition is 22 pages in length and covers a wide array of legal and tax topics of importance to agricultural producers, agribusinesses, rural landowners and those that represent them.

Contents

Volume 1, Edition 1 sets the style for future editions - a lead article and then a series of annotations of court opinions, IRS developments and administrative agency regulatory decisions.  The lead article for Volume 1 concerns losses related to cooperatives.  The USDA is projecting that farm income will be down significantly this year.  That means losses will be incurred by some and some of those will involve losses associated with interests in cooperatives.  The treatment of losses on interests in cooperatives is unique and that’s what I focus on in the article.

The remaining 19-pages of the Digest focus on various other aspect of the law that impacts farmers and ranchers. Here’s an overview of the annotation topics that you will find in Issue 1:

• Chapter 12 Bankruptcy
• Partnership Election – BBA
• Valuation Rules and Options
• S Corporation Losses
• Nuisance
• Fair Credit Reporting Act
• Irrigation Return Flow Exemption and the CWA
• What is a WOTUS?
• EPA Regulation Threatens AI
• Trustee Liability for Taxes
• Farm Bill
• Tax Reimbursement Clauses in IDGTs
• QTIP Marital Trusts and Gift Tax
• FBAR Penalties
• Conservation Easements
• Hobby Losses
• Sustainable Aviation Fuel
• IRS Procedures and Announcements
• Timeliness of Tax Court Petition
• BBA Election
• SCOTUS Opinion on Fees to Develop Property
• Quiet Title Act
• Animal I.D.
• “Ag Gag” Update
• What is a “Misleading” Financing Statement
• Recent State Court Opinions
• Upcoming Seminars

Substack Contents

In addition to the Rural Practice Digest, I plan on adding video content, practitioner forms and other content designed to aid those representing agricultural clients in legal and tax matters, and others simply interested in keeping up on what’s happening in the world of agricultural law and taxation.

Conclusion

Thank you in advance for your subscription.  I trust that you will find the Digest to be an aid to your practice.  Your comments are welcome.  mceowenaglawandtax.substack.com

From the Desk…and Email…and Phone… (Ag Law Style)

Overview

Today’s post is a summary of just a snippet of the items that have come across my desk in recent days.  It’s been a particularly busy time.  The semester has ended at the two universities I teach at, exams are graded and now the seminar season heats up in earnest for the rest of the year.  This week it’s Branson for a two-day farm tax and farm estate/business planning seminar.  Then it’s back to the law school to do the anchor leg of the law school’s annual June CLE.  Next week it’s a national probate seminar and a fence law CLE.  The following week involves battling the IRS on a Tax Court case and the line between currently deductible expenses and those that must be capitalized.  Oh, and I’ll soon start a new subscription publication.  The first edition of the first volume is about ready.  So stay tuned.

For now, today’s post is on miscellaneous ag law topics.

Aerial Crop Dusting

Most cases involving injury to property or to individuals are based in negligence.  That means that someone breached a duty that was owed to someone else that caused damage to them or injured their property.  But there are some situations where a strict liability rule applies.  One of those involves the aerial application of chemicals to crops.  It is perhaps the most frequent application of the doctrine to agriculture. It’s based on the notion that crop dusting is an inherently dangerous activity. In addition, some states may have regulations applicable to aerial crop dusting.  For example, in Arkansas, violation of aerial crop spraying regulations constitutes evidence of negligence, and the negligence of crop sprayers can be imputed to landowners. 

If you utilize crop dusting as part of your farming operation, it’s best from a liability standpoint to hire the work done.  In that event, if chemical drift occurs and damages a neighbor’s crops, trees or foliage, you won’t be liable if you didn’t control or were otherwise involved in how the spraying was to be done.  Especially if all applicable regulations are followed.

Right of First Refusal

A right of first refusal allows the holder the right to buy property on the same terms offered to another bona fide purchaser.  Once notified, the holder can either choose to buy the property on the same terms offered to a third party or decline and allow the owner to sell to the third party.  A right of first refusal can be useful in ag land transactions when there is a desire to ensure that a party has a chance to acquire the property. 

A right of first refusal can be useful in certain settings involving the sale of agricultural land.  Perhaps a longstanding tenant would like to be given a chance to acquire the leased land.  Or maybe a certain family member should be given the chance to buy into the family farming operation.  But it is critical that the property actually be offered to the holder of the right before it is sold to someone else.  If that doesn’t happen the owner can be sued for monetary damages and the third party that had either actual or constructive notice of the right of first refusal can be sued for specific performance.

When a right of first refusal is involved, it’s a good idea to record it on the land records to put the public and any potential buyer on notice.  Also, investigate changes concerning the property – such as to whom lease payments are being made.  The holder must stay vigilant to protect their right.

Ag Leases and Taxes

Leasing farmland is critical to many farmers and farming operations.  What’s the best way to structure an ag lease from a tax standpoint?  Tenants and landlords are often good at understanding the economics of a farm lease and utilize the best type of lease to fit their situation.  A farm lease can be structured to appropriately balance the risk and return between the landlord and tenant. 

There are also many income tax issues associated with leasing farmland.  For the tenant farmer, the lease income is income from a farming business.  That means it’s subject to self-employment tax.  It also means that the tenant can take advantage of the tax provisions that are available for persons that are engaged in the trade or business of farming. 

Whether the landlord gets those same tax advantages depends on whether the landlord is materially participating.  If so, the landlord has self-employment income, but is eligible to exclude at least a portion of USDA cost-share payments from income. The landlord can also deduct soil and water conservation expenses, as well as fertilizer and lime costs.  A landlord engaged in farming can also elect farm income averaging, can receive federal farm program benefits, and can have a special use valuation election made in the estate at death to help save federal estate tax. 

The right type of lease can be very beneficial. 

Corporate Loans

Lending corporate cash to shareholders of a closely-held corporation can be an effective way to give the shareholders use of the funds without the double-tax consequences of dividends.  But an advance or loan to a shareholder must be a bona fide loan to avoid being a constructive dividend.  In addition, the loan must have adequate interest. If it doesn’t meet these criteria, it will be taxed as a dividend distribution.  In addition, it’s not enough for you to simply declare that you intended the withdrawal to be a loan.  There must be additional reliable evidence that the transaction is a debt.  So, what does the IRS look for to determine if a loan is really a loan?

If you have unlimited control of the corporation, there’s a greater potential for a disguised dividend, and if the corporation hasn’t been paying dividends despite having the money to do so, that’s another strike.  Did you record the advances on the corporate books and records as loans and execute notes with interest charged, a fixed maturity date and security given?  Were there attempts to repay the advances in a bona fide manner?  The control issue is a big one for farming and ranching corporations, and few farm corporations pay dividends.  This makes it critical to carefully build up evidence supporting loan characterization. 

NewH-2A Rule

The H-2A temporary ag worker program helps employers who anticipate a lack of available domestic workers.  Under the program foreign workers are brought to the U.S. to perform temporary or seasonal ag work including, but not limited to, labor for planting, cultivating, or harvesting.  Recently, the Department of Labor published a Final Rule designed to enhance protections for workers under the H-2A program. 

Effective June 28, a new Department of Labor final rule will take effect.  The rule is termed, “Improving Protections for Workers in Temporary Agricultural Employment in the United States.”   The rule will impact the temporary farmworker program.  The rule’s purpose is to increase wage transparency, clarify when an employee can be terminated for cause, and prevent employer retaliation among temporary seasonal ag workers. There are also expanded transportation safety requirements, new employer disclosure requirements and new rules for worker self-advocacy.   

The rule is lengthy and complex, but here’s a few points of particular importance:

• New restrictions on an employers’ ability to terminate workers;
• Workers employed under the H-2A program have the right to payment for three-fourths of the hours offered in the work contract, even if the work ends early; housing and transportation until the worker leaves; payment for outbound transportation; and, if the worker is a U.S. worker, to be contacted for employment in the next year, unless they are terminated for cause.
• An employer may only terminate a worker “for cause” when the employer demonstrates the worker has failed to comply with employer policies or rules or to satisfactorily perform job duties after issuing progressive discipline, unless the worker has engaged in egregious misconduct. The rule establishes five conditions that must be satisfied to ensure disciplinary and/or termination processes are justified and reasonable.
• For vehicles that are required by Department of Transportation regulations to be manufactured with seat belts, the employer must retain and maintain those seat belts in good working order and prohibit the operation of a vehicle unless each worker is wearing a seat belt.

Only applications for H-2A employer certifications submitted to the Department of Labor on or after August 29 will be subject to the new rule. 

You can expect legal challenges to the rule.  But, in the meantime, if you use temporary foreign workers on your farm, you should start creating and implementing policies and procedures to comply with the new rule as well as updating your existing H-2A applications.

The rule is published at 89 Fed. Reg. 33898.

Conclusion

The topics in ag law and tax are diverse.  There’s never a dull moment. 

Farm Bankruptcy; Sovereign Immunity; Farm Lease and Pipeline Damages

Introduction

Farmers and ranchers face numerous legal issues on a regular basis.  The variety is vast from contract issues to income tax, estate and business planning, to real estate-related issues.  Other issues come up with water, criminal matters, and environmental law.  Then there are frequent issues with federal and state administrative agencies. 

With today’s article I look at some recent cases that illustrate issues with farm bankruptcy, sovereign immunity, farm lease law and damages from an alleged leaking pipeline.

A potpourri of legal issues facing farmers and ranchers – it’s the topic of today’s post.

Farm Bankruptcy

This first case from Kansas demonstrates that a Chapter 12 bankruptcy debtor must have a legitimate basis for seeking a modification of the Chapter 12 reorganization plan.  A mere hope in getting financing is not a change in circumstances that would justify reimposing the automatic stay (stopping creditors from acting).  The farm debtor must be able to put a feasible plan together for paying debts.  Here, the plan had been approved, but then the farm debtor couldn’t make the payments. 

Debtors Lacked Reasonable Likelihood of Putting Re-Tooled Chapter 12 Plan Together

In re Sis, No. 21-10123, 2024 Bankr. LEXIS 124 (Bankr. D. Kan. Jan. 18, 2024)

The debtors Chapter 12 plan was confirmed in early 2022, but the debtors soon had trouble making plan payments. They managed to make an annual payment to a creditor (bank) but failed to do so the next year.  The Chapter 12 trustee filed a motion to dismiss the case in late 2023, and another creditor filed a motion for relief from the automatic stay.   The debtors sought to re-impose the automatic stay to get more time to modify their Chapter 12 plan and make payments to a creditor to avoid the bank foreclosing on their farm.    The bankruptcy court denied the debtors’ motion.  The court noted the debtors’ genuine efforts to secure financing and sell assets but determined that the debtors had little likelihood of success in modifying their reorganization plan in a manner allowing them to make plan payments.  The court also determined that the debtors had not endured a substantial change in circumstances to support modifying their Chapter 12 plan.  The debtors merely had a hope of obtaining financing was not a change in circumstances.  As a result, the court denied the debtors’ motion for a temporary restraining order because the debtors had not shown a substantial likelihood of prevailing on the merits or any extraordinary circumstances that would justify reimposition of the automatic stay. In late 2023, the court dismissed the debtors’ Chapter 12 case.  Therefore, the court the court directed the debtors to either voluntarily dismiss the adversary proceeding or provide reasons why it should not be dismissed.  The court noted that failure to file a voluntary dismissal or a statement showing cause, within fourteen days of the court’s order in this case would result in the court dismissal of the case. 

Suing the Government – Sovereign Immunity

Recently, the U.S. Supreme Court noted the exception to the general rule that the federal government can’t be sued for damages. 

Fair Credit Reporting Act Waives Sovereign Immunity 

United States Department of Agriculture Rural Development Housing Service v. Kirtz, No. 22-

846, 2024 U.S. LEXIS 589 (U.S. Feb. 8, 2024)

 The defendant received a loan from the plaintiff, a division of the U.S. Department of Agriculture, which was repaid in full by mid-2018.  However, the USDA repeatedly informed a consumer credit reporting company that the defendant’s account was past due.  As a result, thedefendant’s credit score was damaged and his ability to secure future loans at affordable rates was threatened.  The defendant notified the company of the error and the company, in turn, notified the USDA.  However, the USDA did not correct its records and the defendant sued for either a negligent or willful violation on the Fair Credit Reporting Act (FCRA).  The USDA moved to dismiss the case based on sovereign immunity.  The trial court dismissed the case, the appellate court reversed on the basis that the Congress had amended the FCRA to authorize suits for damages against “any person” who violates the FCRA and that “person” includes any governmental agency.  The Supreme Court agreed to hear the case to clear up contrary conclusions reached by the Third, Seventh and D.C. Circuits (holding that the FCRA authorizes suits against government agencies) and the Fourth and Ninth Circuits (holding that the FCRA bars consumer suits against federal agencies). 

The Supreme Court noted that a U.S. is generally immune from suits seeking money damages unless the Congress waived that immunity by making a clear legislative statement.  Here, the Court unanimously determined that the FCRA clearly waived sovereign immunity by applying its provisions to persons who furnish information to consumer reporting agencies, and that no separate provision addressing sovereign immunity was required.  The Court also noted that its holding would not make the States susceptible to consumer suits for money damages because the FCRA was enacted pursuant to the Commerce Clause and, as such, does not give the Congress the power to abrogate state sovereign immunity.  

Farm Lease Law

The law governing farm leases differs from state-to-state.  The following case from Kansas makes a couple of points.  First, if the lease is in writing, the written terms control.  Second, when leased land is sold, the buyer takes the land subject to the existing lease.  Those are two key points that will apply in every state. 

Interpretation of Farm Lease at Issue

Cure Land, LLC v. Ihrig, No. 125,709, 2023 Kan. App. Unpub. LEXIS 479 (Kan. Ct. App. Dec. 1, 2023)

The parties entered into a cash farm lease for the calendar year 2020.  The lease specified that the defendant (tenant) was allowed to harvest any wheat crop planted in the fall of 2020 (or in the fall thereafter if the lease was renewed) by the following summer.  The lease also stated that the crops planted during the term of the lease was to be planted on a rotational basis rather than in a continuous crop fashion unless adequate moisture was present, and the landlord consented.  The lease also stated that continuous cropping was normal on the irrigated ground.  The lease renewed for 2021 and notice to terminate was given on August 27, 2021.  The ownership of the leased ground then changed hands, and the tenant notified the new landlord of the tenant’s intent to plant wheat on the irrigated ground and harvest it in 2022.  The prior owned informed the defendant that planting wheat was not permitted in the fall of 2021, as did the new owner a few days later.  In October of 2021, the defendant harvested corn from the irrigated ground while it was still “high moisture corn,” a practice the tenant had not previously engaged in and planted wheat the next day.  The defendant paid the 2021 lease obligation through the end of 2021 and paid the balance on June 22, 2022.  The plaintiff (the new landlord) sued for breach of contract and unjust enrichment.  The trial court ruled in favor of the new landlord, finding that the lease did not permit the defendant to plant fall 2021 wheat. The trial court interpreted the lease provisions, considering the distinction between wheat ground and irrigated ground, and concluded that the defendant’s interpretation would result in an unintended windfall. Additionally, the court found that the purchaser of the leased land had the right to enforce its terms.  The appellate court affirmed. 

The Proof and Computation of Property Damage

When you incur damage to your property being able to prove those damages and the amount of the loss is critical.  A recent case involving a pipeline under an Oklahoma ranch illustrates these principles.

Cattle Ranch’s Lawsuit Against Energy Company for Pipeline Leak Revived

Lazy S Ranch Properties, LLC v. Valero Terminaling & Distribution Co., No. 23-7001, 2024 U.S. App. LEXIS 3397 (10th Cir. Feb. 13, 2024)

The plaintiff, an Oklahoma cattle ranch noticed a diesel fuel odor coming from a cave.  The ranch hired experts to test the soil, surface water and groundwater for possible hydrocarbon contamination.  The tests found trace amounts of refined petroleum products.  The plaintiff sued the defendant energy company in late 2019 alleging claims of negligence, negligence per se, trespass, unjust enrichment, private nuisance and public nuisance.  The defendant moved for summary judgment on the basis that its pipeline carrying gasoline and diesel fuel beneath the ranch was not leaking and that the plaintiff failed to show any injury from the de minimis presence of hydrocarbons. 

The trial court analyzed the plaintiff’s various tort claims together which required a minimum level of contamination to be present so as to establish injury for each claim.  Ultimately, the trial court granted summary judgment to the defendant.  On appeal, the appellate court held that the trial court’s combining of the plaintiff’s tort claims under legal injury confused the analysis because “what constitutes a legal injury will be different based on the elements of each tort.”  On the two nuisance-based claims, the appellate court noted the plaintiff owners’ testimony that they discontinued their use of the land, in part, due to an odor that induced headaches, stopped water sales, and barred others from recreational activities on the ranch.  The appellate court viewed this as sufficient evidence to warrant trial on whether the defendant had committed a nuisance.  On the negligence issue, the appellate court determined that the plaintiff had presented sufficient evidence to create a genuine issue of material fact concerning legal injury and causation on the private and public nuisance as well as the negligence per se claim.  However, the appellate court affirmed the trial court on the plaintiff’s constructive fraud and trespass claims citing a lack of evidence that the defendant had any intent to commit a trespass or knew that its pipeline was leaking or overlooked the leak or failed to tell the plaintiff about a leak in the pipeline. 

Reporting of Beneficial Ownership Information; Employee Retention Credit; Exclusion of Gain on Sale of Land with Residence; and a Farm Lease

Introduction

As I try to catch up on my writing after being on the road for a lengthy time, I have several items that seem to be recurring themes in what I deal with. 

Another potpourri of random ag law and tax issues – it’s the topic of today’s post.

New Corporate Reporting Requirements

The Corporate Transparency Act (CTA), P.L. 116-283, enacted in 2021 as part of the National Defense Authorization Act, was passed to enhance transparency in entity structures and ownership to combat money laundering, tax fraud and other illicit activities. In short, it’s an anti-money laundering initiative designed to catch those that are using shell corporations to avoid tax.  It is designed to capture more information about the ownership of specific entities operating in or accessing the U.S. market.  The effective date of the CTA is January 1, 2024.    

Who needs to report?  The CTA breaks down the reporting requirement of “beneficial ownership information” between “domestic reporting companies” and “foreign reporting companies.”  A domestic reporting company is a corporation, limited liability company (LLC), limited liability partnership (LLP) or any other entity that is created by filing of a document with a Secretary of State or any similar office under the law of a state or Indian Tribe.  A foreign reporting company is a corporation, LLC or other foreign entity that is formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a Secretary of State or any similar office. 

Note:  Sole proprietorships that don’t use a single-member LLC are not considered to be a reporting company. 

Reporting companies typically include LLPs, LLLPs, business trusts, and most limited partnerships and other entities are generally created by a filing with a Secretary of State or similar office. 

Exemptions.  Exemptions from the reporting requirement apply for securities issuers, domestic governmental authorities, insurance companies, credit unions, certain large accounting firms, tax-exempt entities, public utility companies, banks, and other entities that don’t fall into specified categories.  In total there are 23 exemptions including an exemption for businesses with 20 or more full-time U.S. employees, report at least $5 million on the latest filed tax return and have a physical presence in the U.S.   But, for example, otherwise exempt businesses (including farms and ranches) that have other businesses such as an equipment or land LLC or any other related entity will have to file a report detailing the required beneficial ownership information.  Having one large entity won’t exempt the other entities. 

What is a “Beneficial Owner”?  A beneficial owner can fall into one of two categories defined as any individual who, directly or indirectly, either:

• Exercises substantial control over a reporting company, or
• Owns or controls at least 25 percent of the ownership interests of a reporting company

Note:  Beneficial ownership is categorized as those with ownership interests reflected through capital and profit interests in the company.

What must a beneficial owner do?  Beneficial owners must report to the Financial Crimes Enforcement Network (FinCEN).  FinCEN is a bureau of the U.S. Department of the Treasury that collects and analyzes information about financial transactions to combat domestic and international money laundering, terrorist financing and other international crimes.  Beneficial owners must report their name, date of birth, current residential or business street address, and unique identifier number from a recognized issuing jurisdiction and a photo of that document.  Company applicants can only be the individual who directly files the document that creates the entity, or the document that first registers the entity to do business in the U.S.  A company applicant may also be the individual who is primarily responsible for directing or controlling the filing of the relevant document by someone else. This last point makes it critical for professional advisors to carefully define the scope ot engagement for advisory services with clients.

Note:  If an individual files their information directly with FinCEN, they may be issued a “FinCEN Identifier” directly, which can be provided on a BOI report instead of the required information.

Filing deadlines.  Reporting companies created or registered in 2024 have 90 days from being registered with the state to file initial reports disclosing the persons that own or control the business. NPRM (RIN 1506-AB62) (Sept 28, 2023). If a business was created or registered to do business before 2024, the business has until January 1 of 2025 to file the initial report.  Businesses formed after 2024 must file within 30 days of formation.  Reports must be updated within 30 days of a change to the beneficial ownership of the business, or 30 days from when the beneficial owner becomes aware of or has reason to know of inaccurate information that was previously filed. 

Note:  FinCEN estimates about 32.6 million BOI reports will be filed in 2024, and about 14.5 million such reports will be filed annually in 2025 and beyond. The total five-year average of expected BOI update reports is almost 12.9 million.

Penalties.  The penalty for not filing is steep and can carry the possibility of imprisonment.  Specifically, noncompliance can result in escalating fines ranging from $500 per day up to $10,000 total and prison time of up to two years.     

State issues.  A state is required to notify filers upon initial formation/registration of the requirement to provide beneficial ownership information to the FinCEN.  In addition, states must provide filers with the appropriate reporting company Form.

Withdrawing an ERC Claim

Over the past year or so many fraudulent Employee Retention Credit claims have been filed. You may have heard or seen the ads from firms aggressively pushing the ability to claim the ERC.    It’s gotten so bad that the IRS stopped processing claims for the fourth quarter of 2023.  Many farming operations likely didn’t qualify for the ERC because they didn’t experience at least a 20 percent reduction in gross receipts on an aggregated basis (an eligibility requirement for the ERC) but may have submitted a claim.

Now IRS has provided a path for those that want to withdraw their claim so as not to be hit with a tax deficiency notice and penalties. IR 2023-169 (Sept. 14, 2023).

A withdrawal is possible for those that filed a claim but haven’t received notice that the claim is under audit.  Just file Form 943 and write “withdrawn” on the left-hand margin.  Make sure to sign and date the Form before sending it to the IRS. If your claim is under audit provide the Form directly to the auditor.  If you received a refund but haven’t cashed it, write “VOID and ERC WITHDRAWAL” and send it back to the IRS. 

How Much Gain on Land Can Be Excluded Under Home Sale Rule?

When you sell your principal residence, you can exclude up to $500,000 of gain on a joint return ($250,000 on a single return) if you have owned the home and used it as your principal residence for at least two out of the last five years immediately preceding the sale.  I.R.C. §121.  But how much land can be included with the sale of the home and have gain excluded within that $500,000 limitation?  The Treasury Regulations provide guidance. 

For starters, the land must be adjacent to the principal residence and be used as a part of the residence. Treas Reg. §1.121-1(b)(3).  In addition, the taxpayer must own the land in the taxpayer’s name rather than in an entity that the taxpayer has an ownership interest in (unless the entity is an “eligible entity” defined under Treas. Reg. §301.7701-3(1)).  Land that’s been used in farming within the two-year period before the sale isn’t eligible because its use in farming means it’s not been used as part of the residence. 

Note:  Sale of the principal residence and sale of the adjacent land is treated as a single sale for purposes of the gain limitation amount.  That’s true even if the sale occurs in different years but within the two-year time constraint.  Treas. Reg. §1.121-1(b)(3)(ii)(c).  Also, when computing the maximum limitation for the gain exclusion, the sale of the principal residence is excluded before any gain for the sale of the vacant land. Treas. Reg. §1.121-1(b)(3)(ii). 

For land that is eligible to be included with the residence, how much can be included?  It depends.  Land that contains a garden for home use and land that is landscaped as a yard can be included.  Also, local zoning rules might be instructive.  This all means that it’s a fact-based analysis.  There is no bright-line rule.  IRS rulings and caselaw illustrate that point. 

Written Farm Lease Expires by its Terms; No Holdover Tenancy

A recent case from Kansas illustrates how necessary it is to pay attention to the terms of a written farm lease.  Under the facts of the case, the plaintiff entered into a written farm lease with a landowner on January 10, 2018.  The purpose of the lease was the maintenance and harvesting a hay crop on the leased ground.  By its terms, the lease terminated on December 31, 2018, and contained a provision specifying that the parties could mutually agree in writing to extend the lease.  However, the parties did not extend the lease and it expired as of December 31, 2018.

In 2019, the landowner sold the farm to a third-party buyer.  After the sale, but before the buyer took possession, the plaintiff had the hay field fertilized.  During the summer of 2019, the new landowner hired the defendant to cut and bale the hay, which the defendant ultimately completed late one night. However, early the next morning the plaintiff entered the property and took some of the hay after it was harvested and baled.  The new owner called law enforcement and the plaintiff was informed not to return to the property.  But the plaintiff returned to the property and took more hay.  The plaintiff was criminally charged for multiple offenses.  Ultimately, the plaintiff received a diversion in lieu of prosecution for the charges (against the new owner’s wishes) and was required to provide restitution and perform community service.

The plaintiff claimed that he was entitled to the hay bales because he had a verbal lease and tried to tender a rent check after removing the bales.  The landowner refused to cash the check and moved cattle onto the hay ground.  The plaintiff sued for breach of contract, breach of duty of good and fair dealing, and tortious interference with a contract or business relationship.  The trial court rejected all of the claims and dismissed the case as a matter of law on the basis that the plaintiff did not have a valid lease after 2018.  The trial court denied a motion to reconsider.  On appeal, the appellate court affirmed noting that the lease had not been extended in writing and a holdover tenancy did not exist.  As for monetary damages, the new landowner recovered $27,000 from the plaintiff.  Thoele v. Lee, 2023 Kan. App. Unpub. LEXIS 381 (Kan. Ct. App. Sept. 15, 2023).

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. 

Minnesota Farmer Protection Law – Update

Overview

Last fall I wrote about a case from Minnesota involving that state’s law enacted in 1991 to provide contract protection to farmers.  The law arose out of the farm crisis of the 1980s and was applied in a contract production case.  The farmers ultimately won that case, and now the trial court has issued its remand decision with an important ruling on the choice of law provision that was utilized in the contracts.  That will be an important point for other state legislatures with or considering similar legislation.

Producer protection legislation and recent case – it’s the topic of today’s post. 

Minnesota Farmer Protection Law

In early 1988, the Minnesota Legislature directed the Minnesota Department of Agriculture (MDA) to put together a task force to study the issue of agricultural contract production and recommend to the legislature how it might provide additional legal and economic protection to contract growers.  The MDA’s Final Report was issued in February of 1990.  During the 1990 legislative session, the Minnesota legislature approved various economic protections for farmers based on the task force recommendations focusing particularly on parent liability.  As signed into law, MN Stat. §17.93 provides as follows:

“Parent company liability.  If an agricultural contractor is the subsidiary of another corporation, partnership, or association, the parent corporation, partnership or association is liable to a seller for the amount of any unpaid claim or contract performance claim if the contractor fails to pay or perform according to the terms of the contract.” 

In addition, MN Stat. §17.90 specified as follows:

“’Producer” means a person who produces or causes to be produced an agricultural commodity in a quantity beyond the person’s own family use and: (1) is able to transfer title to another; or (2) provides management input for the production of an agricultural commodity.”

The MDA then prepared a “statement of need and reasonableness” (SONAR) to implement the new statutory provision.  The SONAR referred to the legislation as the “Producer Protection Act” (PPA) and the MDA’s implementing rule (MN Rule 1572.0040) for MN Stat §17.93 which went into effect on March 4, 1991, read as follows:

“A corporation, partnership, sole proprietorship, or association that through ownership of capital stock, cumulative voting rights, voting trust agreements, or any other plan, agreement, or device, owns more than 50 percent of the common or preferred stock entitled to vote for directors of a subsidiary corporation or provides more than 50 percent of the management or control of a subsidiary is liable to a seller of agricultural commodities for any unpaid claim or contract performance claim of that subsidiary.”

During the same 1990 legislative session the Minnesota legislature approved and the governor signed into law MN Stat. §27.133.  This new law stated as follows:

“Parent company liability.  If a wholesale produce dealer is a subsidiary of another corporation, partnership, or association, the parent corporation, partnership, or association is liable to a seller for the amount of any unpaid claim or contract performance claim if the wholesale produce dealer fails to pay or perform in according to the terms of the contract and this chapter.”

Concerning this provision, the legislature stated, “It is therefore declared to be the policy of the legislature that certain financial protection be afforded those who are producers on the farm…”.

Also, under both MN Stat. §17.93 and MN Stat. §27.133, “contractor” and “wholesale produce dealer” were defined as “persons” and “person” was to be applied to corporations, partnerships and other unincorporated associations.”  MN Stat. §665.44, sub. 7. 

Minnesota Litigation

In 2017, the defendants entered into chicken production contracts with Prairie’s Best Farm, Inc. to grow chickens in exchange for monthly payments and bi-monthly bonus payments.  In late 2017, Simply Essentials bought the assets of Prairie’s Best and assumed the grower contracts.  Simply Essentials, incorporated in Delaware and headquartered in California, was the subsidiary of the plaintiff, Pitman Farms, which owned more than 50 percent of Simply Essentials.  Shortly thereafter, the plaintiff bought Simply Essentials’ membership interests and became its sole owner.  In 2019, Simply Essentials encountered financial trouble, ceased processing activities and notified the defendants that it was terminating the contracts effective three months later.  The defendants’ demands for payment in excess of $6 million from the plaintiff for breach of contract failed. Both parties sought a declaratory judgment concerning the application of the PPA to the contracts. 

The plaintiff claimed that the PPA did not apply because the defendants were not “sellers” and, even if they were, the PPA didn’t apply because Simply Essentials was an LLC rather than a “corporation, partnership, or association.  The plaintiff also asserted that the PPA’s parent company liability provisions didn’t apply to it because Delaware law applied, and that applying Minnesota law would violate the Dormant Commerce Clause.  The defendant’s counterclaim made the opposite arguments.

Trial court decision.  The trial court in Pitman Farms v. Kuehl Poultry, LLC, 508 F. Supp.3d 465 (D. Minn. 2020), ruled for the plaintiff, finding that the PPA did not apply by its terms because the defendants were not “sellers” and because Simply Essentials was an LLC rather than a “corporation, partnership, or association.”

Appellate decision.  On appeal, the appellate court unanimously reversed and remanded. Pitman Farms v. Kuehl Poultry, LLC, et al., 48 F.4th 866 (8th Cir. 2022).  The appellate court read the various statutes together to determine the legislature’s purpose and intent.  The appellate court noted that the parent company liability statute of MN Stat. §27.133, the PPA of §§17.90-17.98 and the MDA’s implementing rule all arose from the same legislative session, addressed the same issue, and contained nearly identical language.  Accordingly, the appellate court determined that the trial court should have looked to MN Stat. §27.133 when construing the meaning of “seller” contained in MN Stat. §17.93 and in MDA Rule 1572.0040.  When the various provisions were taken together, the appellate court determined that “seller” can include “producer” under the PPA and the MDA’s implementing regulation. 

The appellate court also concluded that the trial court erred in finding that “seller” was limited to transferors of title.  Because the defendants did not have title to the chickens and could not therefore transfer title, the trial court held that the PPA did not apply.  The appellate court held that such a construction was plainly contrary to the legislature’s intent in creating the PPA which was to provide financial protections to agricultural producers in general and not merely agricultural commodity sellers.  Further, because the appellate court determined that “seller” included “producer,” the defendants were covered by the PPA as providing management services in accordance with MN Stat. §17.90 (2) for the growing of the chickens under contract.  In addition, the appellate court held that the growers were also “sellers” for purposes of the parent company liability provision of MN Stat. §27.133.

The plaintiff also asserted that “subsidiary of another corporation, partnership or association” contained in MN Stat. §17.93 and §27.133 meant that both the parent and the subsidiary had to be either a corporation, partnership or an association.  The trial court agreed with this interpretation.  The appellate court also agreed but pointed out that LLCs (which Simply Essentials was) did not exist in Minnesota when the PPA was enacted and, as such, the legislature had not purposefully excluded them from the statute. The appellate court also noted that an LLC had been found to be a “person” for purposes of the Minnesota Human Rights Act.  That law defined “person” to include a partnership, association, or corporation.  In addition, an unpublished decision of the Minnesota Court of Appeals had previously held that an LLC was an “association” for purposes of a Minnesota oil transportation statute. Thus, there was no apparent reason why the legislature would have singled out LLCs to not be covered under the parent company liability provisions of the PPA. 

The appellate court also noted the strong public policy statement of the Minnesota legislature in enacting the PPA – to protect producers of agricultural commodities from economic harm due to parent business entities using their organizational form to avoid liability for their subsidiaries’ actions. The appellate court sent the case back to the trial court (remand) for a new decision consistent with the guidance that the appellate court provided.

Trial court remand decision.  On remand, the trial court (Pitman Farms v Kuehl Poultry, LLC, No. 19-cv-3040, 2023 U.S. Dist. LEXIS 97917 (D. Min. Jun. 6, 2023)) was faced with five issues: 1) whether a Minnesota choice of law clause in the grower contracts with Simply Essentials bound the plaintiff; 2) if the plaintiff was bound, whether the clause actually applied in the case; 3) whether Minnesota’s parent-liability line of cases apply to parents of foreign LLCs such as Simply Essentials; 4) if Minnesota parent liability law does apply to the plaintiff, whether there is a conflict between Minnesota and Delaware law; and 5) if Minnesota’s parent-liability authorities apply, whether they violate the “dormant” Commerce Clause.

The parties agreed that Minnesota law applied based on the choice of law provision in the contract that stated that Minnesota law applied.  As to whether the clause applied to the grower contracts the court noted that under Minnesota law, a non-party to a contract (such as the plaintiff) may be bound by the contract's forum-selection clause when the non-party is "'closely related' to the dispute such that it becomes 'foreseeable' that it will be bound.  The court determined that it wasn’t foreseeable to the plaintiff that it could be bound by the choice-of-law provision.  In addition, the court determined that the clause did not apply by virtue of the parent-liability theory. 

The court also determined that Minnesota law governed the growers’ claims.  The court noted that the growers were in Minnesota, the contract production activities occurred in Minnesota, and Delaware’s only connection with the matter was that Simply Essentials was organized under Delaware law.  Likewise, the court determined that there was no conflict between Minnesota and Delaware law, and that the Minnesota parent-liability authorities did not violate the dormant Commerce Clause and the Minnesota producer protection statute did not impose a burden on commerce outside the state of Minnesota. 

What remains of the case is a determination of damages for the growers. 

Conclusion

The case is an important one that provides a roadmap for other states as a model for legislation designed to protect growers under ag production contracts. 

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

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

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

Overview

A common interpretive problem in oil and gas conveyances and leases arises when the owner of a fractional mineral interest either conveys or reserves a fraction using unclear language.  One way that can happen is when a “double fraction” clause is used.  That’s a clause that creates uncertainty as to whether the grant or reservation is a fraction of what the grantor owns or a fraction of the whole interest.  For instance, if Bubba owns an undivided ½ interest in minerals and conveys “an undivided ½ interest in the minerals,” does that mean that Bubba conveyed a ½ interest in all of the minerals or simply ½ of Bubba’s ½?  This interpretive issue can also arise when mineral interests are devised from a decedent’s estate.  It also occurs when a conveyancing instrument refers to both “minerals” and a “royalty” or blends the two concepts in the same instrument.

The interpretive issues associated with a double fraction clause recently came up again in a Texas case.  That case involved the construction of a 1924 deed containing a mineral reservation clause, and it could have wide-ranging impact on oil and gas titles in Texas and, perhaps, elsewhere. 

The meaning of a “double-fraction” clause and the impact on future oil and gas conveyances – it’s the topic of today’s post.

Royalty Deed Interpretation

A royalty interest is an interest in a share of production, or the value or proceeds of production, free of the costs of production, when and if there is production.  It is usually expressed as a fraction.  But, the way those fractional interests are expressed can create confusion, whether the fraction is expressed as a “fraction of royalty” or as a “fractional royalty.” 

Fractional royalty interests.  With a fractional royalty interest, the owner is entitled to a share of gross production, free of cost in an amount determined by the fractional size of the owner’s interest.  The share of production the owner is entitled to does not “float” with royalties of differing amounts reserved in an oil and gas lease.  An expression of a fractional royalty clause is, for example, “an undivided 1/16^th royalty interest of any oil, gas, or minerals that may hereafter be produced.” 

Fraction of royalty interest.  With a fraction or royalty interest, the amount of production that is associated with the interest will “float” depending on the royalty reserved in an oil and gas lease.  The owner gets a share in production equal to a fraction multiplied by the royalty reserved in an oil and gas lease.  Examples of such a clause would be, “1/16^th of all oil and gas royalty” or “an undivided ½ interest in and to all of the royalty” or “1/2 of 1/8^th of the oil, gas and other mineral royalty that may be produced.”       

Double fractions.  Complexity increases when a double fraction is used to describe the royalty interest.  For instance, “1/4^th of 1/8^th of all royalty…” is an example of a double fraction clause.  Many courts utilize the multiplication approach and would conclude that such a clause would convey a 1/32^nd interest.  Indeed, for conveyance or reservation clauses drafted before the 1970s, the general assumption was that the royalty provided for in an oil and gas lease would always be 1/8^th.  Thus, a right to “1/4^th of royalty” would be the same thing as the right to 1/4^th of the 1/8^th royalty reserved in an oil and gas lease – a 1/32^nd royalty.  But, since the 1970s, mineral owners have often been able to negotiate a wider range of royalties in mineral leases with many of them larger than 1/8^th (often ranging from 10 percent to over 30 percent).  This resulted in the double fraction clause creating confusion as to the drafter’s intent.  This confusion can arise not only in oil and gas conveyancing instruments, but also in bequests from a decedent’s estate.

Bequests.  In Hysaw v. Dawkins, 483 S.W.3d 1 (Tex. 2015), the decedent executed a will in 1947 that divided three tracts of real estate among her three children.  The will also distributed her mineral estates on the tracts using double fraction language – “each of my children shall have and hold an undivided one-third (1/3) of an undivided one-eighth (1/8) of all oil, gas or other minerals in or under that may be produced from any of said lands… and should there be any royalty sold during my lifetime then [the three children], shall each receive one-third of the remainder of the unsold royalty.”  The question was whether the double fraction language fixed the heirs devised royalty at 1/24^th with any negotiated royalty above 1/8^th passing to the current fee owner, or if the decedent intended her heirs to receive 1/3 of all future royalties, regardless of what the royalty fraction was.  The heirs of two of the decedent’s children sought 1/3^rd  of the 1/5^th royalty in a new oil and gas lease, and the successors of the other child claimed that the successors of the siblings were only entitled to 1/3^rd of 1/8^th and that any additional royalty belonged to the fee simple owner. 

Note:  The Hysaw case involved the “estate-misconception theory.” That theory reflects the historic prevalent belief that, in entering into an oil-and-gas lease, a lessor retained only a 1/8 interest in the minerals rather than the entire mineral estate in "fee simple determinable.”  In turn, for decades afterwards, many lessors referred to their entire interest in the mineral estate with the simple use of “1/8.”  One court has described the “estate misconception” theory as follows: “In earlier times, many landowners labored under the misconception that when they leased their mineral estate to an operator, they only retained 1/8^th of the minerals in place, rather than a fee simple determinable with the possibility of reverter in the entirety of the mineral estate...  Therefore, when the landowner conveyed a mineral interest to a third party in land that was already subject to a lease, he would often use a fraction of 1/8 to express what interest he intended to convey in his possibility of reverter.  Since a landowner in reality retains a full 8/8 interest in the reverter, the application of the estate misconception doctrine has tremendous consequences.”  Greer v. Shook, 503 S.W.3d 571 (Tex. Ct. App. 2016).

The Texas Supreme Court determined that the outcome should turn on the decedent’s intent.  Based on the evidence, the Court found that intent to be to equally divide the royalties among the decedent’s children.  Accordingly, the Court held that the decedent had devised a 1/3^rd fraction of a royalty interest (regardless of the amount of that royalty) to each of her children.  In other words, the decedent has used the phrase "one-eighth royalty" as a shorthand phrase for the entire royalty interest that a lessor could retain under a mineral lease. She had left a floating 1/3^rd  royalty to each child.

Recent Texas Case  

Van Dyke v. The Navigator Group, No. 21-0146,

2023 Tex. LEXIS 144 (Tex. Sup. Ct. Feb. 17, 2023)

Facts.  This case culminated a decade-long battle over a mineral interest reservation involving a double fraction and accumulated royalties of approximately $44 million.  In 1924, the Mulkeys deeded their ranch to White and Tom reserving “one-half of one-eighth” of all minerals and mineral rights.   After the conveyance, both parties conducted themselves as if they believed that they each owned one-half of the mineral interest, as did all successors-in-interest.

 In 2012, an energy company drilled a well and paid both the successors-in-interest to the Mulkeys (the “Mulkey parties”) and the successors-in-interest to White and Tom (the “White parties”) equal one-half shares.  The White parties filed a trespass-to-try-title action, claiming that the 1924 deed reserved only a 1/16^th (1/2 of 1/8^th) of the minerals to the Mulkey parties, and that the White parties owned fifteen-sixteenths of the minerals.  The Mulkey parties claimed that the interest reserved was one-half of the total mineral estate, and that the reference to one-eighth of the minerals was a term of art under the “estate misconception” theory.  Under that theory (which had been forgotten over time), one-eighth was commonly believed to mean the entire mineral estate. 

Alternatively, the Mulkey parties claimed entitlement to one-half of the minerals because of the long history of the original parties and the successors-in-interest acting as if each party owned one-half of the mineral interest.

Trial and appellate courts.  The trial court held that the 1924 deed unambiguously reserved a one-sixteenth interest in the Mulkey parties.  The appellate court affirmed, also concluding that the “estate misconception theory” did not apply because “the deed did not contain any conflicting provisions requiring harmonization and the subject property was not burdened by an oil and gas lease at the time of conveyance.”   

Texas Supreme Court.  On further review, the Texas Supreme Court reversed and remanded.  The Court noted that in the early 20^th century that landowners commonly retained a one-eighth royalty interest under an oil and gas lease and that, over time, “1/8^th” became synonymous with the mineral interest itself or as a proxy for the customary royalty of 1/8^th.  In essence, it became a term of art.  The Court looked to Hysaw where, as noted, the Court held that each child received a “floating one-third interest in the royalty” based on what the evidence showed was the decedent’s intent.  While, as the Court noted, using “1/8” to mean the entire mineral estate is rebuttable, such a rebuttal can only be accomplished with evidence from the document itself suggesting basic multiplication be applied. The Court found that while “1/8” was a term of art in use at the time the deed was drafted to mean the entire mineral estate, there was nothing else in the deed to rebut this meaning.  As a result, the Court held that the Mulkey grantors did in fact reserve a full 1/2 interest in the mineral estate.

Note:  The Court also noted that the court of appeals misapprehended how the estate-misconception theory is applied to instruments, such as the 1924 deed. Instead of looking to whether the lack of inconsistencies in an instrument require harmonization, courts should first assume that the specific use of a double fraction was intentional (a rebuttable presumption) and if the document lacks anything that could rebut that presumption (inconsistencies) then the intended (historical) use of the double fraction stands. For instance, the instrument in this case included the use of a double fraction (“1/2 of 1/8”) and there was no evidence to rebut the presumption that the parties intended “1/2 of 1/8” to mean “1/2 of the mineral estate.” As for the land not being encumbered by a lease at the time of the deed, the Court stated that the theory’s “relevance has never depended on the considerations that the court of appeals identified.”

The Court went on to examine the presumed-grant doctrine – a common law form of adverse possession.  The Court noted three elements which must be satisfied for the presumed grant doctrine to prevail: “(1) a long-asserted and open claim, adverse to that of the apparent owner; (2) nonclaim by the apparent owner; and (3) acquiescence by the apparent owner in the adverse claim.” The Court noted that a ninety-year history existed between the parties in which “conveyances, leases, ratifications, division orders, contract, probate inventories, and a myriad of other instruments” were recorded, thus providing notice of the interests owned by both parties. Likewise, for nearly a century, both parties had stipulated multiple times to the one-half ownership of the mineral estate.  Indeed, in a 1950 conveyance, White had recited that he only held an undivided one-half interest in the oil, gas, and other minerals on the ranch. Based on all of this evidence and the conduct of the parties over time, the Court held that the Mulkey parties conclusively established their ownership under the presumed grant doctrine.

What Would Happen In Kansas?

In Kansas, a royalty deed is normally interpreted in accordance with the evidence concerning usage over time by the parties involved along with other relevant evidence.  But, in Bellport v. Harrison, 255 P. 52 (Kan. 1927), the Court held that “royalty” must be construed in accordance with its “well-known meaning” and that it was not appropriate to look to custom to define the term “royalty.”  The Court also concluded that the term “royalty” cannot have a meaning different from its “well-known” meaning as a result of usage.  The case involved a sale by Harrison of “one-half of [a] royalty.”  The receipt stated, “Received of A.J. Bellport, $2,400.00 payment for 1/16 royalty…”.  The mineral interest was leased at the time and provided for payment of a 1/8^th royalty.  Harrison asserted that Bellport acquired one-half of Harrison’s 1/8^th royalty, but Bellport claimed he purchased one-half of the mineral interest and that the reference to “1/16^th  royalty” conveyed to him a one-half mineral interest entitling him to one-half of the 1/8^th royalty. 

The trial court, based on custom, agreed with Bellport but the Kansas Supreme Court reversed.  Arguably, the Court believed that the usage was unreasonable and not probative.  The Court made a clear distinction between a royalty interest and a mineral interest.  A “royalty” refers to a right to share in the production of oil and gas at severance.  A royalty is personal property and does not include a perpetual interest in and to oil and gas in and other minerals in and under the land.  Conversely, a “mineral interest” means an interest in and to oil and gas in and under the land and constitutes the present ownership of an interest in real property.  See, e.g., Shepard v. John Hancock Mutual Life Insurance Co., 368 P.2d 19 (Kan. 1962). 

As a result, a Kansas court facing a double-fraction set of facts in a conveyancing instrument would likely focus on facts that enlighten the true nature of the instrument based on the language utilized rather than what the parties call it.  This appears to be somewhat like the approach of the Texas Supreme Court taken in Van Dyke.  The “estate misconception” theory is merely instructive, perhaps, but is not dispositive.  It might also be safe to say that is the approach in Texas.  See, e.g., Concord Oil Co. v. Pennzoil Exploration & Production Co., 966 S.W.2d 451 (Tex. 1998). 

Conclusion

The Van Dyke ruling, at least in Texas, will probably have longstanding effect on oil and gas titles.  The term “one-eighth” in a double fraction clause refers to the entire estate absent evidence to the contrary that proves otherwise and satisfies the presumed-grant doctrine.  In any event, practitioners would do well to refrain from using double-fraction clauses.

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

Overview

One of the most important things that a farmer or rancher can do is to put lease agreements in writing.  The problems that can arise with an oral lease are to innumerable to list or even think of.  The first case below is an example.  The second case involves a farm couple that were struggling financially and were trying to utilize Chapter 12 bankruptcy and SBA COVID relief funds.  But the rules must be followed closely, as the Nebraska bankruptcy court’s decision illustrates.

Problems with oral farming agreements and misuse of SBA loan funds – these are the topics of today’s post.

Document Filed with FSA Not a Valid Lease 

Coniglio v. Woods, No. 06-22-00021-CV, 2022 Tex. App. LEXIS 8926 (Tex. Ct. App. Dec. 7, 2022)

Involved in this case was land in Texas that the landowner’s son managed for his father who lived in Florida. The landowner needed the hay cut on 107 acres of the over 5,100-acre farm and agreed orally that the plaintiff, a neighboring landowner, could cut the hay when necessary.  The hay was cut on an annual basis.  So that he could receive government farm program payments on the land, the plaintiff filed wrote up a “memorialization of a lease agreement” and filed it with the local USDA Farm Service Agency (FSA).  The agreement stated as follows:  “This is to inform you that Michael J. Woods operates my farm [farm number specified], (approximately 107 acres) agriculturally for hay.  This lease agreement began in 2015 and will continue thru December 31, 2020.”  The document was dated September 28, 2016, and was signed by the plaintiff.  The landowner’s son also signed the agreement at the plaintiff’s request, but later testified that he didn’t believe the document to constitute a written lease.  After three years of cutting the hay, the landowner wanted to lease the hay ground for solar development and the plaintiff was told by the landowner and son that the hay no longer needed to be cut and there would be no hay profits to share. 

The plaintiff sued for breach of a farm lease agreement – purportedly a lease for a five-year term.  The plaintiff also claimed that the father and son tortiously interfered with contract for future years, were unjustly enriched by the breach and had also violated the Texas Deceptive Trade Practices Act (DPTA).  The trial court ruled in favor of the plaintiff on the basis that the form submitted to the USDA was sufficient to show the existence of a lease agreement, and entered a judgment for the plaintiff and against the father and son, jointly and severally, for $163,434.68 for breach of the “lease.”  The trial court also awarded triple that amount ($490,304.94) for violation of the DPTA.   The trial court also awarded court costs and attorney fees.  The total award was $601,815.62,   

On appeal, the defendant claimed that the document filed with the FSA did not satisfy the writing requirement of the statute of frauds.  The father testified that he wasn’t aware of any lease agreement and the son testified the arrangement was simply one to have the plaintiff cut the hay when needed and the parties would split the hay.  The son testified that he signed the agreement simply so that the plaintiff could receive the farm subsidies associated with the hay ground.  The appellate court agreed, noting that the document didn’t contain the essential terms of the lease.  It didn’t denote the names of the parties, didn’t describe the property, didn’t note the rental rate, and didn’t list any conditions or any consideration.  Accordingly, the appellate court determined that no valid lease existed and reversed the trial court’s judgment.

Debtors Barred From Further Use of COVID Relief Funds

In re Klein, No. BK 22-40804, 2022 Bankr. LEXIS 3451 (Bankr. D. Neb. Dec. 7, 2022)

This is the debtors’ third Chapter 12 case since 2019. Two banks as creditors filed motions to dismiss, asserting the debtors were not eligible for Chapter 12 bankruptcy because they were not “family farmers” at the time of filing Chapter 12.  The debtors claimed that they did meet the definition of a “family farmer” because they were engaged in farming with 15 cows, 5 calves, a one-half interest in a bull, and cash to operate.  However, the debtors did not know where their cows were or if any of them were pregnant. They also failed to confirm a plan in their previous Chapter 12 cases, did not own any land or equipment and were on the brink of surrendering their livestock.  Their only source of income was Social Security. The debtors obtained a $500,000 COVID hardship loan from the SBA in October of 2021 based on their representation that they were engaged in the business of farming, operating under a confirmed Chapter 12 plan.  When they applied for the loan, the debtors agreed the loan money would only be used as working capital and there was no “substantial adverse change” in their financial condition. The debtors failed to schedule the loan and the debtors claimed they had an approved plan of reorganization for their bankruptcy claim, which they did not. When the debtors received the loan, they paid their attorneys for work on their prior bankruptcy cases, paid themselves for farm work, paid for their own groceries, and paid their daughters as contractors. Within four months of the loan disbursement the debtors had used $275,594.41 of the loan. The SBA sought a preliminary injunction against the debtors to ensure they could not use the remainder of the loan that SBA alleged was obtained by fraud. The bankruptcy court granted the preliminary injunction against the debtors to protect the remainder of the SBA loan.  The court found that without the injunction the SBA would suffer irreparable harm if the loan proceeds were spent, and that the SBA would suffer greater harm if an injunction wasn’t entered than if the debtors’ access to was limited.  The court also determined that the SBA was likely to succeed on its claim to except the debt from discharge and that public policy favored ensuring that the loan process was not abused and that the loan funds were properly used. 

Observation

In Coniglio, the lack of a formal written document memorializing the relationship between the parties and the duties and expectations of both, created a problem that resulted in litigation – litigation that could have been avoided.  Based on the facts as stated by the court, the arrangement appeared to be one of a custom cutter.  That would be the result if the plaintiff supplied the machinery to cut the hay.  In that event, the plaintiff would have simply been an independent contractor and not a tenant.  The other possibility is that the plaintiff was a cropper that was compensated with a share of the crop.  To be a cropper, the plaintiff would have used the landowner’s (or son’s) equipment.  In that instance, the plaintiff would not have any legally enforceable interest in the crop, but would have a contract right to compensation for the provision of his in-kind labor.  A cropper is an employee that is hired to produce a crop.  A cropper has no interest in the real estate is not a tenant operating under a lease agreement.  A cropper is, in essence, an employee.  See, e.g., Henney v. Lambert, 237 Iowa 146, 21 N.W.2d 301 (1946).  The court didn’t get into these distinctions, but that would be the analysis.  In any event, the writing, by itself, was insufficient to constitute a lease. 

Conclusion

The court opinions indicate the problems that can arise when farming agreements aren’t reduced to writing and how financial distress can lead to the snowballing of additional legal issues. 

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 Ag Law and Developments of 2022 – Part 2

Overview

Today’s blog article continues the series that began earlier this week reviewing the top ag law and tax developments of 2022.  I am working my way through those developments that were significant, but not quite of national significance to make the “Top Ten” of 2022.

More ag law and tax developments of 2022 – it’s the topic of today’s post.

Regulation of Agricultural Activities on Wildlife Refuges

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

This case involves the management of six national wildlife refuges in the Klamath Basin encompassing over 200,000 acres.  The court faced the specific question of whether the federal government can regulate agricultural activities on leased land within the refuges.  The plaintiffs, an irrigation district and associated agricultural groups, 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 plaintiffs 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 agricultural activity 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 were to be considered a use that the defendant could regulate.  As such, the conditions needed to benefit waterfowl trumped ag considerations under both the Refuge Act and the Kuchel Act and, as the court stated, if the defendant determined that “an ag use is not consistent with proper waterfowl management, the Service must be allowed to restrict agricultural use.  Accordingly, the appellate court affirmed the trial court’s award of summary judgment for the defendant.

Minnesota Farmer Protection Law Upheld

Pitman Farms v. Kuehl Poultry, LLC, et al., 48 F.4th 866 (8th Cir. 2022)

In early 1988, the Minnesota Legislature directed the Minnesota Department of Agriculture (MDA) to put together a task force to study the issue of agricultural contract production and recommend to the legislature how it might provide additional legal and economic protection to contract growers.  The MDA’s Final Report was issued in February of 1990.  During the 1990 legislative session, the Minnesota legislature approved various economic protections for farmers based on the task force recommendations focusing particularly on parent liability.  As signed into law, MN Stat. §17.93 provides as follows:

“Parent company liability.  If an agricultural contractor is the subsidiary of another corporation, partnership, or association, the parent corporation, partnership or association is liable to a seller for the amount of any unpaid claim or contract performance claim if the contractor fails to pay or perform according to the terms of the contract.” 

In addition, MN Stat. §17.90 specified as follows:

“’Producer” means a person who produces or causes to be produced an agricultural commodity in a quantity beyond the person’s own family use and: (1) is able to transfer title to another; or (2) provides management input for the production of an agricultural commodity.”

The MDA then prepared at “statement of need and reasonableness” (SONAR) to implement the new statutory provision.  The SONAR referred to the legislation as the “Producer Protection Act” (PPA) and the MDA’s implementing rule (MN Rule 1572.0040) for MN Stat §17.93 which went into effect on March 4, 1991, read as follows:

“A corporation, partnership, sole proprietorship, or association that through ownership of capital stock, cumulative voting rights, voting trust agreements, or any other plan, agreement, or device, owns more than 50 percent of the common or preferred stock entitled to vote for directors of a subsidiary corporation or provides more than 50 percent of the management or control of a subsidiary is liable to a seller of agricultural commodities for any unpaid claim or contract performance claim of that subsidiary.”

 During the same 1990 legislative session the Minnesota legislature approved, and the governor signed into law MN Stat. §27.133.  This new law stated as follows:

“Parent company liability.  If a wholesale produce dealer is a subsidiary of another corporation, partnership, or association, the parent corporation, partnership, or association is liable to a seller for the amount of any unpaid claim or contract performance claim if the wholesale produce dealer fails to pay or perform in according to the terms of the contract and this chapter.”

Concerning this provision, the legislature stated, “It is therefore declared to be the policy of the legislature that certain financial protection be afforded those who are producers on the farm….”

Also, under both MN Stat. §17.93 and MN Stat. §27.133, “contractor” and “wholesale produce dealer” were defined as “persons” and “person” was to be applied to corporations, partnerships and other unincorporated associations.”  MN Stat. §665.44, sub. 7. 

In 2017, the defendants entered into chicken production contracts with Prairie’s Best Farm, Inc. to grow chickens in exchange for monthly payments and bi-monthly bonus payments.  In late 2017, Simply Essentials bought the assets of Prairie’s Best and assumed the grower contracts.  Simply Essentials, incorporated in Delaware and headquartered in California, was the subsidiary of the plaintiff, Pitman Farms, which owned more than 50 percent of Simply Essentials.  Shortly thereafter, the plaintiff bought Simply Essentials’ membership interests and became its sole owner.  In 2019, Simply Essentials encountered financial trouble, ceased processing activities and notified the defendants that it was terminating the contracts effective three months later.  The defendants’ demands for payment in excess of $6 million from the plaintiff for breach of contract failed. Both parties sought a declaratory judgment concerning the application of the PPA to the contracts. 

The plaintiff claimed that the PPA did not apply because the defendants were not “sellers” and, even if they were, the PPA didn’t apply because Simply Essentials was an LLC rather than a “corporation, partnership, or association.  The plaintiff also asserted that the PPA’s parent company liability provisions didn’t apply to it because Delaware law applied, and that applying Minnesota law would violate the Dormant Commerce Clause.  The defendant’s counterclaim made the opposite arguments.

The trial court ruled for the plaintiff, finding that the PPA did not apply by its terms because the defendants were not “sellers” and because Simply Essentials was an LLC rather than a “corporation, partnership, or association.”

On appeal, the appellate court unanimously reversed.  The appellate court read the various statutes together to determine the legislature’s purpose and intent.  The appellate court noted that the parent company liability statute of MN Stat. §27.133, the PPA of §§17.90-17.98 and the MDA’s implementing rule all arose from the same legislative session, addressed the same issue, and contained nearly identical language.  Accordingly, the appellate court determined that the trial court should have looked to MN Stat. §27.133 when construing the meaning of “seller” contained in MN Stat. §17.93 and in MDA Rule 1572.0040.  When the various provisions were taken together, the appellate court determined that “seller” can include “producer” under the PPA and the MDA’s implementing regulation. 

The appellate court also concluded that the trial court erred in finding that “seller” was limited to transferors of title.  Because the defendants did not have title to the chickens and could not therefore transfer title, the trial court held that the PPA did not apply.  The appellate court held that such a construction was plainly contrary to the legislature’s intent in creating the PPA which was to provide financial protections to agricultural producers in general and not merely agricultural commodity sellers.  Further, because the appellate court determined that “seller” included “producer,” the defendants were covered by the PPA as providing management services in accordance with MN Stat. §17.90 (2) for the growing of the chickens under contract.  In addition, the appellate court held that the growers were also “sellers” for purposes of the parent company liability provision of MN Stat. §27.133.

The plaintiff also asserted that “subsidiary of another corporation, partnership or association” contained in MN Stat. §17.93 and §27.133 meant that both the parent and the subsidiary had to be either a corporation, partnership or an association.  The trial court agreed with this interpretation.  The appellate court also agreed but pointed out that LLCs (which Simply Essentials was) did not exist in Minnesota when the PPA was enacted and, as such, the legislature had not purposefully excluded them from the statute. The appellate court also noted that an LLC had been found to be a “person” for purposes of the Minnesota Human Rights Act.  That law defined “person” to include a partnership, association, or corporation.  In addition, an unpublished decision of the Minnesota Court of Appeals had previously held that an LLC was an “association” for purposes of a Minnesota oil transportation statute. Thus, there was no apparent reason why the legislature would have singled out LLCs to not be covered under the parent company liability provisions of the PPA. 

The appellate court also noted the strong public policy statement of the Minnesota legislature in enacting the PPA – to protect producers of agricultural commodities from economic harm due to parent business entities using their organizational form to avoid liability for their subsidiaries’ actions. 

Conclusion

I will continue my journey through the top developments in ag law and tax in a subsequent post.

E-Mail Subscription Service

This is not really a blog article, but a notice. 

I have heard from numerous readers of my blog articles that they are no longer receiving the email notices when a new article is posted to the blog.  I have determined that the problem is that Feedburner is no longer supported by Google as an RSS/Email subscription service.  The service has been discontinued.  There is no comparable technology platform in the marketplace. This also means that the Law Professor Blog Network can no longer support email publishing of RSS feeds. 

Accordingly, the Law Professor Blog Network has removed the option in the blog menu which offers the email subscription service. However, RSS feeds are still available. As a reader of my Agricultural Law and Taxation blog, you can still use whatever RSS Reader you prefer to subscribe by using an RSS feed.  Recommended RSS feeds are Feedly, NewsBlur, and Inoreader.

For those of you who enjoy receiving my blog articles delivered to your email account each time I add a new article, I regret that the service providing them to your email has been discontinued.  Try using one of the RSS readers mentioned above to still email subscribe to my blog articles. 

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

Minnesota Farmer Protection Law Upheld

Overview

During the farm debt crisis of the 1980s numerous states in the Midwest and Plains enacted law designed to provide legal protection to farmers from various types of economic harm that others caused them.  Farmers are also particularly vulnerable to bad political choices.  During the 1970s the federal government was encouraging farmers to leverage heavily to expand and plant “fence row to fence row.”  Then the Carter Administration made bad economic choices and engaged in a Russian grain embargo. The economy suffered from stagflation and when the newly appointed Federal Reserve Chairman Paul Volcker announced he would “ring inflation out of the economy” by immediately and substantially raising interest rates in late 1979, farmers found themselves with collapsed collateral (land) values, increased debt payments and a decreased ability to continue financing farming operations.    

As the 1980s wore on, the structure of agricultural production began changing at an increasing pace.  The move was on towards contract production of agricultural production.  It had started in the 1970s in the poultry industry but started expanding into hog production.  Also, farm input and output markets began consolidating, largely because of lax enforcement of existing competition laws applicable to the agricultural industry.  Farmers buy inputs from highly concentrated markets and sell into highly concentrated markets.  They face “seller power” when it comes to purchasing inputs and “buyer power” as it relates to selling agricultural commodities. 

The Minnesota legislature, in 1990, enacted a set of laws designed to provide economic protection for farmers producing agricultural commodities under contract.  Recently, the U.S. Court of Appeals for the Eighth Circuit, in Pitman Farms v. Kuehl Poultry, LLC, et al., No. 21-1113, 2022 U.S. App. LEXIS 25167 (8th Cir. Sept. 8, 2022), said the laws applied to a parent corporation of a subsidiary that had canceled several million dollars’ worth of poultry grower contracts. 

The Minnesota Producer Protection Act – it’s the topic of today’s post.

Background

In early 1988, the Minnesota Legislature directed the Minnesota Department of Agriculture (MDA) to put together a task force to study the issue of agricultural contract production and recommend to the legislature how it might provide additional legal and economic protection to contract growers.  The MDA’s Final Report was issued in February of 1990.  During the 1990 legislative session, the Minnesota legislature approved various economic protections for farmers based on the task force recommendations focusing particularly on parent liability.  As signed into law, MN Stat. §17.93 provides as follows:

“Parent company liability.  If an agricultural contractor is the subsidiary of another corporation, partnership, or association, the parent corporation, partnership or association is liable to a seller for the amount of any unpaid claim or contract performance claim if the contractor fails to pay or perform according to the terms of the contract.” 

In addition, MN Stat. §17.90 specified as follows:

“’Producer” means a person who produces or causes to be produced an agricultural commodity in a quantity beyond the person’s own family use and: (1) is able to transfer title to another; or (2) provides management input for the production of an agricultural commodity.”

The MDA then prepared at “statement of need and reasonableness” (SONAR) to implement the new statutory provision.  The SONAR referred to the legislation as the “Producer Protection Act” (PPA) and the MDA’s implementing rule (MN Rule 1572.0040) for MN Stat §17.93 which went into effect on March 4, 1991, read as follows:

“A corporation, partnership, sole proprietorship, or association that through ownership of capital stock, cumulative voting rights, voting trust agreements, or any other plan, agreement, or device, owns more than 50 percent of the common or preferred stock entitled to vote for directors of a subsidiary corporation or provides more than 50 percent of the management or control of a subsidiary is liable to a seller of agricultural commodities for any unpaid claim or contract performance claim of that subsidiary.”

 During the same 1990 legislative session the Minnesota legislature approved and the governor signed into law MN Stat. §27.133.  This new law stated as follows:

“Parent company liability.  If a wholesale produce dealer is a subsidiary of another corporation, partnership, or association, the parent corporation, partnership, or association is liable to a seller for the amount of any unpaid claim or contract performance claim if the wholesale produce dealer fails to pay or perform in according to the terms of the contract and this chapter.”

Concerning this provision, the legislature stated, “It is therefore declared to be the policy of the legislature that certain financial protection be afforded those who are producers on the farm…”.

Also, under both MN Stat. §17.93 and MN Stat. §27.133, “contractor” and “wholesale produce dealer” were defined as “persons” and “person” was to be applied to corporations, partnerships and other unincorporated associations.”  MN Stat. §665.44, sub. 7. 

Facts of Pitman Farms v. Kuehl Poultry, LLC

In 2017, the defendants entered into chicken production contracts with Prairie’s Best Farm, Inc. to grow chickens in exchange for monthly payments and bi-monthly bonus payments.  In late 2017, Simply Essentials bought the assets of Prairie’s Best and assumed the grower contracts.  Simply Essentials, incorporated in Delaware and headquartered in California, was the subsidiary of the plaintiff, Pitman Farms, which owned more than 50 percent of Simply Essentials.  Shortly thereafter, the plaintiff bought Simply Essentials’ membership interests and became its sole owner.  In 2019, Simply Essentials encountered financial trouble, ceased processing activities and notified the defendants that it was terminating the contracts effective three months later.  The defendants’ demands for payment in excess of $6 million from the plaintiff for breach of contract failed. Both parties sought a declaratory judgment concerning the application of the PPA to the contracts. 

Trial Court Decision

The plaintiff claimed that the PPA did not apply because the defendants were not “sellers” and, even if they were, the PPA didn’t apply because Simply Essentials was an LLC rather than a “corporation, partnership, or association.  The plaintiff also asserted that the PPA’s parent company liability provisions didn’t apply to it because Delaware law applied, and that applying Minnesota law would violate the Dormant Commerce Clause.  The defendant’s counterclaim made the opposite arguments.

The trial court ruled for the plaintiff, finding that the PPA did not apply by its terms because the defendants were not “sellers” and because Simply Essentials was an LLC rather than a “corporation, partnership, or association.”

Eighth Circuit Opinion

On appeal, the appellate court unanimously reversed.  The appellate court read the various statutes together to determine the legislature’s purpose and intent.  The appellate court noted that the parent company liability statute of MN Stat. §27.133, the PPA of §§17.90-17.98 and the MDA’s implementing rule all arose from the same legislative session, addressed the same issue, and contained nearly identical language.  Accordingly, the appellate court determined that the trial court should have looked to MN Stat. §27.133 when construing the meaning of “seller” contained in MN Stat. §17.93 and in MDA Rule 1572.0040.  When the various provisions were taken together, the appellate court determined that “seller” can include “producer” under the PPA and the MDA’s implementing regulation. 

The appellate court also concluded that the trial court erred in finding that “seller” was limited to transferors of title.  Because the defendants did not have title to the chickens and could not therefore transfer title, the trial court held that the PPA did not apply.  The appellate court held that such a construction was plainly contrary to the legislature’s intent in creating the PPA which was to provide financial protections to agricultural producers in general and not merely agricultural commodity sellers.  Further, because the appellate court determined that “seller” included “producer,” the defendants were covered by the PPA as providing management services in accordance with MN Stat. §17.90 (2) for the growing of the chickens under contract.  In addition, the appellate court held that the growers were also “sellers” for purposes of the parent company liability provision of MN Stat. §27.133.

The plaintiff also asserted that “subsidiary of another corporation, partnership or association” contained in MN Stat. §17.93 and §27.133 meant that both the parent and the subsidiary had to be either a corporation, partnership or an association.  The trial court agreed with this interpretation.  The appellate court also agreed but pointed out that LLCs (which Simply Essentials was) did not exist in Minnesota when the PPA was enacted and, as such, the legislature had not purposefully excluded them from the statute. The appellate court also noted that an LLC had been found to be a “person” for purposes of the Minnesota Human Rights Act.  That law defined “person” to include a partnership, association, or corporation.  In addition, an unpublished decision of the Minnesota Court of Appeals had previously held that an LLC was an “association” for purposes of a Minnesota oil transportation statute. Thus, there was no apparent reason why the legislature would have singled out LLCs to not be covered under the parent company liability provisions of the PPA. 

The appellate court also noted the strong public policy statement of the Minnesota legislature in enacting the PPA – to protect producers of agricultural commodities from economic harm due to parent business entities using their organizational form to avoid liability for their subsidiaries’ actions. 

Conclusion

The farm debt crisis of the 1980’s produced legislative efforts in numerous states to address the legal and economic plight of farmers.  Over 30 years later, it’s refreshing to see how one of those laws has worked to protect farmers under chicken production contracts.  Other states without such protections for farmers should take note of the Eighth Circuit’s opinion.

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