Thursday, October 6, 2022

More Ag Law Developments – Potpourri of Topics

Overview

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

Court Says Public Has Right to Use Private Riverbeds

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

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

Retained Ownership of Minable Surface Negates Conservation Easement Deduction.

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

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

Family Farms Not Part of Bankruptcy Estate.

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

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

FIFRA Doesn’t Preempt State-Based Warranty Claims

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

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

Comparative Fault for Unmaintained Waterway

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

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

Conclusion

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

October 6, 2022 in Bankruptcy, Civil Liabilities, Environmental Law, Income Tax, Real Property, Water Law | Permalink | Comments (0)

Wednesday, September 14, 2022

Ag Law and Tax Developments

Overview

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

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

Retained Ownership of Minable Surface Negates Conservation Easement Deduction

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

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

Use of Pore Space Without Permission Unconstitutional

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

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

Net Operating Loss Couldn’t Be Carried Forward

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

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

Overtime Pay Rate Not Applicable to Construction Work on Farm

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

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

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

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

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

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

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

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

Crop Salesman Sued for Ruining Relationship with Landowner

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

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

Standard Default Interest Rate Not Unconscionable

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

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

Conclusion

I’ll post additional developments in a subsequent post.

September 14, 2022 in Civil Liabilities, Income Tax, Real Property, Regulatory Law | Permalink | Comments (0)

Sunday, September 11, 2022

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

September 11, 2022 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Monday, September 5, 2022

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

September 5, 2022 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Saturday, August 20, 2022

Ag Law Summit

Overview

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

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

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

Agenda

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

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

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

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

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

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

Reception

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

Conclusion

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

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

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

August 20, 2022 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Thursday, July 28, 2022

Tax Deal Struck? – and Recent Ag-Related Cases

Overview

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

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

Tax Agreement

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

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

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

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

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

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

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

 Recent Ag-Related Court Opinions

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

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

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

Deduction for Full Amount of C Corporate Shareholder Compensation Not Deductible 

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

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

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

Homeowner’s Policy Doesn’t Cover Farming Injury

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

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

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

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

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

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

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

Conclusion

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

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

July 28, 2022 in Civil Liabilities, Income Tax, Insurance, Real Property | Permalink | Comments (0)

Thursday, June 16, 2022

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

Overview

Agricultural law touches many aspects of the daily life of a farmer, rancher, or anyone using an ag-related product or service.  In today’s post, I provide a small sample illustrating that very point.

Some additional ag law-related developments – it’s the topic of today’s post.

Claims Against Dog Food Producer Wrongfully Dismissed

Kucharski-Berger v. Hill's Pet Nutrition, Inc., 60 Kan. App. 2d 510, 494 P.3d 283 (Kan, Ct. App. 2021)

A veterinarian prescribed Hill’s Pet Nutrition dog food for the plaintiff’s dog.  The plaintiff sued Hill’s Pet Nutrition upon discovering that the dog food did not contain medicine or drugs, had not been tested and approved for medicinal purposes by the FDA, but was priced higher than “normal” dog food.  The plaintiff claimed the defendant and other pet food manufacturers had conspired to monopolize the prescription pet food market and they had artificially inflated the prices by claiming the food required a prescription.  No federal or state law required pet food to be sold with a prescription from a vet. The plaintiff claimed the defendant had violated the Kansas Restraint of Trade Act (KRTA) and the Kansas Consumers Protection Act (KCPA) and also brought an unjust enrichment claim. The trial court dismissed the case for failure to state a claim under KCPA, the plaintiff had to allege that the defendant was engaged in a deceptive act or practice involving the plaintiff that caused the plaintiff damages.  The plaintiff claimed that the defendant had misrepresented that the dog food required a prescription so as to sell at a premium price.  The appellate court determined that the plaintiff had clearly alleged sufficient facts to put the defendant on notice of the allegations under the KCPA. The defendant claimed that the plaintiff failed to show a causal connection between the prescription practices and the injury, but the appellate court noted that the plaintiff did not need to show she was misled, only that the defendant’s actions were deceptive.  On that point, the appellate court noted that the plaintiff had provided enough detail in the complaint to show that the prescription requirement could be deceptive and was the cause of her spending more money (the injury).  As such, the plaintiff’s KCPA claims should not have been dismissed. With respect to the KRTA claim, the court noted that the plaintiff was required to allege that the defendant was creating a restriction in trade, increasing or reducing the price of merchandise to prevent competition, and had entered into an agreement establishing a set price for a good in the market. The plaintiff alleged the defendant had entered into a contract with other dog food producers to set prices higher for prescription dog food, which violated KRTA. The plaintiff also claimed that the defendant had entered into a conspiracy to monopolize the prescription dog food market.  As such, the appellate court held that the plaintiff had properly presented the KRTA claims.  The appellate court reversed the trial court’s dismissal and remanded the case for furthering proceedings.

Oil and Gas Developments

Fracking Water Not Taxable 

CDOR PLR 22-001 (Apr. 8, 2022)

A Colorado company sold non-potable river water to oil and gas producers for use in hydraulic fracturing and sought guidance from the Colorado Department of Revenue (CDOR) as to its taxability.  The company delivers water by withdrawing it from ditch and reservoir systems, securing rights-of-way, and laying temporary surface lines to the customers’ locations.  The CDOR concluded that the company did not owe sales tax because water in conduits, pipes, ditches and reservoirs is not subject to sales tax. 

Colorado Changes Oil and Gas Severance Tax Credit 

H.B. 1391, signed into law on June 7, 2022. 

Colorado H.B. 1391 was signed into law on June 7, 2022 and changes the calculation of the oil and gas severance tax credit.  Beginning January 1, 2025, the credit will be calculated as 76.56 percent of the gross income attributable to the well in the current tax year, multiplied by the local mill rate of the prior year.  Under prior law, the credit was 87.5 percent of the prior year’s local taxes, which are assessed at 87.5 percent of the gross income of the prior year and are subject to the prior year’s local mill levies.  The change is intended to simplify the credit’s calculation and eliminate the one-year lag in its administration.  Well operators, rather than royalty interest owners will be responsible for the tax. 

Low-Producing Oil and Gas Tax Exemption Tied to Actual Projection. 

Farmer v. Board of Ellis County Commissioners, Nos. 123,488 & 123,489, 2022 Kan. App. LEXIS 19 (Kan. Ct. App. May 6, 2022)

The taxpayer sought a refund for property tax exemptions under state law (K.S.A. 79-201t) for tax year 2018 for several oil and gas leases on his property for low-producing oil and gas wells (less than five barrels per day. The Board of Tax Appeals (BOTA) denied the refund on the basis that it would be retrospective and concluded that the taxpayer should pay the amount of tax based on the predicted production for 2018 rather than actual production. At the trial court, BOTA argued the leases should not be exempt because the 2017 production that was used to find the fair market value for taxes for 2018 was not at the exempt level. BOTA claimed the first time the taxpayers would qualify for the exemption would be in 2019 as the 2018 oil production would be used at that time to predict the value that would meet the exemption level. The trial court held the taxpayers should be granted the exemption as the daily average in 2018 fell below the level required for the exemption.  On appeal, the appellate court concluded that the statute was unclear on when the exemption could take effect and if a refund could be awarded. The appellate court looked at how BOTA honored tax refunds in the past for taxpayers who filed for an exemption retrospectively.  Based on legislative intent, the appellate court held the intent was clearly to allow tax exemptions on the first day an oil well would qualify. The appellate court held that the taxpayer should be refunded property tax if the well actually produced at exempt levels instead of the projected production levels.

Conclusion

There’s never a dull moment in the ag law and tax world. 

June 16, 2022 in Civil Liabilities, Real Property, Regulatory Law | Permalink | Comments (0)

Sunday, June 12, 2022

More Ag Law Court Developments

 Overview

Three recent court opinions from Kansas illustrate the diverse ways that the law is involved in ag-related activities.  Two of the cases involve ag real estate, with one of those having estate planning implications.  The other case involves rules involving showing animals at the State Fair. 

More ag-related court cases and their implications – it’s the topic of today’s post.

Irrigation System Value Included in Land Valuation in Partition Action 

Claeys v. Claeys, No. 124,032, 2022 Kan. App. LEXIS 16 (Kan. Ct. App. May 6, 2022)

Two brothers each inherited an undivided one-third interest in farmland, and the wife of a deceased brother owned the other one-third interest via a trust created for her benefit.  The brothers obtained a water permit, installed and $83,000 ten-tower irrigation system to convert the dryland to irrigation crop farming, and spent over $10,000 on piping and a water meter.  The irrigation system was one brother’s personal property.  The sister in-law did not contribute to the cost of these improvements. She filed a partition action seeking to sever the co-ownership. The brothers counterclaimed, asserting they improved the value of the land and that her share should be offset to account for the improvements.  Three commissioners were appointed to appraise the land and valued the dryland at $390,000 and the irrigated land at $2,065,000, not including the irrigation equipment.  The sister-in-law chose to buy the smaller, non-irrigated tract.  The commissioners determined that because her tract was less valuable, the brothers owed her $428,333 to account for her one-third interest, with $50,000 of that amount placed in escrow pending the outcome of the brothers’ counterclaim. The trial court determined that the definition of “improvements” should be limited to physical structures and equipment.  The trial court ruled for the sister-in-law on the brothers’ counterclaim, find that the brothers had not shown that they receive a credit for the irrigation-driven value increase.  According to the trial court, the irrigation equipment was personal property of one of the brothers and was not an “improvement.”  Hence, the trial court awarded the $50,000 to the sister-in-law.  On appeal, the appellate court held the trial court erred when it found the brothers did not improve the land.  The appellate court determined that Kansas law requires a “broader inquiry” into possible improvements to the land other than just physical structures and equipment, and that the trial court erred when it found that the brothers did not improve the land when they installed the irrigation system.  Changing the land’s status from dry to irrigated and obtaining a water right improved the value of the land.  “Improvements,” the appellate court determined, are not simply limited to physical additions.  The personal property (irrigation system) improved the property and should have been included in the land valuation.  The water permit was not the sole source of the higher land value for the irrigated ground – the irrigation system was necessary to make the water permit “operative.”  Accordingly, the appellate court held that the trial court erred in denying the brothers’ counterclaim and remanded the case to the trial court to determine whether to award credit for the value of the irrigation equipment based on an assessment of the evidence previously presented at trial. 

Comment:  The case points out the possible peril of leaving property to the children in co-equal undivided interests.  What often happens is that a child (or multiple children) will want to "cash-out" by filing a partition action.  That happened in this case, and then the issue of valuation came up to balance out the economics of the partition.  In determining value, "improvements" had to be dealt with. A change from dryland to irrigation farming increases the value of the land and must be accounted for in a partition action. 

Grand Champion Lamb Properly Stripped of State Fair Title

Gilliam v. Kansas State Fair Board, No. 122, 254, 2022 Kan. App. LEXIS 18 (Kan. Ct. App. May 6, 2022)

The plaintiff’s lamb was crowned grand champion of the market-lamb competition at the 2016 Kansas State Fair. State Fair rules bar exhibitors from treating any part of an animal’s body, internally or externally, with a substance to alter conformation.  Regulations also prohibit changing an animal's natural contours or appearance of an animal’s body or inserting a foreign material under the skin – known as "unethical fitting."   Before the Fair was over, the lamb was removed from display, slaughtered and its meat was sold to market.  After the lamb was processed, a veterinarian analyzed the lamb’s carcass and observed multiple injection marks on the back of both hind legs with associated swelling and discoloration in the muscle and fat and abnormal reddening of the skin over those areas.  The veterinarian concluded that multiple recent injections had likely caused the abnormalities.   Lab tests did not identify any drugs in the lamb’s system leading the veterinarian to conclude that a natural substance had been injected.  These finding led the veterinarian to conclude that injections were used to alter the lamb’s appearance, rather than treat the lamb for any illness. Consequently, the defendant (State Fair Board) determined that the plaintiff had engaged in an “unethical fitting,” and stripped the plaintiff of her title along with her championship belt buckle and her $4,000 cash prize. The plaintiff appealed to two State Fair committees with no success and then filed suit.  The trial court determined that the veterinarian’s findings did not provide “substantial evidence” as to unethical fitting.  While the veterinarian confirmed his findings of injections, the trial court noted that he did not find that the lamb’s appearance had been altered and never used the term “unethical fitting.”  Thus, the trial court held that the plaintiff had sustained her burden of proving the invalidity of the defendant’s action.  On appeal, the defendant asserted that “unethical fitting” was its determination to make, not that of a veterinarian, and that the trial court erred in basing its determination on the veterinarian’s conclusion which it found unsupported by the evidence.  The appellate court noted that state law vested in the defendant the authority to adopt rules and regulations governing the State Fair.  Those rules provided non-exhaustive examples of what could be considered unethical fitting and the appellate court determined that the defendant could consider injections to be an “unethical fitting” even though not listed in the examples.  Thus, the appellate court reversed the trial court and held that substantial evidence supported the defendant’s decision to disqualify the plaintiff’s lamb in accordance with the defendant’s rules and that a finding of “unethical fitting” need not be made nor attested to by a veterinarian.  

Comment:      The facts of the case seem to indicate that the practice of “airing” was engaged in with respect to the lamb.  Airing occurs most frequently with market animals such as steers and lambs and is a practice that injects air into the animal’s muscle.  The fat content of the animal’s feed is increased with the intent of the fat filling the “aired” area. When the practice occurs, it is possible that the animal owner does not know that it has happened.  Many animals are sent to professional “fitters” and the owner merely shows the animal. 

Landowner Establishes Adverse Possession Through “Tacking.”

Shelton v. Chacko, 501 P.3d 909 (Kan. Ct. App. 2022)

The parties owned adjacent tracts. A fence existed between the properties on the assumed boundary.  The plaintiff had a survey completed which indicated that the fence was on the plaintiff’s land inside the surveyed boundary.  The plaintiff sued to have the surveyed line established as the boundary, and the defendant counterclaimed to establish the fence line as the boundary via adverse possession.  The trial court held the appellee had established adverse possession over the property through “tacking.”  While the defendant had only possessed the strip in controversy for eight years, the defendant claimed that the evidence showed that the prior owner of the defendant’s tract had owned it and used it up to the fence for at least seven years which meant that the 15-year requirement for adverse possession was satisfied under Kansas law.  The trial court ruled that the defendant had satisfied the requirements for adverse possession via tacking because there was no interruption in possession and no abandonment for at least 15 years, and the defendant had a continual good-faith belief of ownership.  On appeal, the appellate court affirmed, noting that the defendant provided credible testimony of his belief of ownership up to the fence.  The appellate court noted that the fence was in place when the defendant bought his tract and was not repositioned when it was rebuilt. 

Note:   I often get the question of whether the 15-year requirement (Kansas) for adverse possession “resets” when there is a change in ownership.  The answer is “not necessarily so.”  Here the defendant had a good faith belief of ownership for seven years and his predecessor in interest had also treated it as the boundary, as did the adjacent owner. 

June 12, 2022 in Estate Planning, Real Property, Regulatory Law | Permalink | Comments (0)

Thursday, June 9, 2022

Recent Court Cases of Importance to Agricultural Producers and Rural Landowners

Overview

Farmers, ranchers and other rural landowners face many legal and tax issues on a daily basis.  The type of legal issues varies, and some are cyclical.  Others seem to repeat over and over.  In today’s article I discuss two cases from Kansas that illustrate some of the issues that seem to come up frequently with respect to real estate, and one that arises on a cyclical basis. 

Various legal issues associated with agricultural production and rural landownership – it’s the topic of today’s post.

Common Issues Involving Ag Real Estate

Removal of Vegetation Within Easement Proper

Presnell v. Cullen, 2022 Kan. App. Unpub. LEXIS 250 (Kan. Ct. App. May 6, 2022)

Farm and ranch land is often burdened by easements.  Energy-related easements are common in rural areas as are access easements to a landlocked field or home.  One common question is what activities are permissible in the easement area by the easement holder?  Without clear specification in the written easement agreement, the rule is one of reasonability.  That means that the easement holder can use the easement for the purpose(s) for which it was acquired and other associated purposes, within reason. 

In this case, the plaintiff owned land subject to a railroad easement. The Central Kansas Conservancy (Conservancy) acquired the easement from a railroad under the National Trails System Act for the purpose of developing a recreational trail.  The plaintiff sued claiming that the Conservancy did not have a right to cut down vegetation located within the easement.  The trial court disagreed and awarded the Conservancy legal fees.  On appeal, the plaintiff claimed that the Conservancy had a duty to protect and preserve the trees in the easement area, only needed to use 10 to 14 feet of the 66-foot easement, did not control the entire width of the easement, and had actually abandoned the easement. 

The appellate court disagreed, finding that the Conservancy had a right to use the railroad corridor to develop and maintain the trail based either based on title ownership or via the easement.  Thus, the Conservancy was entitled to remove the vegetation, but only to the extent necessary for developing and maintaining the trail.  The appellate court also rejected the plaintiff’s trespass claim.  The appellate court affirmed the trial court’s award of attorney's fees under K.S.A. §61-2709(a). 

Note:  The case points out that reasonable use of the easement is the key when the easement agreement is silent.  Here, the Conservancy could remove vegetation, but only if the removal was related to the trail.  The landowner’s other trees and vegetation were to be left untouched. 

Farmland Adversely Possessed, But No Prescriptive Easement. 

Pyle v. Gall, No. 123,823, 2022 Kan. App. Unpub. LEXIS 242 (Kan. Ct. App. Apr. 29, 2022)

Adverse possession has its origin in the English common law.  It’s a concept whereby someone who knows that they don’t have legal title to land can gain title by possessing the land long enough without the owner’s permission.  There are various elements to adverse possession that have been added over time, but basically if someone openly and knowingly takes possession of someone else’s land and does so for a long enough period of time set by state law, that person can end up the owner of the land via a quiet title action if the true owner knows of the possession and doesn’t do anything within the statutory timeframe to stop it. 

Adverse possession was at issue in this case. 

The parties disputed the location of the property line between their tracts.  The plaintiff routinely planted crops up to what the plaintiff believed to be the property line, but that planting interfered with the crop farming plans of the defendant’s tenant.  The plaintiff also regularly used a portion of the defendant’s field as a road to access the plaintiff’s crops.  In 2015, the defendant offered to sell the disputed area to the plaintiff and told the plaintiff to stop accessing the plaintiff’s crops via the defendant’s field.  Each party hired surveyors, but the surveyors reached different conclusions as to the property line. In March of 2016, the defendant built a fence based on the property line that the defendant’s surveyor found, which was 17 feet beyond what the plaintiff believed to be the property line. In March 2017, the plaintiff sued to quiet title to the field up to the crop line they farmed to by adverse possession and sought either a prescriptive easement or easement by necessity.  The trial court held that the plaintiff had adversely possessed the land in dispute and had acquired a prescriptive easement across the defendant’s property. 

On appeal, the appellate court upheld the trial court’s determination that the plaintiff had acquired the strip in question by adverse possession.  The plaintiff had used the property for the statutory timeframe in an open, exclusive and continuous manner upon belief of true ownership.  Use by others for recreational purposes, the appellate court reasoned, did not negate the exclusivity requirement because the use was infrequent compared to the plaintiff’s farming activity on the disputed land.  However, the appellate court reversed the trial court on the prescriptive easement issue because both the plaintiff and the defendant used the alleged area on which a prescriptive easement was being asserted.  Thus, the plaintiff had not used the easement exclusively.  The appellate court remanded to the trial court the issue of whether an easement by necessity had arisen because the trial court had not considered the issue. 

Note:  Exclusivity is a key element of an adverse possession/prescriptive easement claim

Farm Bankruptcy

Bankruptcy is a cyclical.  With the significant downturn in the economy driven largely by incomprehensible energy policy, it is looking as if 2023 will be an even tougher year for many parts of the agricultural sector.  Existing operating loans will be renewed at higher interest rates, and this year’s inputs that were prepaid before major price increases may not work to avoid price increases next year.  Thus, farm bankruptcies and foreclosures may tick up in 2023. 

One of the key points of a farm bankruptcy is that a reorganization plan must be file in a timely manner and in good faith.  A debtor cannot act in bad faith towards creditors.

The following case makes the points, and also points out that a farm bankruptcy requires planning as well as a plan. 

Chapter 12 Case Dismissed for Unreasonable Delays

In re Bradshaw, No. 20-40948-12, 2022 Bankr. LEXIS 1424 (Bankr. D. Kan. May 19, 2022) 

The debtor filed Chapter 12 bankruptcy in late 2020 but failed to file a confirmable plan for 18 months. The debtor also failed to meet many other Chapter 12 requirements.  As a result, the Chapter 12 Trustee filed a motion to dismiss the case under 11 U.S.C. § 1208(c) which allows a case to be dismissed for the debtor’s unreasonable delay or gross mismanagement.  Before the court, the Trustee pointed to the debtor’s failure to file a plan in a timely fashion, denial of plan confirmation, continuous loss to the bankruptcy estate and absence of a reasonable likelihood of rehabilitation. The Trustee also noted that the debtor did not file taxes in 2016, 2017, or 2018 and the returns filed in 2019 and 2020 were insufficient. The debtor did not consistently file monthly operating reports and the debtor’s proposed plan did not meet basic bankruptcy code requirements. 

The court also noted that the Trustee had no way of monitoring the debtor’s case properly because the debtor only filed three of eighteen monthly reports. Without monthly operating reports, it was impossible to determine if the estate could be rehabilitated. The debtor also had no income from farming operations with no prospect of an improved financial situation.  The debtor also gambled with estate property and failed to account for, liquidate, or preserve estate property. The bankruptcy estate was uninsured, and the debtor had abandoned it.  The court concluded that this amounted to the debtor’s gross mismanagement of the estate. The court noted that the debtor had ninety days to file a plan and after eighteen months and had not done so. While the debtor proposed one plan in April of 2021, it was denied, and no amended plan was submitted. This constituted an unreasonable delay and prejudice to creditors. The court granted the Trustee’s motion to dismiss the case. 

Note:   Don’t simply file Chapter 12 without an idea of where you are headed with your farming/ranching operation.  Chapter 12 is designed for farmers that intend on continuing in farming after restricting the business to make it viable into the future.  It’s not for those that don’t have a plan for the business into the future.

June 9, 2022 in Bankruptcy, Real Property | Permalink | Comments (0)

Monday, May 30, 2022

Recent Court Decisions Involving Taxes and Real Estate

The courts are constantly deciding tax issues.  Two recurring themes in numerous cases involve timing of asset sales and recordkeeping/substantiation.  Those two issues are on display in court opinions that I summarize.  On the real estate side of the ledger fence issues loom large (and always have) as do partition actions (don’t leave property at death to your children in co-equal undivided interests – just don’t) and warrantless searches of farmland. 

Recent court opinions involving taxes and real estate – it’s the topic of today’s post.

Recent Tax Cases of Interest

Questions Remain on “Unforeseen Circumstances” Exception Under I.R.C. §121

Webert v. Comm’r, T.C. Memo. 2022-32

The petitioners, a married couple, bought a home in 2005.  The wife was diagnosed with cancer later that year and underwent costly treatments.  They resided in the home until 2009 and then rented out the home and resided in another home the husband owned.  The sold the first home in 2015.  They filed joint returns for tax years 2010 through 2015.  During those years, they reported income from the lease of the first home on Schedule E.  They reported that they used the home for personal purposes for 14 days in 2010 and zero days in 2011 through 2015. Their depreciation schedules mirrored the number of fair rental days reported for the property on their Schedule E. On their 2015 return, they reported the sale of the first home but excluded the gain from gross income.  The IRS audited and asserted that the income from the sale of the home should have been reported and moved for summary judgment.  The Tax Court granted summary judgment to the IRS on the issue of whether the petitioners used the home as their principal residence for at least two of the last five years immediately preceding the sale as I.R.C. §121 requires.  They did not.  However, the Tax Court determined that issues of material fact remained on whether the wife’s health problems were the primary reason for the sale such that the gain might be excludible because the sale was on account of health or other unforeseen circumstance in accordance with I.R.C. §121(c)(2)((B).  

Jewelry Gift Not Properly Substantiated – Charitable Deduction Denied

Albrecht v. Commissioner, T.C. Memo. 2022-53

 In 2014, the petitioner donated approximately 120 pieces of Native American jewelry to a museum, a qualified charity.  The museum executed a “Deed of Gift” which specified, in part, that “all rights, titles, and interests” in the jewelry were transferred from the donor to the donee upon donation unless otherwise stated in the Gift Agreement.  The petitioner claimed a charitable deduction for the donation on her 2014 return and supported the claimed deduction by submitting the “Deed of Gift” documentation.  The IRS denied the deduction on the basis that the “Deed of Gift” documentation did not meet the substantiation requirements of I.R.C. §170(f)(8)(B) that require a description of the donated item(s), whether the donee provided any form of consideration in exchange for the donation, and a good faith estimate of the value of the donation. The IRS pointed out that the “Deed of Gift” documentation from the museum did not state whether the museum provided any goods or services in return for the donation. In addition, the terms of the “Deed of Gift” documentation with the museum referred to a superseding agreement, “the Gift Agreement,” which left open the question of whether the donor retained some title or rights to the donation, and also indicated that the petitioner’s documentation did not include the entire agreement with the done.  The Tax Court agreed with the IRS and held that the petitioner did not comply with the substantiation requirements of I.R.C. §170(f)(8)(B) and denied the charitable deduction. 

Legal Issues Related to Real Estate

Court Construes State Fence Law 

Yin v. Aguiar, 146 Haw. 254, 463 P.3d 911 (2020)

The plaintiff leased property from a third party for growing sweet potatoes. Under the lease, the plaintiff was responsible for keeping cattle from damaging his crop. The plaintiff filed a complaint against a neighboring cattle owner claiming that the cattle damaged over 13 acres of the plaintiff’s sweet potato crop and the landowner’s fence in the amount of $190,000. The cattle owner claimed he was not liable because the fence between the properties was not a legal fence.  The fence was less than 4 and ½ feet tall and was made from hog wire, which did not meet the state law requirements for a legal fence.  The cattle owner further pointed to the plaintiff’s lease, which stated the plaintiff was responsible for keeping cattle off the leased property. The state Supreme Court determined that that it was inappropriate to interpret state fence law to hold cattle owners solely responsible for properly fenced or entirely unfenced property (including property enclosed with improper fencing) because that did not comport with  the legislative intent of the fence laws.  But, the Supreme Court also concluded that to hold the plaintiff liable for the damage due to a clause in his lease agreement would be against public policy because upholding the clause would be contrary to state fence law that holds livestock owners responsible for escaped livestock in certain situations. The state Supreme Court remanded the case to the circuit court for further proceedings consistent with its opinion.

“Improvements” Valued in Partition Action

Claeys v. Claeys, No. 124,032, 2022 Kan. App. LEXIS 16 (Kan. Ct. App. May 6, 2022)

Two brothers each inherited an undivided one-third interest in farmland, and the wife of a deceased brother owned the other one-third interest via a trust created for her benefit.  She filed a partition action seeking to sever the co-ownership. The brothers counterclaimed, asserting they improved the value of the land and that her share should be offset to account for the improvements. The brothers obtained a water permit, installed an $83,000 ten-tower irrigation system to convert the dry land to irrigation crop farming, and spent over $10,000 on piping and a water meter.  The irrigation system was one brother’s personal property.  The sister in-law did not contribute to the cost of these improvements. Three commissioners were appointed to appraise the land and they valued the dryland at $390,000 and the irrigated land at $2,065,000.  She elected to take the smaller tract that was not worth as much. The commissioners determined that because her tract was less valuable, the brothers owed her $428,333 to account for her one-third interest. The trial court ultimately ordered the brothers to pay her the $428,333 for her one-third interest in the higher-valued land based on a finding that improvements were limited to physical structures and equipment.  $50,000 of the $428,333 was placed in escrow and the brothers filed a counterclaim that the $50,000 represented her one-third interest in the increased value from irrigation and should be credited against what they owed her.  The trial court ruled for the sister-in-law on the counterclaim, finding that the increase in value was attributable solely to the pivot irrigation system.  As personal property of one of the brothers, the irrigation system was not an “improvement.”  The trial court awarded the $50,000 to the sister-in-law.  On appeal, the appellate court held the trial court erred when it found the brothers did not improve the land.  The appellate court determined that Kansas law requires a broader inquiry into possible improvements to the land other than just physical structures and equipment.  The appellate court held that the improvements enhanced the property’s condition by increasing productivity and were not mere repairs or replacements.  Changing the land’s status from dry to irrigated and obtaining a water right improved the value of the land.  Accordingly, the appellate court held that such “improvements” should be considered to offset the sister-in-law’s share in the property and remanded the case to the trial court.

State Law Allowing Warrantless Searches Unconstitutional

Rainwaters, et al. v. Tennessee Wildlife Resources Agency, No. 20-CV-6 (Benton Co. Ten. Dist. Ct. Mar. 22, 2022)

The plaintiffs owned farmland on which they hunted or fished.  They marked fenced portions of their respective tracts where they hunted and posted the tracts as “No Trespassing.”  Tennessee Wildlife Resources Agency (TWRA) officers entered onto both tracts on several occasions and took photos of the plaintiffs and their guests without permission or a warrant. Tennessee law (Tenn. Code Ann. §70-1-305(1) and (7)) allows TWRA officers to enter onto private property, except buildings, without a warrant “to perform executive duties.”  The TWRA officers installed U.S. Fish & Wildlife Service surveillance cameras on the plaintiffs’ property without first obtaining a warrant to gather information regarding potential violations of state hunting laws.  The plaintiffs challenged the constitutionality of the Tennessee law and sought injunctive and declaratory relief as well as nominal damages. The defendants moved for summary judgment arguing that the plaintiffs lacked standing and that there was no controversy to be adjudicated. The trial court found the Tennessee law to be facially unconstitutional.  The trial court noted that the statute at issue reached to “any property, outside of buildings” which unconstitutionally allowed for warrantless searches of a home’s curtilage.  The trial court also determined that the officers’ information gathering intrusions were unconstitutional searches rather than reasonable regulations and restrictions, and that the statute was comparable to a constitutionally prohibited general warrant.  It was unreasonable for the TWRA officers to enter onto occupied, fenced, private property without first obtaining consent or a search warrant. The trial court also held the plaintiffs had standing to sue because they experienced multiple unauthorized entries onto their private property, and that declaratory relief was an adequate remedy.  The trial court awarded nominal damages of one dollar.  The defendant has appealed, and the case is ongoing.  

Conclusion

The cases summarized in this post point out several important things:  1) for purposes of the gain exclusion rule of I.R.C. §121, usage of the principal residence as a “principal residence” is critical, as is the timing of the sale; 2) the substantiation rules for charitable deductions must be closely followed; 3) fence law statutes tend to be old and can be complex and somewhat difficult and confusing to apply; 4) leaving land at death to children in co-equal undivided interests often creates issues, including partition actions and difficulties in equating each separate tract; and 5) the warrantless search of farmland is a continuing issue in agriculture. 

May 30, 2022 in Income Tax, Real Property | Permalink | Comments (0)

Sunday, May 22, 2022

2021 Bibliography

Overview

In the past, I have posted bibliographies of my articles by year to help readers researching the various ag tax and ag law topics that I write about.  The blog articles are piling up, with more 750 available for you to read and use for your research for clients (and yourself).  The citations contained in the articles are linked so that you can go directly to the source.  I trust that you find that feature helpful to save you time (and money) in representing clients.

Today, I provide you with the bibliography of my 2021 articles (by topic) as well as the links to the prior blogs containing past years.  Many thanks to my research assistant, Kennedy Mayo, for pulling this together for me.

Prior Years

Here are the links to the bibliographies from prior years:

Ag Law and Taxation 2020 Bibliography

https://lawprofessors.typepad.com/agriculturallaw/2021/01/ag-law-and-taxation-2020-bibliography.html

Ag Law and Taxation – 2019 Bibliography

https://lawprofessors.typepad.com/agriculturallaw/2021/02/ag-law-and-taxation-2019-bibliography.html

Ag Law and Taxation – 2018 Bibliography

https://lawprofessors.typepad.com/agriculturallaw/2021/03/ag-law-and-taxation-2018-bibliography.html

Ag Law and Taxation – 2017 Bibliography

https://lawprofessors.typepad.com/agriculturallaw/2021/04/ag-law-and-taxation-2017-bibliography.html

Ag Law and Taxation – 2016 Bibliography

https://lawprofessors.typepad.com/agriculturallaw/2021/04/ag-law-and-taxation-2016-bibliography.html

 

2021 Bibliography

Below are the links to my 2021 articles, by category:

BANKRUPTCY

The “Almost Tope Ten” Ag Law and Ag Tax Developments of 2020

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020.html

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

What’s an “Asset” For Purposes of a Debtor’s Insolvency Computation?

https://lawprofessors.typepad.com/agriculturallaw/2021/04/whats-an-asset-for-purposes-of-a-debtors-insolvency-computation.html

The Agricultural Law and Tax Report

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

Is a Tax Refund Exempt in Bankruptcy?

https://lawprofessors.typepad.com/agriculturallaw/2021/06/is-a-tax-refund-exempt-in-bankruptcy.html

Ag Law and Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2021/06/ag-law-and-tax-potpourri.html

Montana Conference and Ag Law Summit (Nebraska)

https://lawprofessors.typepad.com/agriculturallaw/2021/07/montana-conference-and-ag-law-summit-nebraska.html

Farm Bankruptcy – “Stripping,” “Claw-Back” and the Tax Collecting Authorities (Update)

https://lawprofessors.typepad.com/agriculturallaw/2021/10/farm-bankruptcy-stripping-claw-back-and-the-tax-collecting-authorities-update.html

BUSINESS PLANNING

For Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

Recent Happenings in Ag Law and Ag Tax

https://lawprofessors.typepad.com/agriculturallaw/2021/01/recent-happenings-in-ag-law-and-ag-tax.html

C Corporate Tax Planning; Management Fees and Reasonable Compensation – A Roadmap of What Not to Do

https://lawprofessors.typepad.com/agriculturallaw/2021/02/c-corporate-tax-planning-management-fees-and-reasonable-compensation-a-roadmap-of-what-not-to-do.html

Will the Estate Tax Valuation Regulations Return?

https://lawprofessors.typepad.com/agriculturallaw/2021/02/will-the-estate-tax-valuation-regulations-return.html

June National Farm Tax and Estate/Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2021/03/june-national-farm-tax-and-estatebusiness-planning-conference.html

August National Farm Tax and Estate/Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2021/03/august-national-farm-tax-and-estatebusiness-planning-conference.html

C Corporation Compensation Issues

https://lawprofessors.typepad.com/agriculturallaw/2021/03/c-corporation-compensation-issues.html

Planning for Changes to the Federal Estate and Gift Tax System

https://lawprofessors.typepad.com/agriculturallaw/2021/05/planning-for-changes-to-the-federal-estate-and-gift-tax-system.html

The Agricultural Law and Tax Report

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

The “Mis” STEP Act – What it Means To Your Estate and Income Tax Plan

https://lawprofessors.typepad.com/agriculturallaw/2021/05/the-mis-step-act-what-it-means-to-your-estate-and-income-tax-plan.html

Intergenerational Transfer of Family Businesses with Split-Dollar Life Insurance

https://lawprofessors.typepad.com/agriculturallaw/2021/05/intergenerational-transfer-of-family-businesses-with-split-dollar-life-insurance.html

Ohio Conference -June 7-8 (Ag Economics) What’s Going On in the Ag Economy?

https://lawprofessors.typepad.com/agriculturallaw/2021/05/ohio-conference-june-7-8-ag-economics-whats-going-on-in-the-ag-economy.html

Montana Conference and Ag Law Summit (Nebraska)

https://lawprofessors.typepad.com/agriculturallaw/2021/07/montana-conference-and-ag-law-summit-nebraska.html

Farm Valuation Issues

https://lawprofessors.typepad.com/agriculturallaw/2021/08/farm-valuation-issues.html

Ag Law Summit

https://lawprofessors.typepad.com/agriculturallaw/2021/08/ag-law-summit.html

The Illiquidity Problem of Farm and Ranch Estates

https://lawprofessors.typepad.com/agriculturallaw/2021/08/the-illiquidity-problem-of-farm-and-ranch-estates.html

When Does a Partnership Exist?

https://lawprofessors.typepad.com/agriculturallaw/2021/09/when-does-a-partnership-exist.html

Gifting Assets Pre-Death – Part One

https://lawprofessors.typepad.com/agriculturallaw/2021/09/gifting-assets-pre-death-part-one.html

Gifting Assets Pre-Death (Entity Interests) – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2021/09/gifting-assets-pre-death-entity-interests-part-two.html

Gifting Pre-Death (Partnership Interests) – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2021/09/gifting-pre-death-partnership-interests-part-three.html

The Future of Ag Tax Policy – Where Is It Headed?

https://lawprofessors.typepad.com/agriculturallaw/2021/09/the-future-of-ag-tax-policy-where-is-it-headed.html

Estate Planning to Protect Assets From Creditors – Dancing On the Line Between Legitimacy and Fraud

https://lawprofessors.typepad.com/agriculturallaw/2021/09/estate-planning-to-protect-assets-from-creditors-dancing-on-the-line-between-legitimacy-and-fraud.html

Fall 2021 Seminars

https://lawprofessors.typepad.com/agriculturallaw/2021/09/fall-2021-seminars.html

Corporate-Owned Life Insurance – Impact on Corporate Value and Shareholder’s Estate

https://lawprofessors.typepad.com/agriculturallaw/2021/10/corporate-owned-life-insurance-impact-on-corporate-value-and-shareholders-estate-.html

Caselaw Update

https://lawprofessors.typepad.com/agriculturallaw/2021/10/caselaw-update.html

S Corporations – Reasonable Compensation; Non-Wage Distributions and a Legislative Proposal

https://lawprofessors.typepad.com/agriculturallaw/2021/10/s-corporations-reasonable-compensation-non-wage-distributions-and-a-legislative-proposal.html

2022 Summer Conferences – Save the Date

https://lawprofessors.typepad.com/agriculturallaw/2021/12/2022-summer-conferences-save-the-date.html

CIVIL LIABILITIES

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2020

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020.html

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2020 – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020-part-three.html

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

The “Top Ten” Agricultural Law and Tax Developments of 2020 – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-top-ten-agricultural-law-and-tax-developments-of-2020-part-three.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

Prescribed Burning Legal Issues

https://lawprofessors.typepad.com/agriculturallaw/2021/02/prescribed-burning-legal-issues.html

Damaged and/or Destroyed Trees and Crops – How is the Loss Measured?

https://lawprofessors.typepad.com/agriculturallaw/2021/03/damaged-andor-destroyed-trees-and-crops-how-is-the-loss-measured.html

The Agricultural Law and Tax Report

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

Mailboxes and Farm Equipment

https://lawprofessors.typepad.com/agriculturallaw/2021/07/mailboxes-and-farm-equipment.html

Statutory Immunity From Liability Associated With Horse-Related Activities

https://lawprofessors.typepad.com/agriculturallaw/2021/12/statutory-immunity-from-liability-associated-with-horse-related-activities.html

CONTRACTS

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2020 – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020-part-three.html

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

Deed Reformation – Correcting Mistakes After the Fact

https://lawprofessors.typepad.com/agriculturallaw/2021/05/deed-reformation-correcting-mistakes-after-the-fact.html

Considerations When Buying Farmland

https://lawprofessors.typepad.com/agriculturallaw/2021/11/considerations-when-buying-farmland.html

Recent Court Decisions of Interest

https://lawprofessors.typepad.com/agriculturallaw/2021/12/recent-court-decisions-of-interest.html

The Potential Peril Associated With Deferred Payment Contracts

https://lawprofessors.typepad.com/agriculturallaw/2021/12/the-potential-peril-associated-with-deferred-payment-contracts.html

COOPERATIVES

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Final Ag/Horticultural Cooperative QBI Regulations Issued

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

CRIMINAL LIABILITIES

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2020

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020.html

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

The Agricultural Law and Tax Report

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

Estate Planning to Protect Assets From Creditors – Dancing On the Line Between Legitimacy and Fraud

https://lawprofessors.typepad.com/agriculturallaw/2021/09/estate-planning-to-protect-assets-from-creditors-dancing-on-the-line-between-legitimacy-and-fraud.html

Recent Court Decisions of Interest

https://lawprofessors.typepad.com/agriculturallaw/2021/12/recent-court-decisions-of-interest.html

ENVIRONMENTAL LAW

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

Recent Happenings in Ag Law and Ag Tax

https://lawprofessors.typepad.com/agriculturallaw/2021/01/recent-happenings-in-ag-law-and-ag-tax.html

Court and IRS Happenings in Ag Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2021/03/court-happenings-in-ag-law-and-tax.html

Valuing Ag Real Estate With Environmental Concerns

https://lawprofessors.typepad.com/agriculturallaw/2021/05/federal-estate-tax-value-of-ag-real-estate-with-environmental-concerns.html

Ag Law and Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2021/06/ag-law-and-tax-potpourri.html

No Expansion of Public Trust Doctrine in Iowa – Big Implications for Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2021/06/no-expansion-of-public-trust-doctrine-in-iowa-big-implications-for-agriculture.html

Key “Takings” Decision from SCOTUS Involving Ag Businesses

https://lawprofessors.typepad.com/agriculturallaw/2021/06/key-takings-decision-from-scotus-involving-ag-businesses.html

Montana Conference and Ag Law Summit (Nebraska)

https://lawprofessors.typepad.com/agriculturallaw/2021/07/montana-conference-and-ag-law-summit-nebraska.html

Navigable Waters Protection Rule – What’s Going on with WOTUS?

https://lawprofessors.typepad.com/agriculturallaw/2021/07/navigable-waters-protection-rule-whats-going-on-with-wotus.html

ESTATE PLANNING

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2020 – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020-part-two.html

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

What Now? – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2021/02/what-now-part-two.html

Will the Estate Tax Valuation Regulations Return?

https://lawprofessors.typepad.com/agriculturallaw/2021/02/will-the-estate-tax-valuation-regulations-return.html

June National Farm and Tax and Estate/Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2021/03/june-national-farm-tax-and-estatebusiness-planning-conference.html

August National Farm Tax and Estate/Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2021/03/august-national-farm-tax-and-estatebusiness-planning-conference.html

Farmland in an Estate – Special Use Valuation and the 25 Percent Test

https://lawprofessors.typepad.com/agriculturallaw/2021/03/farmland-in-an-estate-special-use-valuation-and-the-25-percent-test.html

The Revocable Living Trust – Is it For You?

https://lawprofessors.typepad.com/agriculturallaw/2021/04/the-revocable-living-trust-is-it-for-you.html

Summer Conferences – NASBA Certification! (and Some Really Big Estate Planning Issues – Including Basis)

https://lawprofessors.typepad.com/agriculturallaw/2021/04/summer-conferences-nasba-certification-and-some-really-big-estate-planning-issues-including-basis.html

Court Developments of Interest

https://lawprofessors.typepad.com/agriculturallaw/2021/04/court-developments-of-interest.html

The Agricultural Law and Tax Report

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

Planning for Changes to the Federal Estate and Gift Tax System

https://lawprofessors.typepad.com/agriculturallaw/2021/05/planning-for-changes-to-the-federal-estate-and-gift-tax-system.html

The “Mis” STEP Act – What it Means To Your Estate and Income Tax Plan

https://lawprofessors.typepad.com/agriculturallaw/2021/05/the-mis-step-act-what-it-means-to-your-estate-and-income-tax-plan.html

The Revocable Trust – What Happens When the Grantor Dies?

https://lawprofessors.typepad.com/agriculturallaw/2021/05/the-revocable-trust-what-happens-when-the-grantor-dies.html

Intergenerational Transfer of Family Businesses with Split-Dollar Life Insurance

https://lawprofessors.typepad.com/agriculturallaw/2021/05/intergenerational-transfer-of-family-businesses-with-split-dollar-life-insurance.html

Ohio Conference –June 7-8 (Ag Economics) What’s Going On in the Ag Economy?

https://lawprofessors.typepad.com/agriculturallaw/2021/05/ohio-conference-june-7-8-ag-economics-whats-going-on-in-the-ag-economy.html

Reimbursement Claims in Estates; Drainage District Assessments

https://lawprofessors.typepad.com/agriculturallaw/2021/07/reimbursement-claims-in-estates-drainage-district-assessments.html

Montana Conference and Ag Law Summit (Nebraska)

https://lawprofessors.typepad.com/agriculturallaw/2021/07/montana-conference-and-ag-law-summit-nebraska.html

Farm Valuation Issues

https://lawprofessors.typepad.com/agriculturallaw/2021/08/farm-valuation-issues.html

Ag Law Summit

https://lawprofessors.typepad.com/agriculturallaw/2021/08/ag-law-summit.html

The Illiquidity Problem of Farm and Ranch Estates

https://lawprofessors.typepad.com/agriculturallaw/2021/08/the-illiquidity-problem-of-farm-and-ranch-estates.html

Planning to Avoid Elder Abuse

https://lawprofessors.typepad.com/agriculturallaw/2021/08/planning-to-avoid-elder-abuse.html

Gifting Assets Pre-Death – Part One

https://lawprofessors.typepad.com/agriculturallaw/2021/09/gifting-assets-pre-death-part-one.html

Gifting Assets Pre-Death (Entity Interests) – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2021/09/gifting-assets-pre-death-entity-interests-part-two.html

The Future of Ag Tax Policy – Where Is It Headed?

https://lawprofessors.typepad.com/agriculturallaw/2021/09/the-future-of-ag-tax-policy-where-is-it-headed.html

Estate Planning to Protect Assets From Creditors – Dancing On the Line Between Legitimacy and Fraud

https://lawprofessors.typepad.com/agriculturallaw/2021/09/estate-planning-to-protect-assets-from-creditors-dancing-on-the-line-between-legitimacy-and-fraud.html

Tax Happenings – Present Status of Proposed Legislation (and What You Might Do About It)

https://lawprofessors.typepad.com/agriculturallaw/2021/09/tax-happenings-present-status-of-proposed-legislation-and-what-you-might-do-about-it.html

Corporate-Owned Life Insurance – Impact on Corporate Value and Shareholder’s Estate

https://lawprofessors.typepad.com/agriculturallaw/2021/10/corporate-owned-life-insurance-impact-on-corporate-value-and-shareholders-estate-.html

Tax (and Estate Planning) Happenings

https://lawprofessors.typepad.com/agriculturallaw/2021/11/tax-and-estate-planning-happenings.html

Selected Tax Provisions of House Bill No. 5376 – and Economic Implications

https://lawprofessors.typepad.com/agriculturallaw/2021/11/selected-tax-provisions-of-house-bill-no-5376-and-economic-implications.html

2022 Summer Conferences – Save the Date

https://lawprofessors.typepad.com/agriculturallaw/2021/12/2022-summer-conferences-save-the-date.html

INCOME TAX

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2020 – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020-part-two.html

The “Top Ten” Agricultural Law and Ag Tax Developments of 2020 – Part One

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-top-ten-agricultural-law-and-ag-tax-developments-of-2020-part-one.html

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

The “Top Ten” Agricultural Law and Tax Developments of 2020 – Part Four

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-top-ten-agricultural-law-and-tax-developments-of-2020-part-four.html

Final Ag/Horticultural Cooperative QBI Regulations Issued

https://lawprofessors.typepad.com/agriculturallaw/2021/01/final-aghorticultural-cooperative-qbi-regulations-issued.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

Recent Happenings in Ag Law and Ag Tax

https://lawprofessors.typepad.com/agriculturallaw/2021/01/recent-happenings-in-ag-law-and-ag-tax.html

Deducting Start-Up Costs – When Does the Business Activity Begin?

https://lawprofessors.typepad.com/agriculturallaw/2021/01/deducting-start-up-costs-when-does-the-business-activity-begin.html

What Now? – Part One

https://lawprofessors.typepad.com/agriculturallaw/2021/02/what-now-part-one.html

C Corporate Tax Planning; Management Fees and Reasonable Compensation – A Roadmap of What Not to Do

https://lawprofessors.typepad.com/agriculturallaw/2021/02/c-corporate-tax-planning-management-fees-and-reasonable-compensation-a-roadmap-of-what-not-to-do.html

Where’s the Line Between Start-Up Expenses, the Conduct of a Trade or Business and Profit Motive?

https://lawprofessors.typepad.com/agriculturallaw/2021/02/wheres-the-line-between-start-up-expenses-the-conduct-of-a-trade-or-business-and-profit-motive.html

June National Farm Tax and Estate/Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2021/03/june-national-farm-tax-and-estatebusiness-planning-conference.html

Selling Farm Business Assets – Special Tax Treatment (Part One)

https://lawprofessors.typepad.com/agriculturallaw/2021/03/selling-farm-business-assets-special-tax-treatment-part-one.html

Tax Update Webinar

https://lawprofessors.typepad.com/agriculturallaw/2021/03/tax-update-webinar.html

Selling Farm Business Assets – Special Tax Treatment (Part Two)

https://lawprofessors.typepad.com/agriculturallaw/2021/03/selling-farm-business-assets-special-tax-treatment-part-two.html

Selling Farm Business Assets – Special Tax Treatment (Part Three)

https://lawprofessors.typepad.com/agriculturallaw/2021/03/selling-farm-business-assets-special-tax-treatment-part-three.html

August National Farm Tax and Estate/Business Planning Conference

https://lawprofessors.typepad.com/agriculturallaw/2021/03/august-national-farm-tax-and-estatebusiness-planning-conference.html

Court and IRS Happenings in Ag Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2021/03/court-happenings-in-ag-law-and-tax.html

C Corporation Compensation Issues

https://lawprofessors.typepad.com/agriculturallaw/2021/03/c-corporation-compensation-issues.html

Tax Considerations When Leasing Farmland

https://lawprofessors.typepad.com/agriculturallaw/2021/04/tax-considerations-when-leasing-farmland.html

Federal Farm Programs and the AGI Computation

https://lawprofessors.typepad.com/agriculturallaw/2021/04/federal-farm-programs-and-the-agi-computation.html

Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2021/04/tax-potpourri.html

What’s an “Asset” For Purposes of a Debtor’s Insolvency Computation?

https://lawprofessors.typepad.com/agriculturallaw/2021/04/whats-an-asset-for-purposes-of-a-debtors-insolvency-computation.html

Summer Conferences – NASBA Certification! (and Some Really Big Estate Planning Issues – Including Basis)

https://lawprofessors.typepad.com/agriculturallaw/2021/04/summer-conferences-nasba-certification-and-some-really-big-estate-planning-issues-including-basis.html

Court Developments of Interest

https://lawprofessors.typepad.com/agriculturallaw/2021/04/court-developments-of-interest.html

The Agricultural Law and Tax Report

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

The “Mis” STEP Act – What it Means To Your Estate and Income Tax Plan

https://lawprofessors.typepad.com/agriculturallaw/2021/05/the-mis-step-act-what-it-means-to-your-estate-and-income-tax-plan.html

The Revocable Trust – What Happens When the Grantor Dies?

https://lawprofessors.typepad.com/agriculturallaw/2021/05/the-revocable-trust-what-happens-when-the-grantor-dies.html

Ohio Conference -June 7-8 (Ag Economics) What’s Going On in the Ag Economy?

https://lawprofessors.typepad.com/agriculturallaw/2021/05/ohio-conference-june-7-8-ag-economics-whats-going-on-in-the-ag-economy.html

What’s the “Beef” With Conservation Easements?

https://lawprofessors.typepad.com/agriculturallaw/2021/05/whats-the-beef-with-conservation-easements.html

Is a Tax Refund Exempt in Bankruptcy?

https://lawprofessors.typepad.com/agriculturallaw/2021/06/is-a-tax-refund-exempt-in-bankruptcy.html

Tax Court Happenings

https://lawprofessors.typepad.com/agriculturallaw/2021/06/tax-court-happenings.html

IRS Guidance On Farms NOLs

https://lawprofessors.typepad.com/agriculturallaw/2021/07/irs-guidance-on-farm-nols.html

Montana Conference and Ag Law Summit (Nebraska)

https://lawprofessors.typepad.com/agriculturallaw/2021/07/montana-conference-and-ag-law-summit-nebraska.html

Tax Developments in the Courts – The “Tax Home”; Sale of the Home; and Gambling Deductions

https://lawprofessors.typepad.com/agriculturallaw/2021/07/tax-developments-in-the-courts-the-tax-home-sale-of-the-home-and-gambling-deductions.html

Recovering Costs in Tax Litigation

https://lawprofessors.typepad.com/agriculturallaw/2021/07/recovering-costs-in-tax-litigation.html

Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2021/08/tax-potpourri.html

Weather-Related Sales of Livestock

https://lawprofessors.typepad.com/agriculturallaw/2021/08/weather-related-sales-of-livestock.html

Ag Law Summit

https://lawprofessors.typepad.com/agriculturallaw/2021/08/ag-law-summit.html

Livestock Confinement Buildings and S.E. Tax

https://lawprofessors.typepad.com/agriculturallaw/2021/08/livestock-confinement-buildings-and-se-tax.html

When Does a Partnership Exist?

https://lawprofessors.typepad.com/agriculturallaw/2021/09/when-does-a-partnership-exist.html

Recent Tax Developments in the Courts

https://lawprofessors.typepad.com/agriculturallaw/2021/09/recent-tax-developments-in-the-courts.html

Gifting Assets Pre-Death – Part One

https://lawprofessors.typepad.com/agriculturallaw/2021/09/gifting-assets-pre-death-part-one.html

Gifting Pre-Death (Partnership Interests) – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2021/09/gifting-pre-death-partnership-interests-part-three.html

The Future of Ag Tax Policy – Where Is It Headed?

https://lawprofessors.typepad.com/agriculturallaw/2021/09/the-future-of-ag-tax-policy-where-is-it-headed.html

Tax Happenings – Present Statute of Proposed Legislation (and What You Might Do About It)

https://lawprofessors.typepad.com/agriculturallaw/2021/09/tax-happenings-present-status-of-proposed-legislation-and-what-you-might-do-about-it.html

Fall 2021 Seminars

https://lawprofessors.typepad.com/agriculturallaw/2021/09/fall-2021-seminars.html

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

https://lawprofessors.typepad.com/agriculturallaw/2021/09/extended-livestock-replacement-period-applies-in-areas-of-extended-drought-irs-updated-drought-areas.html

Farm Bankruptcy – “Stripping,” “Claw-Back” and the Tax Collecting Authorities (Update)

https://lawprofessors.typepad.com/agriculturallaw/2021/10/farm-bankruptcy-stripping-claw-back-and-the-tax-collecting-authorities-update.html

Caselaw Update

https://lawprofessors.typepad.com/agriculturallaw/2021/10/caselaw-update.html

Tax Issues Associated With Easements

https://lawprofessors.typepad.com/agriculturallaw/2021/10/tax-issues-associated-with-easements.html

S Corporations – Reasonable Compensation; Non-Wage Distributions and a Legislative Proposal

https://lawprofessors.typepad.com/agriculturallaw/2021/10/s-corporations-reasonable-compensation-non-wage-distributions-and-a-legislative-proposal.html

Tax Reporting of Sale Transactions By Farmers

https://lawprofessors.typepad.com/agriculturallaw/2021/10/tax-reporting-of-sale-transactions-by-farmers.html

The Tax Rules Involving Prepaid Farm Expenses

https://lawprofessors.typepad.com/agriculturallaw/2021/10/the-tax-rules-involving-prepaid-farm-expenses.html

Self Employment Taxation of CRP Rents – Part One

https://lawprofessors.typepad.com/agriculturallaw/2021/11/self-employment-taxation-of-crp-rents-part-one.html

Self-Employment Taxation of CRP Rents – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2021/11/self-employment-taxation-of-crp-rents-part-two.html

Self-Employment Taxation of CRP Rents – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2021/11/self-employment-taxation-of-crp-rents-part-three.html

Recent IRS Guidance, Tax Legislation and Tax Ethics Seminar/Webinar

https://lawprofessors.typepad.com/agriculturallaw/2021/11/recent-irs-guidance-tax-legislation-and-tax-ethics-seminarwebinar.html

Tax (and Estate Planning) Happenings

https://lawprofessors.typepad.com/agriculturallaw/2021/11/tax-and-estate-planning-happenings.html

Selected Tax Provisions of House Bill No. 5376 – and Economic Implications

 https://lawprofessors.typepad.com/agriculturallaw/2021/11/selected-tax-provisions-of-house-bill-no-5376-and-economic-implications.html

Recent Court Decisions of Interest

https://lawprofessors.typepad.com/agriculturallaw/2021/12/recent-court-decisions-of-interest.html

The Potential Peril Associated With Deferred Payment Contracts

https://lawprofessors.typepad.com/agriculturallaw/2021/12/the-potential-peril-associated-with-deferred-payment-contracts.html

Inland Hurricane – 2021 Version; Is There Any Tax Benefit to Demolishing Farm Buildings and Structures?

https://lawprofessors.typepad.com/agriculturallaw/2021/12/inland-hurricane-2021-version-is-there-any-tax-benefit-to-demolishing-farm-buildings-and-structures.html

2022 Summer Conferences – Save the Date

https://lawprofessors.typepad.com/agriculturallaw/2021/12/2022-summer-conferences-save-the-date.html

The Home Sale Exclusion Rule – How Does it Work When Land is Also Sold?

https://lawprofessors.typepad.com/agriculturallaw/2021/12/the-home-sale-exclusion-rule-how-does-it-work-when-land-is-also-sold.html

Gifting Ag Commodities To Children

https://lawprofessors.typepad.com/agriculturallaw/2021/12/gifting-ag-commodities-to-children.html

Livestock Indemnity Payments – What Are They? What Are the Tax Reporting Options?

https://lawprofessors.typepad.com/agriculturallaw/2021/12/livestock-indemnity-payments-what-are-they-what-are-the-tax-reporting-options.html

Commodity Credit Corporation Loans and Elections

https://lawprofessors.typepad.com/agriculturallaw/2021/12/commodity-credit-corporation-loans-and-elections.html

INSURANCE

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

The Agricultural Law and Tax Report

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

REAL PROPERTY

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2020 – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020-part-three.html

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

Prescribed Burning Legal Issues

https://lawprofessors.typepad.com/agriculturallaw/2021/02/prescribed-burning-legal-issues.html

Ag Zoning Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2021/02/ag-zoning-potpourri.html

Court and IRS Happenings in Ag Law and Tax

https://lawprofessors.typepad.com/agriculturallaw/2021/03/court-happenings-in-ag-law-and-tax.html

Is That Old Fence Really the Boundary

https://lawprofessors.typepad.com/agriculturallaw/2021/04/is-that-old-fence-really-the-boundary.html

Court Developments of Interest

https://lawprofessors.typepad.com/agriculturallaw/2021/04/court-developments-of-interest.html

The Agricultural Law and Tax Report

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

Deed Reformation – Correcting Mistakes After the Fact

https://lawprofessors.typepad.com/agriculturallaw/2021/05/deed-reformation-correcting-mistakes-after-the-fact.html

Valuing Ag Real Estate With Environmental Concerns

https://lawprofessors.typepad.com/agriculturallaw/2021/05/federal-estate-tax-value-of-ag-real-estate-with-environmental-concerns.html

Ag Law and Tax Potpourri

https://lawprofessors.typepad.com/agriculturallaw/2021/06/ag-law-and-tax-potpourri.html

Montana Conference and Ag Law Summit (Nebraska)

https://lawprofessors.typepad.com/agriculturallaw/2021/07/montana-conference-and-ag-law-summit-nebraska.html

Farm Valuation Issues

https://lawprofessors.typepad.com/agriculturallaw/2021/08/farm-valuation-issues.html

Considerations When Buying Farmland

https://lawprofessors.typepad.com/agriculturallaw/2021/11/considerations-when-buying-farmland.html

The Home Sale Exclusion Rule – How Does it Work When Land is Also Sold?

https://lawprofessors.typepad.com/agriculturallaw/2021/12/the-home-sale-exclusion-rule-how-does-it-work-when-land-is-also-sold.html

REGULATORY LAW

The “Almost Top Ten” Ag Law and Ag Tax Developments of 2020 – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-almost-top-ten-ag-law-and-ag-tax-developments-of-2020-part-two.html

 The “Top Ten” Agricultural Law and Ag Tax Developments of 2020 – Part One

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-top-ten-agricultural-law-and-ag-tax-developments-of-2020-part-one.html

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

The “Top Ten” Agricultural Law and Tax Developments of 2020 – Part Two

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-top-ten-agricultural-law-and-tax-developments-of-2020-part-two.html

The “Top Ten” Agricultural Law and Tax Developments of 2020 – Part Four

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-top-ten-agricultural-law-and-tax-developments-of-2020-part-four.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

Recent Happenings in Ag Law and Ag Tax

https://lawprofessors.typepad.com/agriculturallaw/2021/01/recent-happenings-in-ag-law-and-ag-tax.html

Prescribed Burning Legal Issues

https://lawprofessors.typepad.com/agriculturallaw/2021/02/prescribed-burning-legal-issues.html

Packers and Stockyards Act Amended – Additional Protection for Unpaid Cash Sellers of Livestock

https://lawprofessors.typepad.com/agriculturallaw/2021/02/packers-and-stockyards-act-amended-additional-protection-for-unpaid-cash-sellers-of-livestock.html

Federal Farm Programs and the AGI Computation

https://lawprofessors.typepad.com/agriculturallaw/2021/04/federal-farm-programs-and-the-agi-computation.html

Regulation of Agriculture – Food Products, Slaughterhouse Line Speeds and CAFOS

https://lawprofessors.typepad.com/agriculturallaw/2021/04/regulation-of-agriculture-food-products-slaughterhouse-line-speeds-and-cafos.html

The Agricultural Law and Tax Report

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

The FLSA and Ag’s Exemption From Paying Overtime Wages

https://lawprofessors.typepad.com/agriculturallaw/2021/06/the-flsa-and-ags-exemption-from-paying-overtime-wages.html

The “Dormant” Commerce Clause and Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2021/06/the-dormant-commerce-clause-and-agriculture.html

Trouble with ARPA

https://lawprofessors.typepad.com/agriculturallaw/2021/06/trouble-with-arpa.html

No Expansion of Public Trust Doctrine in Iowa – Big Implications for Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2021/06/no-expansion-of-public-trust-doctrine-in-iowa-big-implications-for-agriculture.html

Key “Takings Decision from SCOTUS Involving Ag Businesses

https://lawprofessors.typepad.com/agriculturallaw/2021/06/key-takings-decision-from-scotus-involving-ag-businesses.html

Reimbursement Claims in Estates; Drainage District Assessments

https://lawprofessors.typepad.com/agriculturallaw/2021/07/reimbursement-claims-in-estates-drainage-district-assessments.html

Mailboxes and Farm Equipment

https://lawprofessors.typepad.com/agriculturallaw/2021/07/mailboxes-and-farm-equipment.html

Montana Conference and Ag Law Summit (Nebraska)

https://lawprofessors.typepad.com/agriculturallaw/2021/07/montana-conference-and-ag-law-summit-nebraska.html

California’s Regulation of U.S. Agriculture

https://lawprofessors.typepad.com/agriculturallaw/2021/08/californias-regulation-of-us-agriculture.html

Checkoffs and Government Speech – The Merry-Go-Round Revolves Again

https://lawprofessors.typepad.com/agriculturallaw/2021/08/checkoffs-and-government-speech-the-merry-go-round-revolves-again.html

Is There a Constitutional Way To Protect Animal Ag Facilities

https://lawprofessors.typepad.com/agriculturallaw/2021/08/is-there-a-constitutional-way-to-protect-animal-ag-facilities.html

Caselaw Update

https://lawprofessors.typepad.com/agriculturallaw/2021/10/caselaw-update.html

Recent Court Decisions of Interest

https://lawprofessors.typepad.com/agriculturallaw/2021/12/recent-court-decisions-of-interest.html

Livestock Indemnity Payments – What Are They? What Are the Tax Reporting Options?

https://lawprofessors.typepad.com/agriculturallaw/2021/12/livestock-indemnity-payments-what-are-they-what-are-the-tax-reporting-options.html

SECURED TRANSACTIONS

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

Cross-Collateralization Clauses – Tough Lessons For Lenders

https://lawprofessors.typepad.com/agriculturallaw/2021/03/cross-collateralization-clauses-tough-lessons-for-lenders.html

The Agricultural Law and Tax Report

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

The “EIDL Trap” For Farm Borrowers

https://lawprofessors.typepad.com/agriculturallaw/2021/07/the-eidl-trap-for-farm-borrowers.html

The Potential Peril Associated With Deferred Payment Contracts

https://lawprofessors.typepad.com/agriculturallaw/2021/12/the-potential-peril-associated-with-deferred-payment-contracts.html

WATER LAW

Continuing Education Events and Summer Conferences

https://lawprofessors.typepad.com/agriculturallaw/2021/01/continuing-education-events-and-summer-conferences.html

The “Top Ten” Agricultural Law and Tax Developments of 2020 – Part Three

https://lawprofessors.typepad.com/agriculturallaw/2021/01/the-top-ten-agricultural-law-and-tax-developments-of-2020-part-three.html

Agricultural Law Online!

https://lawprofessors.typepad.com/agriculturallaw/2021/01/agricultural-law-online.html

The Agricultural Law and Tax Report

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

Montana Conference and Ag Law Summit (Nebraska)

https://lawprofessors.typepad.com/agriculturallaw/2021/07/montana-conference-and-ag-law-summit-nebraska.html

May 22, 2022 in Bankruptcy, Business Planning, Civil Liabilities, Contracts, Cooperatives, Criminal Liabilities, Environmental Law, Estate Planning, Income Tax, Insurance, Real Property, Regulatory Law, Secured Transactions, Water Law | Permalink | Comments (0)

Monday, March 21, 2022

Animal Ag Facilities and the Constitution

Overview

In response to attempts to shut down animal confinement operations by activist groups, legislatures in several states have enacted laws designed to protect these businesses by limiting access. A common approach is for the law to criminalize the use of deception to access a confined livestock facility or meatpacking plant with the intent to cause physical harm, economic harm or some other type of injury to the business. But the laws have generally been struck down on free speech and equal protection grounds.  Is there a way for states to provide legal protection to confinement livestock facilities?  What can these facilities do to protect themselves? 

Laws designed to protect confined animal livestock facilities from those intended to do them harm – it’s the topic of today’s post.

General Statutory Construct

The basic idea of state legislatures that have attempted to provide a level of protection to livestock facilities is to bar access to an animal production facility under false pretenses.  At their core, the laws attempt to prohibit a person having the intent to harm a livestock production facility from gaining access to the facility (such as via employment) to then commit illegal acts on the premises.  See, e.g., Iowa Code §717A.3A.  Laws that bar lying and trespass coupled with the intent to do physical harm to an animal production facility should not be constitutionally deficient.  Laws that go beyond those confines may be. 

The Iowa provisions.  Iowa legislation is a common example of how states have attempted to address the issue.  The Iowa legislature has made two attempts at crafting a state law that would withstand a constitutional challenge.  The initial version criminalized “agricultural production facility fraud” if a person willfully obtained access to such a facility by false pretenses (the “access” provision) or made a false statement or representation as part of an application or agreement to be employed at the facility (the “employment” provision).  The law also required the person to know that the statement was false when made and that it was made with an intent to commit a knowingly unauthorized act.  Iowa Code §717A.3A.  This initial statutory version was challenged and, as discussed below, the employment provision was deemed unconstitutional.

The Iowa legislature then modified the law with a second version that described an agricultural production facility trespass as occurring when a person uses deception “on a matter that would reasonably result in a denial of access to an agricultural production facility that is not open to the public, and, through such deception, gains access to [the facility], with the intent to cause physical or economic harm or other injury to the [facility’s] operations, agricultural animals, crop, owner, personnel, equipment, building, premises, business interest, or customer [the “access” provision].  The revised law also criminalizes the use of deception “on a matter that would reasonably result in a denial of an opportunity to be employed  at [a facility] that is not open to the public, and, through such deception, is so employed, with the intent to cause physical or economic harm or other injury to the [facility’s] operations, agricultural animals, crop, owner, personnel, equipment, building, premises, business interest, or customer [the “employment” provision].

In other words, the Iowa provisions criminalizes the use of lies to either gain access or employment at an ag production facility where the use is coupled with the intent to do harm.  Sounds quite reasonable, doesn’t it?  But the courts (a place where the telling of a lie can come with severe penalties) have generally come to a different conclusion.

Recent Court Opinions

North Carolina.  In 2017, a challenge to the North Carolina statutory provision was dismissed for lack of standing. People for the Ethical Treatment of Animals v. Stein, 259 F. Supp. 3d 369 (M.D. N.C. 2017). The plaintiffs, numerous animal rights activist groups, brought a pre-enforcement challenge to the North Carolina Property Protection Act.  They claimed that the law unconstitutionally stifled their ability to investigate North Carolina employers for illegal or unethical conduct and restricted the flow of information those investigations provide.  As noted, the court dismissed the case for lack of standing. On appeal, however, the appellate court reversed.  PETA, Inc. v. Stein, 737 Fed. Appx. 122 (4th Cir. 2018).  The appellate court determined that the plaintiffs had standing to challenge the law through its “chilling effect” on their First Amendment rights to investigate and publicize actions on private property.  They also alleged a reasonable fear that the law would be enforced against them. 

On the merits, the trial court then held that the challenged provisions of the law were unconstitutional under the First Amendment as a violation of the plaintiffs’ free speech rights.  People for the Ethical Treatment of Animals, Inc. v. Stein, 466 F. Supp. 3d 547 (M.D.  N.C. 2020).

Utah.  The Utah law was also deemed unconstitutional. Animal Legal Defense Fund v. Herbert, 263 F. Supp. 3d 1193 (D. Utah 2017). At issue was Utah Code §76-6-112 which criminalizes the entering of a private agricultural livestock facility under false pretenses or via trespass to photograph, audiotape or videotape practices inside the facility.  While the state claimed that lying, which the statute regulates, is not protected free speech, the court determined that only lying that causes “legally cognizable harm” falls outside First Amendment protection. The state also argued that the act of recording is not speech that is protected by the First Amendment. However, the court determined that the act of recording is protectable First Amendment speech. The court also concluded that the fact that the speech occurred on a private agricultural facility did not render it outside First Amendment protection. The court determined that both the lying and the recording provisions of the Act were content-based provisions subject to strict scrutiny. To survive strict scrutiny the state had to demonstrate that the restriction furthered a compelling state interest. The court determined that “the state has provided no evidence that animal and employee safety were the actual reasons for enacting the Act, nor that animal and employee safety are endangered by those targeted by the Act, nor that the Act would actually do anything to remedy those dangers to the extent that they exist.”  For those reasons, the court determined that the Act was unconstitutional. 

A Wyoming law experienced a similar fate. Western Watersheds Project v. Michael, 869 F.3d 1189 (10th Cir. 2017), rev’g., 196 F. Supp. 3d 1231 (D. Wyo. 2016).  In 2015, two new Wyoming laws went into effect that imposed civil and criminal liability upon any person who "[c]rosses private land to access adjacent or proximate land where he collects resource data." Wyo. Stat. §§6-3-414(c); 40-27-101(c). The appellate court, reversing the trial court, determined that because of the broad definitions provided in the statutes, the phrase "collects resource data" included numerous activities on public lands (such as writing notes on habitat conditions, photographing wildlife, or taking water samples), so long as an individual also records the location from which the data was collected. Accordingly, the court held that the statutes regulated protected speech in spite of the fact that they also governed access to private property. While trespassing is not protected by the First Amendment, the court determined that the statutes targeted the “creation” of speech by penalizing the collection of resource data. 

Note:  The appellate court remanded the case to the trial court for a determination of the appropriate level of scrutiny and whether the statutes survived review.   Ultimately, the trial court granted the plaintiffs’ motion for summary judgment, finding that the statutes were content based and, as such failed to withstand constitutional strict scrutiny review on the basis that the laws were not narrowly tailored.  Western Watersheds Project v. Michael, 353 F. Supp. 3d 1176 (D. Wyo. 2018). 

Ninth Circuit.  In early 2018, the U.S. Circuit Court of Appeals for the Ninth Circuit issued a detailed opinion involving the Idaho statutory provision.  Animal Legal Defense Fund v. Wasden, 878 F.3d 1184 (9th Cir. 2018).  The Ninth Circuit’s opinion provides a roadmap for state lawmakers to follow to provide at least a minimal level of protection to animal production facilities from those that would intend to do them economic harm.  According to the Ninth Circuit, state legislation can bar entry to a facility by force, threat or trespass.  Likewise, the acquisition of economic data by misrepresentation can be prohibited.  Similarly, criminalizing the obtaining of employment by false pretenses coupled with the intent to cause harm to the animal production facility is not constitutionally deficient.  However, provisions that criminalize audiovisual recordings are suspect. 

Eighth Circuit.  In 2021, the U.S. Court of Appeals for the Eighth Circuit construed the initial version of the Iowa law and upheld the portion of it providing for criminal penalties for gaining access to a covered facility by false pretenses.  Animal Legal Defense Fund v. Reynolds, 8 F.4th 781 (8th Cir. 2021).  This is the first time that any federal circuit court of appeals has upheld a provision that makes illegal the gaining of access to a covered facility by lying.   

Conversely, the court held that the employment provision of the law (knowingly making a false statement to obtain employment) violated the First Amendment because the law was not limited to false claims that were made to gain an offer of employment.  Instead, the provision provided for prosecution of persons who made false statements that were incapable of influencing an offer of employment.  A prohibition on immaterial falsehoods was not necessary to protect the State’s interest – such as false exaggerations made to impress the job interviewer.  The court determined that barring only false statements that were material to a hiring decision was a less restrictive means to achieve the State’s interest. 

Note.  The day before the Eighth Circuit issued its opinion concerning the Iowa law, it determined that plaintiffs challenging a comparable Arkansas law had standing the bring the case.  Animal Legal Defense Fund v. Vaught, 8 F.4th 714 (8th Cir. 2021).  The court later denied a petition for rehearing.   Animal Legal Defense Fund v. Vaught, No. 20-1538, 2021 U.S. App. LEXIS 27712 (8th Cir. Sept. 15, 2021). 

In late 2019, the plaintiffs in the Iowa case file suit to enjoin the second version of the Iowa law – Iowa Code §717A.3B.  The trial court agreed and preliminary enjoined the revised law.  The plaintiffs then filed a motion for summary judgment in early 2020 and the state filed a cross motion for summary judgment, and the case was continued while the appellate court was considering the case involving the initial version of the Iowa law.  As noted above, the appellate court ultimately upheld the access provision but not the employment provision.  The trial court, in the current case upheld the plaintiffs’ motion for summary judgment, finding that the revised statutory language had been slightly modified, but was substantially similar to the initial version.  As such, the trial court determined that the revised statute discriminated based on content and viewpoint and was unconstitutional under a strict scrutiny analysis.  Animal Legal Defense Fund v. Reynolds, No. 4:19-cv-00124-SMR-HCA, 2022 U.S. Dist. LEXIS 48142 (S.D. Iowa Mar. 14, 2022). 

Tenth Circuit.  In Animal Legal Defense Fund, et al. v. Kelly, 9 F.4th 1219 (10th Cir. 2021), pet. for cert. filed, (U.S. Sup. Ct. Nov. 17, 2021), the court construed the Kansas provision that makes it a crime to take pictures or record videos at a covered facility “without the effective consent of the owner and with the intent to damage the enterprise.”  The plaintiffs claimed that the law violated their First Amendment free speech rights.  The State claimed that what was being barred was conduct rather than speech and that, therefore, the First Amendment didn’t apply.  But, the court tied conduct together with speech to find a constitutional violation – it was necessary to lie to gain access to a covered facility and consent to film activities.  As such, the law regulated protected speech (lying with intent to cause harm to a business) and was unconstitutional.  The court determined that the State failed to prove that the law narrowly tailored to a compelling state interest in suppressing the “speech” involved.  The dissent pointed out (correctly and consistently with the Eighth Circuit) that “lies uttered to obtain consent to enter the premises of an agricultural facility are not protected speech.” The First Amendment does not protect a fraudulently obtained consent to enter someone else’s property. 

A Different Approach?

The appellate courts generally holding that the right to free speech protects false factual statements that inflict real harm and serve no legitimate interest runs contrary to an established line of U.S. Supreme Court precedent, at least until the Court’s decision in United States v. Alvarez, 567 U.S. 709 (2012).  See, e.g., Bill Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731 (1983); Brown v. Hartlage, 456 U.S. 45 (1982); Herbert v. Lando, 441 U.S. 153 (1979); Garrison v. Louisiana, 379 U.S. 64 (1964).  The current split between the Eighth, Ninth and Tenth Circuits on the constitutionality of the Iowa Idaho and Kansas laws with respect to the issue of gaining access to a covered facility by lying could warrant a Supreme Court review. 

Indiana trespass law.  Short of a Supreme Court review of a state statute such as that of Iowa, Idaho or Kansas, is there another approach that a state might take to provide protection for agricultural livestock facilities?  The state of Indiana’s approach might be the answer.  In 2014, the Indiana legislature passed, and the Governor signed into law the “Indiana Trespass Law.”  Ind. Code 35-43-2-2.  Under the statute, “trespass” is defined as being on a property after being denied entry by the property owner, court order or by a posted sign (or purple paint).  If the trespass involves a dwelling (including an ag operation), the landowner need not deny entry for a trespass to be established.  The law also sets various thresholds for criminal violations. 

The Indiana law appears to base property entry on the legal property interest of that of a license.  A license is a term that covers a wide range of permissive land uses which, unless permitted, would be trespasses.  For example, a hunter who is on the premises with permission is a licensee.  The hunter has a license for the limited purpose of hunting only.  If the hunter were to videotape any activity on the premises, that would constitute a trespass as exceeding the scope of the license.  An unlawful entry.  This would be the same result for a farm employee.  Video recording would be outside the scope of employment. By focusing on the property interest of a license and that of a trespass for unauthorized entry, a claim of a possible free speech violation is eliminated.

Hiring Practices

In light of activists that wish to harm animal agriculture, ag animal facilities should utilize common sense steps to minimize potential problems.  Of course, not mistreating animals should always be the standard.  Proper hiring practices are also very important.  A well drafted employment agreement should be used for workers hired to work in an ag animal facility to  help screen potential hires.  The agreement should specify in detail the job requirements and what is not permitted to occur on the premises and inside buildings.  The agreement should give the employer the right to search every employee for devices that could be used to record activities on the farm and in farm buildings.  Also, employee training should be provided and documented.  Also, it’s critical that employee conduct be closely monitored to ensure that employees are acting within the scope of their employment and that animals are being treated appropriately. 

Conclusion

It’s unfortunate that groups exist dedicated to damage and/or eliminate certain aspects of animal agriculture, and that they will use lies and deception to become employed and gain access.  But, until state law is drafted in a way that will be found constitutional, livestock operations must adopt hiring and business practices that will minimize potential harm.

March 21, 2022 in Civil Liabilities, Criminal Liabilities, Real Property, Regulatory Law | Permalink | Comments (0)

Thursday, February 17, 2022

Elements of a Hunting Use Agreement

Overview

Some landowners allow hunting on the farm and ranch land that they own.  Often, the use of a tract for hunting will simply be by oral permission.  But, other landowners may take the step to reduce expectations to writing to avoid misunderstandings and minimize future legal issues.  So, what are the elements of a good hunting use agreement? 

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

The Property Interest Involved

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

Elements of a Hunting Use Agreement

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

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

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

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

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

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

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

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

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

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

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

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

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

Liability Issues

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

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

Note:  The point is to check state law with respect to both agritourism statutes and recreational use statues.  Generally, they will provide liability protections to the landowner for hunting activities on the premises if the landowner does not act willfully or wantonly (with reckless disregard to the safety of the hunting operator).  State laws vary on the protection of the statutes if a fee is charged. 

Conclusion

Allowing hunting activities to be engaged in on farming or ranching property can provide an additional source of income.  But, it’s important to enter into written agreements with hunters.  The points made above should be an guide for helping construct a good agreement that will benefit the parties involved.

February 17, 2022 in Contracts, Real Property | Permalink | Comments (0)

Friday, February 11, 2022

What to Consider Before Buying Farmland

Overview

Buying farmland is a major decision.  That means that it’s important to carefully consider numerous things before signing the purchase contract.  Many persons have bought farmland only to encounter unanticipated problems.

So, what can be done to avoid the unexpected?  A lot of it boils down to making sure that the buyer has full information about the property they are interested in buying.  This is especially important with respect to farmland. 

Considerations when buying farmland – it’s the topic of today’s post.

Environmental Issues – Due Diligence

Endangered Species.  Rural landowners can have issues with various state and federal regulatory agencies such as the Natural Resources Conservation Service (NRCS); the Environmental Protection Agency (EPA); the U.S. Army Corps of Engineers (COE); the Interior Department; and the Fish and Wildlife Service (USFWS).  The extent to which any of those government agencies has regulatory authority over the land in question is tied to where the land is located.  Some parts of the country are more susceptible to government regulations.  States such as Florida, California and Tennessee, for example, are a few of the states with a substantial agricultural economy that have many endangered or threatened species and animals and plants.  A “habitat” designation for protected species on privately owned land can severely restrict farming and ranching activities on that land.  Some pre-purchase research as to listed species in the state where you are considering and then determining whether a habitat designation might influence the land is worthwhile.    

Comprehensive Environmental Response Compensation & Liability Act (CERCLA).   CERCLA focuses on the cleanup of hazardous waste sites, but it can have significant ramifications for agricultural operations because the term “hazardous waste” has been defined to include most pesticides, fertilizers, and other chemicals commonly used on farms and ranches and its presence can lead to huge liability. 

Perhaps the most important defense to CERCLA liability is the “innocent purchaser” defense.  This defense applies if the defendant purchased land not known at the time of purchase to contain hazardous substances, but which is later determined to have some environmental contamination at the time of the purchase or is contiguous to land not known at the time of the purchase to be contaminated.  A buyer attempting to utilize this defense must establish that the real estate was purchased after the disposal or placement of the hazardous substance, and that the buyer didn’t know or had no reason to know at the time of purchase that a hazardous substance existed on the property.  To utilize the defense, the buyer, as of the purchase date, must have undertaken “all appropriate inquiry” into the previous ownership and uses of the property in an effort to minimize liability.  The phrase “all appropriate inquiry” generally depends upon the existence or nonexistence of five factors:  (1) the buyer’s knowledge or experience about the property; (2) the relationship of the purchase price to the value of the property if it was uncontaminated; (3) commonly known or reasonably ascertainable information about the property; (4) the obviousness of the presence or likely presence of contamination of the property; and (5) the ability to detect such contamination by appropriate inspection.

A buyer of farmland can take several common-sense steps to help satisfy the “appropriate inquiry obligation”.  Certainly, a title search should be made of the property.  Any indication of previous owners that may have conducted operations that might lead to contamination should be investigated.  Aerial photographs of the property should be viewed, and historical records examined.  Likewise, investigation should be made of any government regulatory files concerning the property.  A visual observation of the premises should be made, soil and well tests conducted, and neighbors questioned. However, the execution of an environmental audit may be the best method to satisfy the “all appropriate inquiry” requirement.  Some states have enacted legislation requiring the completion of an environmental audit upon the sale of agricultural real estate.  Today, many real estate brokers, banks and other lenders utilize environmental audits to protect against cleanup liability and lawsuits filed under CERCLA.      

Drainage records.  In some parts of the country farmland is tile drained.  This is particularly the case in areas of the corn belt east of Nebraska.  Public records are a good place to look for information about a tract of farmland.  Checking drainage records with the local Auditor’s office (at least in some states) is a good place to discover drainage information.  Those records may not be in the Recorder’s records and probably won’t show up in an abstract.  Also, there may be private drainage agreements and/or easements that exist.  Those agreements will likely be recorded and appear in the Recorder’s office records for the property. 

USDA records.  USDA records about the land should be examined.  This includes Farm Service Agency (FSA) and NRCS records.  Many sellers will choose to make all of the records open concerning a particular farm.  So, that can be a good way to get your hands on USDA maps and documents.  This will also allow the buyer to determine if there are any government contracts or easements on the property, such as the Conservation Reserve Program or the Wetlands Reserve Program.  Also, the USDA information will allow the buyer to determine if any of the land is highly erodible or has wetland status. 

Wetlands.  A wetland designation on even a small part of the farmland can create significant problems for the owner.  There are two possible aspects to such a designation.  One aspect is regulation via the USDA’s Swampbuster rules.  Under those rules, land designated as a wetland cannot be farmed.  Doing so can bring substantial penalties.  This makes it imperative to analyze any available aerial photos, soil maps and the type of vegetation that is growing on various areas of the land. 

The other aspect with respect to wetland is the “waters of the United States” (WOTUS) issue under the jurisdiction of the EPA and the COE.  Under the current regulatory interpretation of the extent of federal jurisdiction, virtually any connection with a WOTUS can bring substantial restrictions on what can be done on the designated location(s) and result in substantial penalties.  In addition, a wetland designation with Swampbuster and/or WOTUS implications can have a substantial negative effect on the land’s value. 

Note:  Any time that a governmental agency gets involved, the administrative process can drag on for months and even years.  It can be a horrible and costly process.  Due diligence before the purchase can help steer you away from a tract that might get you caught up in a bureaucratic web.

Other Issues

Existing lease.  It’s important to determine whether the land being purchased is leased to a tenant.  In some states, long-term farm leases must be recorded.  In that situation, check the publicly filed records.  But most farm leases are oral leases that run from year-to-year.  Relatedly, for farmland purchases from an individual (or entity) seller or an estate, it is important to understand whether the lease will continue (and, if so, for how long) or whether it has been properly terminated in accordance with state law.  The mere sale of the land, absent some written agreement, will not terminate any existing lease. 

Note:  Do not take a realtor’s (or auctioneer’s) word for it that an existing lease has been terminated or that the purchase will terminate the lease. 

If the land is leased, determine who the tenant is.  Is there only one tenant or multiple tenants?  Ask the existing owner/seller to check the FSA records to see how the government program payments (if any) are being paid and who signed up for them as “tenant.”  If multiple tenants are involved, have they all been properly terminated in accordance with state law?

Local Development Plans

The erection of either wind turbines or solar panels on adjacent or nearby property will have an impact on land value of the tract you buy.  If there currently is no such development, are plans in the works?  Check archives of local newspapers for information on county commissioner meetings as well as with the county clerk.  What’s the talk in the community?  Have easements been acquired on adjacent tracts, but development not begun.  Get the seller to sign-off on a disclosure statement about what they know concerning potential development in the area, and whether the seller has been approached by wind or solar developers. 

Note:  The seller’s failure to disclose key information when required by law as well as an untruthful disclosure that the buyer can prove, can serve as the basis for cancelling a farm sale before closing occurs if the failure pertains to information that serves as the basis of the bargain. 

Also check county records for long-range planning documents.  Are plans in place to widen a road that borders the property that would take some of the land out of production?  If so, how would that impact your plans for the property? 

Signatures.  Make sure to obtain all appropriate signatures (that means a spouse, when applicable), and determine whether the sale is part of a family settlement agreement.  Also, it is important to make sure that the legal description matches what is being purchased.  On this point, take great care when using the abstract and bring it up to date before the purchase and have it carefully examined for accuracy and for defects in title.

Sometimes a tract of land won’t have precisely the acres that the buyer thinks it has.  A half-section, for example, may not actually contain a full 320 acres.  That’s especially likely if the tract lies on the edge of a township, county or a state border.  Similarly, if a “correction” line is present (to account for the curvature of the earth), that can impact the actual number of acres being purchased.  In other words, a “section” may not actually be a full section. 

Physical Inspection

From a practical standpoint, put your boots on and physically walk the tract.  Look at the fences.  Are they on the actual, intended location or boundary?  If not, had the adjoining landowners mutually recognized the existing fence location for a long-enough period of time (determined by state law) so that it is the actual dividing line irrespective of what a survey shows?  Is there a written fence agreement that has been recorded?  Probably not, but it’s a good idea to check the real estate records.  Look for paths that might be easements.  Relatedly, are existing paths wide enough to allow equipment into fields and locations where planting is desired?  How much of the land is consumed by ditches and roads?  The seller will try to sell in accordance with deeded acres, but a buyer that plans on farming the property is interested in paying only for tillable ground.  Not much, if any, value is assigned to non-tillable ground other than pasture. 

Valuation

Land grant universities have good survey data on the value of various classifications of land.  That is a good place to start on determining what a fair/average price for the land might be based on its location and soil type/grassland classification.  Also, actual local sale data (if it exists) is very helpful in determining market value. 

Of course, economic conditions and markets change over time, so current cash flow projections can be off as time passes, so it’s a good idea to build in a buffer to account for negative changes in economic conditions, or unexpected weather issues.

Taxes

How much of the purchase price can be allocated to depreciable items such as fences, farm structures, drainage tile, feeding floors, residual fertilizer supply, etc.?  To the extent that the purchase price can be allocated to such items, it effectively lowers the out-of-pocket cost of the purchase.

Conclusion

There are many things to think about and get clarified when buying farmland.  I am sure that I have not covered them all in this brief article.  What would you add to the list?

February 11, 2022 in Contracts, Real Property | Permalink | Comments (0)

Wednesday, February 9, 2022

Ag Law and Tax Potpourri

Overview

I haven’t done a “potpourri” topic for a couple of months, so it is time for one.  There are always interesting developments happening in the courts and with the IRS.  Today’s edition of the “potpourri” is no different.

Recent miscellaneous developments in the courts and with the IRS – it’s the topic of today’s post.

No WOTC For “Weed” Business 

C.C.A. 202205024 (Nov. 30, 2021)

The taxpayer is a business that is engaged in the trade or business of trafficking marijuana.  Under federal law, marijuana is a Schedule I controlled substance under the Controlled Substances Act.  The taxpayer hires and pays wages to employees from one or more targeted groups provided under I.R.C. §51, and is otherwise eligible for the Work Opportunity Tax Credit (WOTC).  The IRS noted that I.R.C. §280E bars a deduction or credit for a business that traffics in controlled substances as defined by state or federal law.  Thus, the taxpayer was not eligible for any WOTC attributable to wages paid or incurred in carrying on a business of trafficking in marijuana. 

Note:  The IRS position is correct, based on the statute.  But, the discrepancy between federal law and the law of some states creates confusion and inconsistency.

IRS Email Approval of Supervisor Penalty Approval

C.C.A. 202204008 (Sept. 13, 2021)

Under I.R.C. §6751(b)(1), when an IRS agent makes an initial determination to assess penalties against a taxpayer, the agent must obtain “written supervisory approval” before informing the taxpayer of the penalties via a “30-day” letter.  Here, the IRS agent received written supervisory approval of the penalty recommendation via an email from his supervisor before issuing the 30-day letter to the taxpayer. The taxpayer sought to have the IRS remove the tax lien securing penalties imposed for his failure to furnish information on reportable transactions on the basis that IRS had failed to comply with I.R.C. §6751.  The taxpayer claimed that such failure made the penalties invalid and required the lien to be released.  The IRS Chief Counsel’s Office disagreed, finding that the IRS had complied with I.R.C. §6751.  The Chief Counsel’s Office noted that the U.S. Tax Court has held that compliance with the supervisory approval requirement doesn’t require written supervisory approval to be given on a specific form and that an email satisfied the statute, if not the Internal Revenue Manual. 

Low Soil Quality Doesn’t Reduce Assessment Value 

Reichert v. Scotts Buff County Board of Equalization, No. 20A 0061, (Neb. Tax Equal. And Rev. Com. Jan. 31, 2022)

The petitioner owned low soil quality farmland in western Nebraska and challenged the assessed value of the land of $312,376 for 2020 as determined by the county assessor.  The value had been set at $289,186 for 2020. The petitioner sought a value of $269,595 for 2020 in accordance with the land’s lower 2019 classification. The County Board of Equalization (CBOE) determined the taxable value of the property was $289,186 for tax year 2020.  The petitioner’s primary issue with the county’s valuation was that the county had upgraded the soil quality of the land from 2019 to 2020 to justify the higher valuation.  The petitioner provided a Custom Soil Resource Report conducted by the Natural Resources Conservation Service (NRCS) showing that the soil had a farmland classification of “not prime farmland” and should be put back to its prior classification at the lower valuation.    The CBOE determined that the value should be $289,186 for 2020.  The petitioner appealed. 

On review, the Nebraska Tax Equalization and Review Commission (Commission) affirmed the CBOE’s valuation.  The Commission noted that the CBOE’s valuation was based on state assessment standards that became law in 2019 as a result of LB 372 that amended Neb. Rev. Stat. §77-1363.  Under the revised law, the Land Capability Group (LCG) classifications must be based on land-use specific productivity data from the NRCS.  The Nebraska Dept. of Revenue Property Assessment Division used the NRCS data to develop a new LCG structure to comply with the statutory change.  Each county received the updated LCG changes and applied them to the land inventory in the 2020 assessment year.  The Commission noted that the petitioner’s NRCS report did not show the classification that each soil type should receive under the LCG system and, thus, did not rebut the reclassifications of the soil types for his farmland under an arbitrary or unreasonable standard. 

Note:  The case points out that the burden is in the taxpayer to establish that the assessed value is incorrect.  To rebut the presumption, the evidence provided must be specific as to soil type.  The Nebraska farmland tax valuation system is a frustration for many farmers and ranchers despite the change in the system made with the 2019 legislation. 

ESOP Didn’t Shield Taxpayer From Income 

Larson v. Comr., T.C. Memo. 2022-3

The petitioner, a CPA and an attorney, was also the fiduciary of an Employee Stock Ownership Plan (ESOP).  He placed restricted S corporate stock in the ESOP for his own benefit.  The petitioner claimed that the ESOP met the requirements of I.R.C. §401(a) such that the related trust was exempt from income tax under I.R.C. §501(a).    The IRS claimed that the stock value was to be included in his income because he (and the other control person) failed to enforce employment performance restrictions, and “grotesquely” failed to perform fiduciary duties associated with the ESOP.  The petitioner testified that he was not aware of his duties as a fiduciary, but the court didn’t believe the testimony.  The court noted that the petitioner waived the stock restrictions and breached his fiduciary duties which revealed an effort to avoid enforcement of the restrictions.  As such, there was no way he could lose control over the S corporation.  As a result, there was no substantial risk of forfeiture associated with the stock, and the value of the stock was properly included in the petitioner’s income in accordance with Treas. Reg. §1.83-3(a)-(b).  The court also upheld the denial of deductions for claimed business expenses incurred and paid by the S corporation. 

New ESA Policy for ESA Consultations 

EPA Announcement, January 11, 2022.  Effective upon announcement   

The Environmental Protection Agency (EPA) has announced a change in policy regarding Endangered Species Act (ESA) consultations (to determine the impact on endangered or threatened species in light of critical habitat) for newly registered pesticide active ingredients being registered under the Federal Insecticide, Fungicide, Rodenticide Act (FIFRA) for the first time.  Pesticides already registered under FIFRA or that have active ingredients already registered by EPA may not be subject to the same policy, but may still require ESA consultation but not under the ESA’s new policy. The EPA will determine whether formal or informal consultation is necessary on a case-by-case basis. 

Court Says Animal Chiropractic is Veterinary Medicine 

McElwee v. Bureau of Professional and Occupational Affairs, No. 1274 C.D. 2020, 2022 Pa. Commw. LEXIS 9 (Pa. Commw. Ct. Jan. 18, 2022)

The plaintiff is a licensed chiropractor that holds herself out to the public as an “animal chiropractor.”  She treats animals in her practice.  She is not a veterinarian and does not hold herself out as a veterinarian.  She is certified in veterinary chiropractic by the International Veterinary Chiropractic Association.  She receives medical records or x-rays when necessary from a treating veterinarian and reviews them to find infusions of the spine, breaks or fracturs of the spine, misalignments of the spine or any disk space between the vertebrae.  She then makes a treatment and care plan for the animal with or without the veterinarian’s input.  She also practices on animals of veterinarians, and requires animal owners to complete a consultation form granting authorization for her to provide chiropractic care to the animal’s owner.  All animals in her care must have a veterinarian before she will work with the animals. 

The defendant filed an order to show cause alleging that the plaintiff was subject to disciplinary action under state law because the services she performed in her practice constituted the unlicensed practice of veterinary medicine.  The plaintiff sought a hearing on the matter and the hearing examiner issued a proposed adjudication and order concluding that the plaintiff was engaged in the unlicensed practice of veterinary medicine.  The State Board of Veterinary Medicine issued a final adjudication finding the plaintiff, and the plaintiff appealed.  The court rejected the plaintiff’s claim that animal chiropractic was unregulated not subject to the Board’s authority.  The court held that even though animal chiropractic was not specifically regulated under the Veterinary Medicine Practice Act, it was regulated by the Board. 

Note:  Occupational licensure is highly questionable.  In this case, there was no allegation that the plaintiff was not performing as an animal chiropractor in any manner other than with professional competence. 

February 9, 2022 in Environmental Law, Income Tax, Real Property, Regulatory Law | Permalink | Comments (0)

Monday, January 10, 2022

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

Overview

As I pointed out in the previous articles in this series, agricultural law and agricultural tax law intersect with everyday life of farmers and ranchers in many ways.  Some of those areas of intersection are good, but some are quite troubling.  In any event, it points to the need for being educated and having good legal and tax counsel that is well-trained in the special rules that apply to agriculture.

This is the fourth installment in my list of the “Top Ten” agricultural law and tax developments of 2021.  The list is comprised of what are, in my view, the most important developments in agricultural law (which includes taxation that impacts farmers and ranchers) to the sector as a whole.  The developments primarily are focused on the impact to production agriculture, but the issues involved will also have effects that spillover to rural landowners and agribusinesses as well as consumers of agricultural products.

The Fourth and Third most important agricultural law and tax developments of 2021 – it’s the topic of today’s post.

4.    U.S. Supreme Court Says Equitable Apportionment Doctrine Applies to Underground Water. In Mississippi v. Tennessee, 211 L. Ed. 2d 230 (U.S. 2021) the facts of this case revealed that the city of Memphis, Tennessee gets its drinking water from the Middle Claiborne Aquifer. The aquifer lies beneath eight states, and wells extract water from the aquifer by pumping it to the surface which lowers the water pressure around each well’s location (“cones of depression”). Memphis has more than 160 wells that pump about 120 million gallons of water daily from the aquifer. The pumping caused a cone of depression in the part of Mississippi across the state line closest to the wells. Mississippi sued Memphis in 2005 claiming that the pumping wrongfully appropriated Mississippi’s groundwater. The trial court dismissed the case because the State of Tennessee wasn’t joined as an indispensable party.

The appellate court affirmed and also held that interstate aquifers are similar to interstate rivers and, as such, are subject to the doctrine of equitable apportionment which allows the U.S. Supreme Court to allocate rights in disputes involving interstate waters when one state sues another unless a statute, compact or other apportionment controls. Equitable apportionment provides that each state has an equality of right to use the waters at issue. As such, Tennessee was an indispensable party that couldn’t simply be added because the lawsuit was really between states.  That meant that the lawsuit should have been filed with the U.S. Supreme Court. Mississippi sought U.S. Supreme Court review, which was denied.

Note:   Under the Constitution and the Judiciary Act, jurisdiction over interstate controversies is original and exclusive to the Supreme Court.

In 2014, Mississippi sought approval to file a complaint with the U.S. Supreme Court claiming that the pumping had depleted Mississippi’s groundwater by altering the historic flow of the underground water which required Mississippi to drill deeper wells and use more electricity to get the water to the surface. Mississippi also claimed that it had absolute ownership of the groundwater in its state, even the water that crossed the border by flowing underground into Mississippi. As such, Tennessee’s pumping of groundwater was a tortious taking of its property. Mississippi claimed that equitable apportionment did not apply in the case, and sought $615 million in damages and injunctive as well as declaratory relief. The Supreme Court granted Mississippi’s request to file the complaint and appointed a Special Master to manage the case.

In late 2020, the Special Master recommended dismissal of the complaint with leave to amend. Against Mississippi's technical argument that the aquifer was distinct from the water it contained, the Special Master found that the aquifer is an interstate water resource and a single hydrological unit. The Special master also found that Tennessee’s pumping affected groundwater beneath Mississippi, disrupting the flow between Tennessee and Mississippi. Equitable apportionment was determined to be the only available remedy, but because the complaint did not seek equitable apportionment, the Special Master recommended the Supreme Court dismiss the complaint with leave to file an amended complaint to seek equitable apportionment.

In a case of first impression, the Supreme Court dismissed the case, but without leave to amend. However, the Court did rule on the application of equitable apportionment to the aquifer. The Court noted that it had, in prior cases, applied the doctrine to interstate rivers and streams and to disputes over interstate river basins. Such cases include interstate compact cases where the pumping of hydrologically connected groundwater reduced surface flows into downstream states. 

The Court determined, with little thorough legal analysis, that the water in the aquifer was sufficiently similar to the water in the other cases where it had applied the doctrine. The Court also rejected Mississippi’s absolute ownership argument noting that such argument would allow an upstream state to completely cut-off the flow to a downstream state.  Such a result would be contrary to the equitable apportionment doctrine. Because the Court determined that the aquifer was subject to equitable apportionment, the Court adopted the Special Master’s recommendation to dismiss the complaint.

Note:   Because Mississippi had not sought leave to amend, the case was dismissed without leave to amend. However, in future cases, the Court said it would apply the doctrine of equitable apportionment to interstate aquifers where the aquifer involves multiple states with water flowing between the states and the actions of one state affects the portion of the aquifer below another state and there is no overriding statute, compact or other water sharing agreement between the states.

Implications for agriculture.  The application of the equitable apportionment doctrine apportions the benefits of the water use between or among the competing states.  The doctrine does not apportion the water itself. That is an important point as applied to agriculture.  Ag uses of water, compared to non-ag uses of water, generally involves the use of a greater volume of water with perceived lower economic value.  For example, in the case, the use of water from the aquifer by Memphis for drinking water and other municipal uses would have a higher economic value than the use for agricultural purposes in Mississippi  This, indeed, could be the reason that Mississippi did not argue for application of the equitable apportionment doctrine.  In addition, the Court, in a 1907 case, made clear that the geographical/hydrological origin of the interstate river has no significance on the apportionment.  The Court also restated this in the early 1980s.  That made Mississippi’s trespass and conversion theory quite weak.  Unfortunately, the Court didn’t provide any guidance on how states might consider equitable apportionment of groundwater when it is the only water supply source, and how the apportionment might affect hydrologically connected (and isolated) surface supplies. 

Note:  For an excellent article discussing other points of the case and interstate groundwater issues in general, see Griggs, “Interstate Litigation, State Reaction, and Federalism in the Age of Groundwater,” Rocky Mountain Mineral Law Foundation, proceedings of 65th annual Rocky Mountain Mineral Law Institute (2019).

3.    Supreme Court Says Government Cannot Force Private Property Owners to Allow Trespassing. In Cedar Point Nursery, et al. v. Hassid, et al., No. 20-107, 2021 U.S. LEXIS 3394 (U.S. Sup. Ct. Jun. 23, 2021), the lead plaintiff was a large strawberry growing operation in California, employing over 400 seasonal workers and about 100 full-time workers.  A California labor regulation, based on the California Agricultural Labor Relations Act of 1975 that gives ag employees a right to self-organize, grants labor organizations a “right to take access” to an ag employer’s property in order to solicit support for unionization.  Cal Code Regs., tit. 8, §20900(e)(1)(C).  Under the regulation, an ag employer must allow union organizers onto their property for up to three hours daily, 120 days per year.  In the fall of 2015, at 5 a.m., members of the United Farm Workers entered the plaintiff’s property without any prior notice being given.  They entered the plaintiff’s trim shed where hundreds of workers were preparing strawberry plants.  The organizers used bullhorns to stir up the workers and encourage them to join in a protest.  Other workers left the worksite.  The plaintiff filed charges against the union for taking access without notice.  In return, the union claimed that the plaintiff had committed an unfair labor practice similar to the claim it had made during the summer of 2015 against a California grower and shipper of table grapes and citrus. 

The ag businesses believed that the union would try to enter their properties again in the future, and sued claiming that the access regulation was an unconstitutional per se physical taking of an easement that was given, without compensation, to union organizers.  The trial court held that the regulation did not amount to a per se physical taking because it did not “allow the public to access their property in a permanent and continuous manner for whatever reason.”  Instead, the trial court held that the regulation was a non-physical taking to be evaluated under a muti-factor balancing test that the U.S. Supreme Court had set forth in the past. 

The appellate court affirmed, identifying the various types of non-physical takings and determining that the balancing test applied.  The U.S. Supreme Court agreed to hear the case and reversed.

The Supreme Court determined that an actual physical appropriation of private property was involved.  It was a per se governmental taking.  The Court noted that the regulation didn’t merely restrict the use of private property, it appropriated it for the use and enjoyment of third parties.  One aspect of property ownership is the right to exclude others, and the Court determined that the ability of the union to take access of a part of an ag operation’s private property took that right away.  In addition, the right of access, even though temporary, still constitutes a taking.  There was no benefit of the loss of a property right flowing back to the ag businesses. 

Note:   The distinction between an outright physical and a non-physical (regulatory) taking is not always clear.  But, the Court’s decision in Cedar Point Nursery is a clear indication that the loss of the right to exclude others, even on a temporary basis, when no benefit inures to the property owner, is a fundamental property right that will be classified and protected as a physical taking with no balancing test required.  Applied more broadly, the Court’s decision is a major victory for farmers and ranchers and other private property owners.

Conclusion

The next installment in this series will detail what I view as the two biggest developments in agricultural law and agricultural taxation in 2021.  Can you guess what they might be?

January 10, 2022 in Real Property, Water Law | Permalink | Comments (0)

Wednesday, December 22, 2021

The Home Sale Exclusion Rule – How Does it Work When Land is Also Sold?

Overview

Section 121 of the Internal Revenue Code provides for the exclusion of gain that is attributable to the sale of the taxpayer’s principal residence.  The maximum exclusion is $500,000 for taxpayers that are married and file jointly.  It’s one-half of that amount for single filers.  Of course, the IRS just doesn’t give the exclusion away.  The taxpayer has to meet certain requirements.  In addition, the provision only applies to the taxpayer’s “principal residence.” 

But, what if there is a farm sale and the residence is sold with the farm?  In that event, how much (if any) of the farmland and outbuildings can be included with the residence to exclude gain under the provision?  Also, what if the taxpayer uses a part of the residence for business?  How does that impact the exclusion?  What if the farm and residence are sold on an installment basis and the buyer defaults and the seller gets the property back?  What then? 

Excluding gain associated with the sale of the principal residence – it’s the focus of today’s blog post.

Eligibility

The two-year rule.  To be able to claim the I.R.C. §121 exclusion, the taxpayer must have owned the residence for at least two years or more (in the aggregate) during the five years immediately preceding the sale date.  Also, the taxpayer must have occupied and used the home as the taxpayer’s principal residence for at least two years (in the aggregate) of the five years preceding the sale date.  In addition, the taxpayer must not have used the gain exclusion during the immediately preceding two years before the sale. 

Adjacent Land

Treasury regulations address the eligibility of vacant land for the $500,000/$250,000 exclusion. Treas. Reg. § 1.121-1(b)(3).  In general, the sale or exchange of vacant land is not included under the gain exclusion rule applicable to the principal residence unless: (1) the vacant land is adjacent land containing the principal residence; (2) the taxpayer owned and used the vacant land as part of the taxpayer’s principal residence; and (3) the taxpayer engages is a sale or exchange of the principal residence meeting the requirements of I.R.C. §121 either two years before or two years after the date of the sale or exchange of the vacant land.  In addition, the requirements of I.R.C. §121 must be met with respect to the vacant land. 

Note:   It is important that the taxpayer owns the vacant land in the taxpayer’s name rather than via an entity that the taxpayer has an ownership interest in.  See, e.g., Farah v. Comr., T.C. Memo. 2007-369. 

Based on those requirements, land that has been used in farming within the two-year period before the sale won’t be eligible.  If the land is used in farming, it’s not being used as part of the principal residence.  Also, the sale of the principal residence and the adjacent land are treated as a single sale for purposes of the gain limitation amount.  That’s the case even if the sales occur in different years.  In addition, because the separate transactions are treated as a single sale for purposes of applying the rule under I.R.C. §121 that bars use of the provision more frequently than every two years.  Thus, if the principal residence is sold in a later tax year than the qualified adjacent land is sold that is after the filing date (including extensions) for the return that includes the land sale, the gain from the land sale has to be reported as a taxable event.  When the residence is later sold, the taxpayer then can claim the I.R.C. §121 exclusion with respect to the vacant land by filing an amended return.  Procedurally, when calculating 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)(C).

Note:   In a situation where a fire destroyed the taxpayer’s principal residence, the IRS determined that I.R.C. §121 was applicable to the sale of the resulting vacant land on which the dwelling had been located.  The gain exclusion provision applied to the gain from the receipt of insurance proceeds for the destruction of the principal residence and also to the sale of the vacant land in the next tax year.  Priv. Ltr. Rul. 201944006 (Jul. 31, 2019).

How much land?  It’s a factual question as to how much land can be included with the principal residence for purposes of I.R.C. §121.  A relevant factor is whether the land has been for personal purposes, such as a garden to grow produce for the taxpayer’s consumption.  Also, if the land is landscaped, that fact supports inclusion with the personal residence.  On the other hand, if the land is used in the taxpayer’s farming business (or contains outbuildings used in the farming business) or otherwise to produce income, inclusion with the residence is not supported.

Business Use of the Residence

If part of the principal residence is used for business purposes, the I.R.C. §121 exclusion does not apply.  At least that’s the rule to the extent any depreciation is claimed.  Also, the exclusion is inapplicable to a portion of the property that is separate from the dwelling unit.  On that separate portion, the problem is that the taxpayer hasn’t satisfied the personal occupancy requirement.  So, in that case, only the gain that is allocated to the residential portion is excludible.  But, no allocation is required is both the residential and business portions of the property are within the dwelling unit, other than to the extent that the gain is attributable to depreciation. 

It might also be possible to trade the home that has an office in it for qualified replacement property and qualify the transaction as a tax-deferred exchange under I.R.C. §1031.  Of course, this can only happen if both the principal residence that is traded away and the replacement property that is received both have at least a portion of the property that is used in the taxpayer’s trade or business or held for investment.  But, legislation enacted in 2004 denies the I.R.C. § 121 exclusion to property acquired in a like-kind exchange within the prior five-year period beginning with the date of property acquisition.  The provision is designed to counter situations where (1) the property is exchanged for residential real property, tax-free, under I.R.C. § 1031; (2) the property is converted to personal use; and (3) a tax-free sale is arranged under I.R.C. § 121.  The provision applies to sales or exchanges after October 22, 2004. Legislation enacted in late 2005 clarifies that the five-year ineligibility period also applies to exchanges by the taxpayer or by any person whose basis in the property is determined by reference to the basis in the hands of the taxpayer (such as by gift)

The Gain Exclusion Rule and Like-Kind Exchange Treatment

However, if like-kind exchange treatment applies to the residence, the homeowner may also be able to benefit from exclusion of gain.  In early 2005, IRS published guidance (Rev. Proc. 2005-14) on coupling the I.R.C. § 121 exclusion with like-kind exchange procedures.  Under that guidance, the IRS said that the I.R.C. §121 exclusion is applied before the I.R.C. §1031 like-kind exchange rules, and that the I.R.C. §121 exclusion cannot apply to gain attributable to depreciation of the residence after May 6, 1997.  But, the I.R.C. §1031 rules may apply to that gain.  Also, the IRS said that when the I.R.C. §1031 rules are applied, any boot or non-like-kind property that is received is taxable only to the extent the boot exceeds the gain excluded under I.R.C. §121.  In addition, when determining basis of the property received in the exchange, any gain that is excluded under I.R.C. §121 on the former property is treated as providing basis to the taxpayer in the replacement property.  The impact of the guidance is that, for farm residences, the amount of the allowable exclusion will more than cover the gain involved. In other situations, the Rev. Proc. may allow deferral of realized gain into replacement property.

In Priv. Ltr. Rul. 201944006 (Jul. 31, 2019), a married couple lived in a home on a property that one of the spouses had purchased before the marriage.  After the marriage, they continued to use the home as their principal residence.  They later moved into a new home and offered the prior residence for rent.  The prior home was rented for both short-term rentals and was also rented to full-time tenants.  The rental use stopped when a fire destroyed the property.  The couple received insurance proceeds for the destroyed residence and sold the land without rebuilding the residence.  In the same transaction, they used the insurance and sale proceeds to acquire two other rental properties, and sought to defer the gain on the sale under I.R.C. §1031 in addition to the use of I.R.C. §121 to exclude the gain associated with the residence. 

The gain on the sale exceeded the amount the couple could exclude under I.R.C. §121.  They satisfied the ownership and use tests of I.R.C. §121.  Thus, the question was whether they could use I.R.C. §1031 to defer the remaining gain to eliminate current tax on the transaction.  The IRS determined that they could because excluding gain under I.R.C. §121 does not preclude the use of I.R.C. §1031 for property that involves an exchange of investment property.  The IRS applied the same reasoning as it had in Rev. Proc. 2005-14, 2005-1 C.B. 528 which also provided the mechanics of recording the transaction.  Under Section 4.02 of Rev. Proc. 2005-14, I.R.C. §121 is applied to the realized gain before I.R.C. §1031 is applied, and the basis of the property received in the exchange is increased by any gain attributable to the relinquished property that is excluded under I.R.C. §121.  

Installment Sale

What if the principal residence and the farmland are sold via an installment sale and the seller claimed the I.R.C. §121 exclusion on the principal residence?  The normal rules would apply and the gain attributable to the principal residence would be excluded up to the applicable limit.  But what if the buyer, after making a few payments, defaults on the contract and the seller gets the property back – including the principal residence on which the gain was previously excluded?   This is not an unlikely possibility given the downturn in the farm economy in recent years which could result in a buyer not having the ability to make the annual payments that the installment contract requires.  This situation occurred in Debough v. Comr., 142 T.C. 297 (2014).  In that case, the taxpayer had purchased a personal residence in 1966 along with 80 acres for $25,000.  He agreed to sell the residence and the land in 2006 for $1.4 million with the purchase price to be paid in installments through 2014.  He reported the gain for the year of sale (computed in accordance with the calculated gross profit percentage) after excluding the gain attributable to the principal residence, and then received another $505,000 in payments that he reported on the installment method.  The buyer defaulted and the seller reacquired the property in 2009.  The reacquisition triggered tax to the taxpayer, but he didn’t report the portion of the gain that was previously excluded under I.R.C. §121.  The IRS disagreed, pointing out that I.R.C. §1038(e) specifies that, with respect to I.R.C. §121, a taxpayer that reacquires property and sells it within one year can treat the subsequent sale as the original sale for I.R.C. §121 purposes.  The taxpayer didn’t do that, so the provision didn’t apply.  That meant that the only way to exclude the gain was to move back into the residence to meet the two-out-of-five-year ownership and use test.  Of course, the taxpayer didn’t want to do that.  The only relief available was that the reacquisition would cause an increase in the basis of the residence to the extent of the gain recognized on repossession which, in turn, would result in less gain on resale.  In 2015, the U.S. Court of Appeals for the Eighth Circuit affirmed the Tax Court.  Debough v. Shulman, 799 F.3d 1210 (8th Cir. 2015). 

Conclusion

The home sale exclusion rule comes in handy when a principal residence is sold.  But, careful planning is needed when the residence is sold with the farm, when a portion of the residence is used for business purposes, or when the transaction is structured as a deferred exchange or installment sale.

December 22, 2021 in Income Tax, Real Property | Permalink | Comments (0)

Sunday, November 7, 2021

Considerations When Buying Farmland

Overview

The most important asset for a farming or ranching operation is the land on which the business will be operated.  Therefore, the acquisition of farm or ranch land is critical.  As a legal transaction, many issues and considerations arise.  What are some of the major concerns for land acquisition transactions?  What are the “must know” concepts in land transactions?

Acquiring farm or ranch land, the key concepts and issues – it’s the topic of today’s post.

Environmental Issues

Agricultural production has become subject to many environmental-related laws over the last 50 years.  As a result, a buyer of farmland must be aware of potential liability upon acquiring farm or ranch land that might have environmental issues as a result of a prior owner’s conduct.  That makes it imperative that a buyer has full information about any tract that might be acquired. 

Comprehensive Response Compensation & Liability Act.  Perhaps the most significant federal environmental rule that can come into play in this regard is  the Comprehensive Environmental Response Compensation & Liability Act (CERCLA).  42 U.S.C. §9601 et seq.  CERCLA focuses on hazardous waste sites, but it can have significant ramifications for agricultural operations because the term “hazardous waste” has been defined to include most pesticides, fertilizers, and other chemicals commonly used on farms and ranches and its presence can lead to huge liability.  But, there are defenses to liability. 

Perhaps the most important CERCLA defense for farmland buyers is the “innocent purchaser” defense.  This defense can apply if the defendant purchased land not known at the time of purchase to contain hazardous substances, but which is later determined to have some environmental contamination at the time of the purchase or is contiguous to land not known at the time of the purchase to be contaminated.  A buyer attempting to utilize this defense must establish that the real estate was purchased after the disposal or placement of the hazardous substance, and that they didn’t know or had no reason to know at the time of purchase that a hazardous substance existed on the property.  To utilize the defense, the buyer, as of the purchase date, must undertake “all appropriate inquiry” into the previous ownership and uses of the property in an effort to minimize liability.  The phrase “all appropriate inquiry” generally depends upon the existence or nonexistence of five factors:  (1) the buyer’s knowledge or experience about the property; (2) the relationship of the purchase price to the value of the property if it was uncontaminated; (3) commonly known or reasonably ascertainable information about the property; (4) the obviousness of the presence or likely presence of contamination of the property; and (5) the ability to detect such contamination by appropriate inspection.

Note:   Some states have statutes requiring a seller of agricultural land to complete an environmental disclosure form as a condition of sale.  This form can be helpful to the buyer as constituting the undertaking of “all appropriate inquiry as to the environmental status of the land.

A buyer of farm land can take several common-sense steps to help satisfy the “appropriate inquiry obligation”.  Certainly, a title search should be made of the property.  Any indication of previous owners that may have conducted operations that might lead to contamination should be investigated.  Aerial photographs of the property should be viewed and historical records examined.  Likewise, investigation should be made of any government regulatory files concerning the property.  A visual observation of the premises should be made, soil and well tests conducted, and neighbors questioned. However, the execution of an environmental audit may be the best method to satisfy the “all appropriate inquiry” requirement.  Some states have enacted legislation requiring the completion of an environmental audit upon the sale of agricultural real estate.  Today, many real estate brokers, banks and other lenders utilize environmental audits to protect against cleanup liability and lawsuits filed under CERCLA.      

Publicly Available Information

County records.  There’s more than just CERCLA to be concerned about when buying a farm.  As previously noted, much information about a tract of farmland can be obtained publicly.  In the Midwest, checking drainage records on file at the County Auditor’s office (at least in some states) is a good place to discover drainage information.  Those records may not be in the County Register of Deed’s (Recorder’s) records and probably won’t show up in an abstract.  Also, there may be private drainage agreements and/or easements (such as manure easements) that exist.  Those agreements will likely be recorded and appear in the County Recorder’s office records for the property. 

USDA (and sub-agency) records.  Also, USDA records about the land should be examined.  This includes Farm Service Agency (FSA) and Natural Resources Conservation Service.  Many sellers will choose to make all of these records open concerning a particular farm.  So, that can be a good way to get access to USDA maps and documents.  This will also allow the buyer to determine if there are any government contracts or easements on the property involving such government programs as the Conservation Reserve Program and the Wetlands Reserve Program.  Also, the USDA information will allow the buyer to determine if any of the land is highly erodible or has wetland status.  Those designations can impact value substantially. 

Leases

A buyer of farmland will also want to know whether the land is leased to a tenant.  In some states, long-term farm leases must be recorded.  In that situation, check the publicly filed records.  But, most farm leases are short-term leases – often oral leases that automatically renew each year on the same terms and conditions.  Having the seller sign a disclosure statement concerning the existence or non-existence of a crop lease, mineral lease, hunting lease or other type of land use agreement.  Also, FSA records may reveal if government payments are being shared between the owner and a tenant or whether the payments attributable to the farm are being paid to someone other than the owner. 

Relatedly, for farmland purchases from an individual (or entity) seller or an estate, an important  question is whether an existing lease will continue (and, if so, for how long) or whether it has been properly terminated in accordance with state law.  The mere sale of the land, absent some written agreement, will not terminate any existing lease. 

Miscellaneous

Other things to consider include getting all appropriate signatures (including the seller’s spouse, when applicable), and determining whether the sale is part of a family settlement agreement.  Also, it is important to make sure that the legal description matches what is being purchased.  On this point, when an abstract is used, it is important to have legal counsel bring it up to date before the purchase and carefully examine it for accuracy and defects in title. 

Sometimes a tract of land won’t consist of precisely the acreage that the buyer thinks it has – a half-section, for example, may not actually contain 320 acres, for example.  That’s especially likely if the tract lies on the edge of a township, county or a state border.  Because of the earth’s curvature, range lines on a survey will converge the further north.  To keep those lines as parallel as possible (and six miles apart) the lines are laid out for about 24 miles.  Then a correction line occurs so that the lines return to the six-mile separation so as to retain the square shape of the township.  Other irregularities may also be present.   But, even with these irregularities, a legal description is sufficient if it either identifies the location of the land on the ground to the exclusion of all other land, or furnishes a means by which the location can be obtained from other sources.

From a practical standpoint, walking the property is a good idea.  Look at the fences.  Are they on the actual, intended location or boundary?  If not, had the adjoining landowners mutually recognized the existing fence location for a long-enough period of time (determined by state law) so that it is the actual dividing line irrespective of what a survey shows?  Is a written fence agreement recorded at the county Register of Deeds office?  Examine the land for paths that might be evidence of easements.  Relatedly, are existing paths wide enough to allow equipment into fields and locations where planting is desired?  How much of the land is consumed by ditches and roads?  The seller will try to sell in accordance with deeded acres, but a buyer that plans on farming the property is interested in paying only for tillable ground.  Not much, if any, value is assigned to non-tillable ground other than pasture. 

Check local newspaper archives for announcements concerning potential wind and solar farm planned development that could impact future value.

Conclusion

There are many things to think about and get clarified when buying farmland.  While some information is publicly available, getting signed disclosures can be very important.  From the seller’s perspective, failure to disclose key information can serve as the basis for cancelling a farm sale before it takes place if the failure pertains to information that serves as the basis of the bargain.

November 7, 2021 in Contracts, Real Property | Permalink | Comments (0)

Saturday, August 14, 2021

Farm Valuation Issues

Overview

It is not uncommon for farmers to encounter the need to have their farm assets valued.  Lenders, for instance, have a keen interest in understanding the value of assets utilized in the farming operation.  Also, valuation is an issue when estate, business and succession planning is engaged in.  What are the valuation issues that are associated with estate and business planning for farmers and ranchers? 

Valuing farm and ranch assets – it’s the topic of today’s post

Real Estate Valuation

Number of acres.  Farmland is typically the asset of largest value in a farmer’s estate.  That makes it important to arrive at an accurate measure of market value.  The starting point is to correctly denote the number acres.  What are the total acres?  What are the taxable acres?  What are the tillable acres?  Often “total acres” defines the total area within a legal description and makes no reference to quality or any restrictions on title, such as easements.  “Taxable acres” is tied to assessed acres, and “tillable acres” are those that are used in crop production.  Recent developments in technology have made it easier to more accurately determine tillable acres, and certifications to the USDA can also determine tillable acres.  But, “tillable acres” does not include areas that can’t be farmed – waterways, fence rows, timber land, creeks etc.  Make sure that the valuation is accurately measuring the type of land at issue and breaks it out properly. 

Legal descriptions.  Make sure that legal descriptions are accurate.  Local government offices such as the County Recorder and County Auditor can be helpful on this.  They can review a legal description and should be able to determine if any part of the legal description has been transferred.  They can also help to determine how the land at issue is owned – individually, in some form of entity, in fee simple, in life estate, etc. 

Zoning.  For farmland, zoning issues are usually not much of an issue.  But, if an airport is nearby there could be issues that come into play that would restrict the height of structures on the property.  That could impact the ability to erect a cell tower, aerogenerator, or even impact the use of drones on the property. 

Some rural counties do have zoning rules that separate farm uses from non-farm rural homeowners.  When those rules apply, they can impact large-scale confinement operations.  However, each state has a right-to-farm law and in some states, counties do not have the authority to zone “agriculture.”  Of course, the key to that issue is what constitutes “agriculture.”  That’s an issue that either state law defines, or the courts have determined the parameters of in judicial opinions. 

Appraisal.  Getting some type of formal valuation of farmland is critical to gaining a proper understanding of the land’s worth for planning purposes.  One approach is to use a certified appraisal, while another approach is to use an estimate of selling price based on comparable sales.  In any event, some attempt needs to be made to get an accurate view of the land’s fair market value.  Land markets are tricky, and appraisals have their drawbacks and may need to be supplemented with additional data that might not be incorporated into the appraisal, such as local buyer strength, distance to local markets and similar features.  There can also be some unique situations that provide inaccurate data about land values.  Discount the reliability of data involving individual sales and look at larger pool of sale data from your area or region.  The state land-grant university ag land sale/survey data is a good place to start.  That data is typically broken down by region of the state and by land type and whether the land is irrigated or not.  The USDA/ERS (Economic Research Service) also provides survey data of land values on its website.  

Livestock

Valuing livestock is usually not as difficult as valuing land.  Daily market prices exist for just about all types of livestock.  The key is to make sure to understand and properly note differences in livestock with respect to gender, and whether the livestock are to be used for breeding, dairy or meat production purposes.  So, if you know your categories and weight ranges in those categories you will get an accurate picture of value.  Also, livestock can be affected by health issues and catastrophes that can wipe out value very quickly. 

Crops

It is easy to come up with an accurate value for most agricultural crops.  They are valued in a similar manner to that of livestock.  There is a daily market price that is readily accessible.  But, factors that can influence the bottom line regardless of the daily market price include quality and the cost to deliver the commodity to market. 

Valuing fruits and vegetable can be a bit trickier.  Most of those types of agricultural crops do not have any reliable daily market price, and there may not be any type of reasonable guarantee that the fruit or vegetable can be sold at its highest valued use.  Many of these crops are sold via production contract, so that can determine value, but there are risks associated with production contracts that can affect value, such as the contracting processor terminating the contract. 

Also, valuation issues can arise when growing crops need to be valued, perhaps because of the death of the farmer.  Some states, such as Iowa, have specific regulations that apply to establish the value of growing crops.  The IRS also has regulations that provide guidance in this area.  Relatedly, predicting harvest yields is highly speculative.  But it might be possible to use the amount of the potential harvest that is insured as a basis for determining a yield when valuing a growing crop.

Discounting

Under the Obama/Biden Administration, the Treasury Department issued proposed regulations that that would have denied minority discounts in family-controlled entities.  Thankfully, the Trump Administration directed the Treasury to repeal those regulations.  But, there is a much greater likelihood now that those regulations will come back.  If they do, that will be problematic for many farming and ranching operations – particularly so if the exemption from the federal estate tax is reduced significantly as is currently proposed.

In recent decades, discounts for minority interest and lack of marketability have been recognized by the courts as a necessary element in arriving at the true fair market value of a gifted or inherited interest in a family business.  But, if the valuation regulations return they would foreclose many, if not all, of those planning opportunities.  Those regulations represent the Treasury’s attempt to redefine value in just about any manner it desires, and is a movement away from the time-tested (and judicially validated) willing-buyer/willing-seller test.  If the Treasury does resurrect those rules and finalize them in the form they had previously been in, you can expect court challenges that will take years to arrive at a final determination on their validity.

Conclusion

Valuation issues arise often in agriculture. Land is the big item to determine value accurately to the best of one’s ability.  Crops and livestock are usually fairly easy to get an accurate valuation, at least for Midwest type agricultural crops.  But, as always, good valuation numbers will help for financial, tax, and estate, business and succession planning purposes.  Valuation issues will become a bigger issue if the federal transfer tax rules change significantly. 

August 14, 2021 in Business Planning, Estate Planning, Real Property | Permalink | Comments (0)

Thursday, July 15, 2021

Montana Conference and Ag Law Summit (Nebraska)

Overview

The second of the two national conferences on Farm/Ranch Income Tax and Farm/Ranch Estate and Business Planning is coming up on August 2 and 3 in Missoula, Montana.  A month later, on September 3, I will be conducting an “Ag Law Summit” at Mahoney State Park located between Omaha and Lincoln, NE.

Upcoming conferences on agricultural taxation, estate and business planning, and agricultural law – it’s the topic of today’s post.

Montana

The second of my two 2021 summer conferences on agricultural taxation and estate/business planning will be held in beautiful Missoula, Montana.  Day 1 on August 2 is devoted to farm income taxation, with sessions involving an update of farm income tax developments; lingering PPP and ERC issues (as well as an issue that has recently arisen with respect to EIDLs); NOLs (including the most recent IRS Rev. Proc. and its implications); timber farming; oil and gas taxation; handling business interest; QBID/DPAD planning; FSA tax and planning issues; and the prospects for tax legislation and implications.  There will also be a presentation on Day 1 by IRS Criminal Investigation Division on how tax practitioners can protect against cyber criminals and other theft schemes. 

On Day 2, the focus turns to estate and business planning with an update of relevant court and IRS developments; a presentation on the farm economy and what it means for ag clients and their businesses; special use valuation; corporate reorganizations; the use of entities in farm succession planning; property law issues associated with transferring the farm/ranch to the next generation; and an ethics session focusing on end-of life decisions.

If you have ag clients that you do tax or estate/business planning work for, this is a “must attend” conference – either in-person or online.

For more information about the Montana conference and how to register, click here:  https://www.washburnlaw.edu/employers/cle/farmandranchtaxaugust.html

Nebraska

On September 3, I will be holding an “Ag Law Summit” at Mahoney St. Park, near Ashland, NE.  The Park is about mid-way between Omaha and Lincoln, NE on the adjacent to the Platte River and just north of I-80.  The Summit will be at the Lodge at the Park.  On-site attendance is limited to 100.  However, the conference will also be broadcast live over the web for those that would prefer to or need to attend online.

I will be joined at the Summit by Prof. Ed Morse of Creighton Law School who, along with Colten Venteicher of the Bacon, Vinton, et al., firm in Gothenburg, NE, will open up their “Ag Entreprenuer’s Toolkit” to discuss the common business and tax issues associated with LLCs.  Also on the program will be Dan Waters of the Lamson, et al. firm in Omaha.  Dan will address how to successfully transition the farming business to the next generation of owners in the family. 

Katie Zulkoski and Jeffrey Jarecki will provide a survey of state laws impacting agriculture in Nebraska and key federal legislation (such as the “30 x 30” matter being discussed).  The I will address special use valuation – a technique that will increase in popularity if the federal estate tax exemption declines from its present level.  I will also provide an update on tax legislation (income and transfer taxes) and what it could mean for clients. 

The luncheon speaker for the day is Janet Bailey.  Janet has been deeply involved in Kansas agriculture for many years and will discuss how to create and maintain a vibrant rural practice. 

If you have a rural practice, I encourage you to attend.  It will be worth your time. 

For more information about the conference, click here:   https://www.washburnlaw.edu/employers/cle/aglawsummit.html

Conclusion

The Montana and Nebraska conferences are great opportunities to glean some valuable information for your practices.  As noted, both conferences will also be broadcast live over the web if you can’t attend in person.   

July 15, 2021 in Bankruptcy, Business Planning, Environmental Law, Estate Planning, Income Tax, Real Property, Regulatory Law, Water Law | Permalink | Comments (0)