March 2016

March 2016


U.S. Army Corps v. Hawkes: A Case to Watch

Yesterday, the Supreme Court of the United States heard oral arguments in a case that tests the authority of a federal agency to effectively restrict a property owner’s land use choices without an opportunity for judicial review. U.S. Army Corps v. Hawkes involves a jurisdictional determination from the United States Corps of Engineers (the Corps) that found that a landowner’s wetlands comprised “waters of the United States” subject to Clean Water Act jurisdiction. What difference did that make? For this landowner it was the difference between allowing the land to be used for a productive business or requiring the land to remain idle.

Under the Clean Water Act, a landowner cannot discharge dredged or fill material into “waters of the United States” without obtaining a permit from the Corps. These Section 404 permits are costly and time consuming. In fact, Justice Scalia once stated that the average applicant for an individual Corps permit “spends 788 days and $271,596 in completing the process." The permit, however, is necessary, to avoid substantial monetary penalties and perhaps jail sentences for dredging and filling a known “waters of the United States.” If a landowner knowingly conducts prohibited activity on wetlands meeting the arguably ambiguous definition of a “waters of the United States,” he could face penalties in excess of $75,000 per day. These fines and penalties are possible even if the landowner did not believe the wetland to be jurisdictional. At the very least, the Corps will issue a compliance order. The landowner could also give up his fight and cede his wetlands to a reserve program.

There is arguably a middle ground. Corps regulations allow a landowner to request a jurisdictional determination (JD) from the agency. Once such a determination is requested, the Corps offers its opinion as to whether a wetland (or other waterbody) is a “waters of the United States.” A JD is not required before a landowner can discharge dredged or fill material into a wetland. And, according to the Corps, if a landowner is later found to have violated the CWA, the prior existence of a JD does not expose the landowner to additional penalties. But in the face of a JD stating that a wetland is a “waters of the United States,” would any prudent landowner embark on a project in opposition to that determination, one that could subject him to huge fines and possible jail terms? That is a preamble to the question that has now come before our highest court.

Continue reading here.


It's Official! Iowa Couples for One Year

For many Iowa taxpayers and practitioners, this tax season has generated more than its usual amount of angst. Some faced the possibility of Iowa tax bills exceeding their expectations by thousands of dollars. That is because it looked doubtful in the first months of 2016 that the Iowa Legislature would pass “coupling” legislation to sync Iowa tax law with federal tax provisions enacted by the Protecting Americans from Tax Hikes Act of 2015 (the Path Act). Without this coupling legislation, several key Iowa tax breaks would have ended or faced severe curtailment. On March 15, Iowa legislators ended this 2015 uncertainty, passing HF 2433. The Governor signed the bill into law on March 21. This coupling legislation, which reportedly will cost Iowa $97.6 million, retroactively integrates most Path Act changes into the Iowa tax law. The lone exception is 50% bonus depreciation which is specifically excluded from Iowa law.

In the Path Act, enacted December 18, 2015, Congress permanently extended a $500,000 enhanced IRC § 179 deduction with a $2,000,000 annual dollar threshold. Absent this extension, this deduction was limited to $25,000 with a $200,000 annual dollar threshold. The Path Act also provided 50% bonus depreciation that will be phased out over a five-year period and a permanent five-year (instead of 10-year) period during which S Corporations must recognize built-in gain.  Additionally, the Path Act made permanent a number of other popular tax breaks, including a $250 above-the-line deduction for teachers who purchase supplies for their K-12 classrooms, the option to allow taxpayers to claim state and local sales tax instead of state and local income tax as an itemized deduction, and an option for taxpayers ages 70.5 and older to make tax-free distributions from their IRAs to a qualified charity. Continue reading here.


Iowa Utilities Board Approves the Bakken Pipeline

On March 10, the Iowa Utilities Board voted 3-0 to grant a hazardous liquid pipeline permit to Dakota Access, LLC under Iowa Code § 479B. The Board determined that the project would “promote the public necessity and convenience” as is required by the law.

Dakota Access filed its petition seeking the permit in January of 2015. They wish to build a 346-mile crude oil pipeline (30 inches in diameter) across Iowa. The pipeline would carry oil from the Bakken oil fields in North Dakota to a refining station in Illinois. Iowa was the last impacted state to approve the pipeline.

In the March 10 order order, the Board also vested Dakota Access with eminent domain authority over the parcels in the pipeline’s path for which voluntary easements could not be acquired. In seeking voluntary easements, Dakota Access must offer the holdout landowners the same price, terms, and conditions as they were offered before today’s order. Continue reading here.

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