August 2013 – Significant Developments
Ownership of Firearms. At the upcoming Agricultural Law seminar on September 12, 2013 one of the topics to be discussed will involve self-defense issues and liability issues with respect to firearms. That has become a big issue recently. Both federal and state law can expose gun owners to liability. That liability can even extend to persons acting in a fiduciary capacity. The Gun Control Act of 1968 bars the interstate transfer of firearms unless the transfer is by a licensed manufacturer, dealer or importer. Also, the National Firearms Act of 1934 requires registration of the owners of certain types of guns including machine guns, short-barreled rifles, short barreled shotguns, and silencers, just to name a few. Also, there may be various state law provisions that come into apply. There are some key points for lawyers representing clients that own guns to be aware of.
- Make sure to double check dispositive provisions in wills and trusts to make sure that they don’t violate the federal restrictions on the transfer, possession and use of firearms.
- Fiduciaries (trustees, executors and other estate representatives) should determine whether any firearms that they have possession or control over need to be registered. If it is later discovered that a firearm should have been registered, but was not, that firearm may need to be turned over to law enforcement officials.
- Make sure to determine if the fiduciary needs to be registered. One way to avoid this is to establish a “gun trust.”
- Make sure that the person designated in a will or trust to receive a firearm can lawfully do so. Unqualified persons include felons, aliens and persons that lack capacity.
These issues and more will be addressed at the Ag Law Seminar on September 12. It may be an issue that you haven’t given much thought to, but it is critically important.
Food Safety Rules. In 2011, the President signed into law the Food Safety Modernization Act (FSMA). The FMSA give the Food and Drug Administration (FDA) expansive power to regulate the food supply, including the ability to establish standards for the harvesting of produce and preventative control for food production businesses. The FMSA also gives the FDA greater authority to restrict imports and conduct inspections of domestic and foreign food facilities. To implement the requirements of the FMSA, the FDA has to prepare in excess of 50 rules, guidance documents, reports and studies in short order. Indeed, the timeframe was so short FDA complained that they didn’t have enough time to do the job appropriately. That led to lawsuits being filed by activist groups to compel the FDA to issue several rules that were past-due. A federal court agreed with the activists in the spring of 2013, and now FDA has issued four proposed rules with comment periods ending in November of 2013. One of the most contentious issues involves the rule FDA is supposed to develop on intentional adulteration. FDA says it needs two more years to develop an appropriate rule, but the Court ordered them to develop it now. Maybe the Congress will step in and modify the deadlines that are being imposed on the FDA so that reasonable rules can be developed and not simply rushed through the regulatory process for the sake of meeting an arbitrary deadline.
Loan Modifications. Several years ago, in the first year or two of the housing crisis, some politicians and associated economists were pushing an idea that homeowners that were underwater on their mortgages should have mortgages written down comparable to how debt is written off in a Chapter 12 bankruptcy. Nevermind the fact that Chapter 12 involves a farm business that is subject to weather and other uncontrollable factors as compared to the decision to buy a home and finance its purchase which is a personal decision not involving a business. Now, a report by the Troubled Asset Relief Program (TARP) shows that 46 percent of homeowners who received loan modifications under the Treasury Department’s TARP program have defaulted again. The Treasury received $38.5 billion of TARP funds for the loan modification program. Certainly, part of the problem is that unemployment still remains approximately 40 percent higher than what the Administration said it would be at this time if the 2009 “stimulus” legislation weren’t passed.
Farm Bill. In July, the U.S. House passed a Farm Bill. The House bill includes a $195 billion package of subsidies for farmers over the next 10 years and would end direct payments. It also, for the first time since 1973, splits out funding for food stamps and a separate food stamp bill is likely to be proposed after the Congress returns from the August recess. That will give the Congress the opportunity to take a close look at the food stamp program instead of simply throwing it in with an agricultural policy bill with no critical analysis of how (or if) the program is working as intended. Food stamp spending has ballooned in recent years, as has the fraud associated with the program. In addition, food stamp spending is not an economic stimulus. It’s just spending dollars in the economy that would have been spent elsewhere – it’s a reshuffling of dollars that doesn’t add to economic growth. The dollars for the food stamps have to come from somewhere, and that somewhere is from people that pay taxes. Food stamps also act as an income tax paid by the recipients of the food stamps. That’s because benefits are reduced by about 30 cents for every dollar of net income a recipient earns. That can end up being a strong disincentive to work, especially in a down economy like we are presently enduring. The earned income credit is similarly flawed.
The big issue in the Farm Bill negotiations between the House and Senate is how to handle crop insurance. Some type of provision based on adverse price movement and revenue-based risk coverage is likely to emerge. The House is considering a provision that offers either price loss coverage or revenue loss coverage, but not both. The Senate crop insurance provision is different, so there is still quite a bit of work to do before a Farm Bill can be passed. Remember, the deadline is September 30. Look for action on the Farm Bill in September.
Health Care Law Developments. In late August, the Treasury issued final regulations on the “individual mandate” contained in the 2010 healthcare law. The individual mandate becomes effective in 2014 (unless, of course, the legislation is defunded by the Congress). Under the regulations, for persons that claim dependents under the age of 26 on their tax returns, those taxpayers bear the responsibility for paying the mandate fine (e.g., tax) for any dependent that doesn’t have health insurance. The tax (for 2014) is the greater of $95 per person or one percent of income. But, the IRS cannot enforce the non-payment of the tax. The only recourse the IRS has is to withhold the amount from any tax refund that a taxpayer might be due. Watch for developments in the Congress in September to defund the health care bill and replace it with a workable solution. The Congress has already defunded certain mandatory programs in the health care law. For example, the Congress has already permanently defunded $2.2 billion in mandatory funding to the law’s co-op health care insurance program.
Open enrollment in the health care exchanges begins on October 1. Things to watch for include how many insurers participate and whether they offer state-wide coverage. As week progresses, more insurance companies are announcing that they will not participate in the exchanges. Another item to keep an eye on is the cost of premiums. For example, Ohio has recently announced that premiums in their exchange will be about 41 percent higher than the premiums reported by Ohio companies last year. Ohio reports that the total cost of coverage will be up about 83 percent from last year. Also watch the level of regulation by the states that operate their own exchanges. In addition, the whole matter of the legality of the exchanges is presently before the federal courts. In August, a federal judge in an Oklahoma case denied the Administration’s request to dismiss a lawsuit challenging the constitutionality of the health care law’s mandatory minimum coverage provision on employers that don’t cover “full-time” employees. The State of Oklahoma challenged the law on several grounds – that the minimum coverage provision exceeds the power of the Congress to regulate interstate commerce; that the associated Treasury rules with respect to health care exchanges are arbitrary and capricious and violates the 10th Amendment. Also, there is still a case remaining challenging the entire health care law on constitutional grounds. Remember, for many clients that are presently uninsured, if the tax for not getting insurance is less than the cost of the insurance, they will opt for paying the tax. That’s especially true since the tax is not enforceable. In turn, based on the U.S. Supreme Court opinion last year, the Congress can’t increase the level of the “tax” very much because then it would become a mandate – which all of the Justices (in their various separate opinions) said would be unconstitutional under the Commerce Clause.
The Center for Agricultural Law and Taxation does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. The Center's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.