Time is running out to avoid automatic renewal of a 2024 farm lease in Iowa. Whether you’re a landlord or a tenant, Iowa law requires that you formally notify the other party by September 1 if you don’t wish to continue the current lease under its existing terms and conditions for another year. If notice is sent by mail, that means mailing the notice, by certified mail, before September 1.
Because of tax credits created by the Inflation Reduction Act (IRA) for clean fuel production, some farmers may in the near future receive a higher price for selling crops to renewable fuel producers (i.e.
Since the U.S. Supreme Court decision in Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984), courts have often been required to defer to “permissible” agency interpretations of the statutes those agencies administer—even when a reviewing court reads the statute differently. In a landmark decision issued June 28, 2024, the U.S. Supreme Court overruled this so-called Chevron doctrine. [Loper Bright Enterprises v. Raimondo, No. 22-451 (U.S. Sup. Ct. June 28, 2024)].
On July 28, 2024, the Iowa Utilities Commission granted Summit Carbon Solutions, LLC, a hazardous liquid pipeline permit. The company cannot begin construction until the authorities in South Dakota and North Dakota grant their approval for the project. (Note: the Iowa Legislature changed the name of the Commission from the Iowa Utilities Board, effective July 1, 2024).
In a case of first impression in Iowa, the Iowa Supreme Court today ruled that common ownership of adjacent parcels eradicates otherwise existing claims of boundary by acquiescence by subsequent purchasers. The case is Sundance Land Company, LLC v. Remmark, No. 22-0848, (Iowa Sup. Ct. June 14, 2024).
Many Iowans have been impacted by recent severe storms. This post summarizes relevant notices and relief issued by IRS, FEMA, and the Iowa Department of Revenue.
On Thursday, June 6, 2024, the Iowa Department of Revenue announced that the revised 2023 Form IA 100A (Iowa Capital Gain Deduction – Cattle, Horses, or Breeding Livestock) is ready to file.
On June 4, 2024, the U.S. Supreme Court issued a unanimous opinion holding that a corporation’s obligation to use life insurance proceeds to redeem a decedent’s shares did not offset the value of the life insurance when valuing the shares for estate tax purposes. [Connelly v. U.S., No. No. 23–146 (U.S. Sup. Ct. June 4, 2024)].
The Iowa Legislature had a busy 2024 session, passing 187 bills through both the House and the Senate. This post reviews the enrolled bills of most interest to agricultural producers and landowners. Several of these bills still await the Governor’s signature. Most are effective July 1, 2024.
On April 19, 2024, the Iowa Supreme Court reversed a decision from the Iowa Court of Appeals and ruled that shareholders of a family farm corporation did not prove their breach of fiduciary duty claims against their father and brother. Hora v. Hora, No. 22-0259 (Iowa S. Ct. 2024) provides a good review of the duties and obligations of corporate directors in a family business. It also serves as a sober reminder of how easily family disputes can arise.
Iowa has a new rule when it comes to boundary by acquiescence and property transferred from a trust. In a rare reversal of precedent, the Iowa Supreme Court overruled Heer v. Thola, 613 N.W.2d 658 (Iowa 2000) (en banc) to find that boundary by acquiescence claims are not cut off by the one-year limitations period for bringing claims arising from the transfer of property by a trustee. 614.14(5)(b). This ruling eliminates a barrier that has preempted some boundary by acquiescence claims for 24 years.
As March 1 approaches, we review the estimated tax rules for farmers.
Generally, self-employed taxpayers are required to make quarterly estimated tax payments or pay a penalty. IRC § 6654(e)(1). A special rule applies to the payment of estimated tax by individuals who are “farmers” or “fishermen.” This special rule protects farmers—whose income is often unpredictable and sporadic—from the burden of attempting to calculate and make quarterly estimated tax payments. IRC § 6654(i).
Update: On January 31, 2024, the House passed this bill with a bipartisan vote of 357 to 70. As of February 12, 2024, the future of the bill remains uncertain. It does not appear to be headed for a Senate floor vote any time soon.
On January 29, 2024, IRS Commissioner Danny Werfel encouraged taxpayers to "file when they're ready. Don't wait on Congress. If there's a change that impacts your return, we will make the change, and we will send you the update whether it's an additional refund or otherwise without you having to take any steps."
In two separate lawsuits, several advocacy groups challenged Iowa’s Farm Trespass law and Trespass Surveillance statute. In both cases, a judge from the Southern District of Iowa previously held that the law violated the First Amendment and granted summary judgment in favor of the plaintiffs. Animal Legal Defense Fund v. Reynolds, 591 F.Supp.3d 397 (S.D. Iowa 2022); Animal Legal Defense Fund v. Reynolds, 630 F.Supp.3d 1105 (S.D. Iowa 2022).
The Eighth Circuit Court of Appeals released two separate opinions on January 8, 2024, and reversed the district court’s decisions, ruling that both statutes passed intermediate scrutiny and were, thus, constitutional. The cases are Animal Legal Defense Fund v. Reynolds, No. 22-1830, (8th Cir. Jan. 8, 2024) and Animal Legal Defense Fund v. Reynolds, No. 22-3464 (8th Cir. Jan. 8, 2024).
Note: In 2024, the Iowa Legislature reinstated the capital gain deduction for the sale of breeding, draft, dairy, and sport livestock, retroactively to include the 2023 tax year. Read more about this change here.
On December 21, 2023, IRS announced a Voluntary Disclosure Program (VDP) through which eligible employers may repay 80 percent of the employee retention credit (ERC) to which they were not entitled and avoid civil litigation, penalties, and interest. IRS initiated this program in response to myriad fraudulent ERC claims, many filed by promoters who aggressively marketed this program to employers. Employers who received improper ERC payments have until March 22, 2024, to submit applications to participate in the VDP.
Update: On March 1, 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), a federal district court in the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs.
On September 8, 2023, the Environmental Protection Agency (EPA) and U.S. Army Corps of Engineers (Army Corps) published a revised definition of “waters of the United States” or WOTUS. 88 FR 61964. To conform with the U.S. Supreme Court’s recent Sackett v. EPA, 143 S. Ct. 1322 (2023) ruling, the agencies made various changes including the removal of the “significant nexus” standard and amending the definition of “adjacent.” The new rule went into effect September 8, 2023. Because the revision was required to make the Rule comply with the Sackett decision, no notice and opportunity for public comment was necessary.
On August 9, 2023, the Iowa Court of Appeals affirmed that a boundary by acquiescence was established between a farm and neighboring homeowner. The parties treated a fence as the boundary line for over ten years. Even though a homeowner later tore the fence down, the boundary line was still clearly marked from farming activities. Therefore, the Court of Appeals affirmed the district court’s finding in favor of the plaintiffs.
A commercial fishing business harvested shrimp by dragging nets along the ocean floor. The nets would trap other marine animals in addition to the shrimp. The fishermen would throw this “bycatch” back into the ocean. A conservation group brought a citizen-suit under the Clean Water Act (CWA) claiming that the company violated the CWA by 1) disturbing the sediment when it dragged nets along the ocean floor and 2) throwing the bycatch back into state waters bordering the Atlantic Ocean. The district court granted the fishing company’s motion to dismiss. On appeal to the Fourth Circuit Court of Appeals, the court affirmed.
Producers have until July 14, 2023, to apply for disaster relief under Phase 2 of the Emergency Relief Program (ERP Phase 2) or the Pandemic Assistance Revenue Program (PARP). The USDA recently extended the application deadline from June 2, 2023, to July 14, 2023. These are revenue loss assistance programs specifically targeting farmers who were impacted by natural disasters in 2020 or 2021 or COVID-related losses in 2020.
On May 25, 2023, the U.S. Supreme Court significantly narrowed the definition of “waters of the United States.” Sackett v. EPA, No. 21-454 (2023). This case marks a decided victory for the Sacketts, an Idaho couple who wished to build a house on property the EPA found to contain federal wetlands. Notably, all nine Justices agreed that the agencies had gone too far in finding that the Sacketts’ property was subject to Clean Water Act (CWA) jurisdiction.
California’s Proposition 12 is here to stay...unless Congress decides to weigh in. On May 11, 2023, the United States Supreme Court ruled that the 2018 law forbidding the sale of whole pork meat that comes from breeding pigs “confined in a cruel manner” did not violate the dormant Commerce Clause of the U.S. Constitution. The decision means that any pork producers around the country wishing to sell their products in California must meet strict sow housing conditions mandated by California.
A recent case from the Iowa Supreme Court highlights the importance of carefully completing and reviewing beneficiary designations for IRAs and other retirement accounts. After acknowledging that there was “puzzling language” in the beneficiary designation before it, the Court ultimately determined that it must enforce the agreement based upon what it said, not based upon what the owner may have intended.
In a January 27, 2023, opinion, the Iowa Supreme Court found that a joint tenancy with rights of survivorship was converted to a tenancy in common when one of the owners transferred her undivided interest to a revocable living trust. The Court also ruled that the severance of the joint tenancy created a presumption of two equal shares, with equitable adjustments allowed only for contributions made after the creation of the joint tenancy. The case, Grout v.
As the 2023 filing season begins, taxpayers and their preparers must sort through new guidance and rules to determine their requirements for the 2022 tax year. This post details 10 key considerations for these returns.
Agricultural supply dealer liens—intended to encourage suppliers to provide necessary feed and supplies to agricultural producers—can be difficult to enforce. An opinion issued by the Iowa Supreme Court today illustrates some of the complexity of this remedy. Quality Plus Feeds, Inc. v. Compeer Financial, FLCA, 984 N.W.2d 437 (Iowa 2023).
On December 16, 2022, the North Carolina Supreme Court denied an appeal claiming that the state’s Right to Farm Act was unconstitutional. Previously, the North Carolina Court of Appeals had granted the State’s motion to dismiss under the Federal Rules of Civil Procedure Rule 12(b)(6). Rural Empowerment Ass’n for Cmty. Help v. North Carolina, 2021 WL 6014722 (N.C. App. Dec. 21, 2021).
On October 18, 2022, the USDA announced that it had already provided nearly $800 million in assistance to distressed borrowers to help cure delinquencies and resolve uncollectable farm loan debts.
The National Bioengineered Food Disclosure Standard law requires all bioengineered food to disclose its bioengineered status to consumers through “text, symbol, or electronic or digital link.” 7 U.S.C. § 1639b(b)(2)(D). The USDA, through the Agricultural Marketing Service (AMS), promulgated the National Bioengineered Food Disclosure Standard rule in 2018 .A group of retail stores and food advocacy groups brought suit in the Northern District of California claiming that the regulations violated the Administrative Procedure Act. A federal judge agreed and found that the USDA failed to comply with the disclosure statute’s directive to “provide additional and comparable options” to ensure that consumers could access the electronic disclosure.
On September 26, 2022, a federal judge in the Southern District of Iowa again found an Iowa farm trespass law to be unconstitutional. Under Iowa Code § 727.8A (the “Trespass Surveillance law”), anyone who trespasses and “knowingly places or uses a camera or electronic surveillance device that transmits or records images or data while the device is on the trespassed property” is guilty of an aggravated misdemeanor. This is Iowa’s third farm fraud and trespass law found to be in violation of the First Amendment by this court.
On August 24, 2022, IRS issued broad penalty relief to most taxpayers who filed 2019 and 2020 returns late. The relief, provided in IRS Notice 2022-36, applies to failure to file (not failure to pay) penalties, as well as some late information return penalties. For the most part, the relief is automatic.
As production costs continue to rise, farmland owners and tenants may be reconsidering the terms of their farm leases. Both tenants and landlords should be aware of Iowa’s farm lease auto-renewal statute. Anyone who does not wish to continue a farm lease into 2023 should know that their 2022 farm lease will automatically renew under the same terms and conditions if neither party provides written notice on or before September 1. This auto-renewal provision applies to both written and oral leases.
On August 23, 2022, the Iowa Department of Agriculture and Land Stewardship (IDALS) announced that the court-appointed receiver for B & B Farm Store Inc., a grain dealer and warehouse operator from Jesup, Iowa, had consented to a voluntary revocation of its Iowa warehouse and grain dealer licenses.
Update: President Biden signed this bill into law on August 16, 2022.
On June 30, 2022, the Iowa Supreme Court, in a 4-3 decision, overruled 18-year-old precedent to find that Iowa’s right to farm statute, Iowa Code § 657.11, does not violate the inalienable rights clause of the Iowa Constitution. This decision generally restores statutory immunity from nuisance lawsuits seeking special damages for many animal feeding operations. Garrison v. New Fashion Pork LLP, No. 21–0652 (Iowa 2022).
President Biden signed the Extending Government Funding and Delivering Emergency Assistance Act (P.L. 117-43) into law on September 30, 2021. It authorized $10 billion to assist agricultural producers impacted by wildfires, droughts, hurricanes, winter storms, and other eligible disasters experienced during calendar years 2020 and 2021. The USDA has determined that the money will be funding two new programs, the Emergency Livestock Relief Program (ELRP) and the Emergency Relief Program (ERP).
On March 22, 2022, the Director of the Iowa Department of Revenue joined the IRS in granting estimated tax penalty relief to qualifying farmers who did not file their 2021 returns and pay their taxes by March 1, 2022. In Order 2022-1, Iowa waives the underpayment of estimated tax penalty for any qualifying farmer who files their 2021 Iowa income tax return and remits payment by May 2, 2022.
On March 3, IRS announced that it would be providing limited penalty relief for qualified farmers required to file Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations.
On March 1, 2022, Governor Kim Reynolds signed HF 2317 into law. The new tax law will reduce individual and corporate income tax rates, provide exemptions from Iowa tax for certain forms of retirement income--including retired farmer rental income--and scale back certain tax credits.
Potential tax changes dominated most 2021 tax discussions. Proposals such as the American Families Plan sought to significantly increase the capital gains tax rate and require recognition of capital gain at death or at gift. A later House of Representatives proposal sought to increase the capital gains tax rate and cut the estate and gift tax exemption in half in 2022.
IRS announced January 10 that it will begin accepting and processing 2021 tax year returns for individuals beginning January 24, 2022. IRS began accepting e-filed business returns on January 7, 2022.
IRS states in its announcement:
Like 2020 before it, 2021 was no ordinary year. As we leave the year behind, we review key tax considerations arising from 2021’s unique circumstances and look ahead to the 2022 tax filing season. This post reviews the tax treatment of common COVID-19 benefits distributed in 2021. With high crop yields and robust commodity prices, many farmers closed 2021 with more income than they expected. Likewise, input costs for 2022 are on track to reach record highs.
With high crop yields and robust commodity prices, many farmers are closing 2021 with more income than they expected. Likewise, input costs for 2022 are on track to reach record highs. In light of these trends, many farmers may have sought to even out income by deferring income from 2021 into 2022, by prepaying expenses in 2021, or by purchasing depreciable property. This article provides a summary review of special tax planning options that may be applied when filing 2021 returns.
Many farmers regularly and generously give to their churches or other charitable organizations. This article reviews the rules for gifting a raised commodity directly to the charity, instead of selling the grain or livestock and then donating the proceeds. This strategy can allow some farmers to recognize both income tax and self-employment tax savings.
We frequently receive questions about depreciating and expensing business vehicles. This post provides a brief summary of the general rules for 2021.
Rural landowners are sometimes asked to enter into an agreement to allow a developer to run a pipeline or power lines across their property. These are important decisions with permanent consequences. Landowners considering entering into such a contract should seek legal counsel to carefully review and negotiate the terms. They should also seek the advice of trusted tax counsel to understand how the payments will be taxed.
On September 30, 2021, President Biden signed a continuing resolution into law. This new law, intended to temporarily fund the government through December 3, 2021, also contains provisions to provide new retroactive disaster relief to some farmers impacted by the 2020 derecho and other weather events.
On August 4, 2021, Summit Carbon Solutions, LLC, initiated the legal process to build a proposed 710-mile carbon sequestration pipeline through 30 Iowa counties by filing a request for public informational meetings with the Iowa Utilities Board.
As many taxpayers are working to finalize extended returns, many in Congress are working to finalize language for tax reform legislation. Here we provide a brief update on the status of tax reform and what we may expect in the next several weeks.
For tax years beginning in 2021, the American Rescue Plan Act (ARPA) significantly expanded the child tax credit. It also implemented advance child tax credit payments, and a possibility that taxpayers may face a repayment obligation if the advance payments are too high. Taxpayers facing a potential repayment may wish to unenroll from these advance payments.
The American Rescue Plan Act of 2021 (ARPA), Pub L. No. 117-2, significantly enhanced the availability of the Affordable Care Act’s (ACA) premium tax credit (PTC) to make healthcare acquired on the ACA’s Health Insurance Marketplace more affordable for 2020, 2021, and 2022. These changes could mean significant savings to taxpayers purchasing healthcare coverage on the Marketplace. Because many farmers and ranchers are self-employed or owners of small partnerships or corporations for which insurance plans may be costly, they may benefit from purchasing insurance on the Marketplace.
The employee retention credit (ERC) has been an important tax credit for many employers in 2020 and 2021. Although a fairly complicated credit, the ERC can be very beneficial to many employers. Recent guidance has clarified several longstanding questions. Here, we provide a brief overview of the credit, as well as a summary of the new guidance. For those readers seeking more detailed information on the ERC, IRS FAQs and the referenced guidance will be helpful.
On August 16, 2021, the Ninth Circuit brought closure to long-standing wetlands litigation between Idaho property owners and the Environmental Protection Agency (EPA). Despite the EPA’s intent to no longer pursue enforcement action, the court held that the case was not moot and that the property consisted of wetlands under the “significant nexus” test.
It’s that time of the year to again think about Iowa’s farm lease auto-renewal law. Tenants or landlords who do not wish to continue a farm lease into 2022 should be aware that their 2021 farm lease will automatically renew under the same terms and conditions if neither party takes action by or before September 1.
On August 10, 2021, the United States Court of Appeals for the Eighth Circuit considered the constitutionality of Iowa’s 2012 “Agricultural Production Facility Fraud” law (2012 law), sometimes called an “ag-gag” law. The court reversed a 2019 district court decision and upheld the constitutionality of the portion of the law providing criminal penalties for gaining access to an agricultural production facility using false pretenses. Iowa Code § 717A.3A(1)-(2).
Update: On March 31, 2023, the Eastern District of Arkansas granted one of the defendant’s Rule 12(b)(6) motion to dismiss for failure to state a claim. The district court concluded that the First Amendment applies to state action, not private actors such as the defendant. Additionally, the Eighth Circuit’s Article III determination did not equate to state action. Animal Legal Defense Fund v. Peco Foods, Inc., 2023 WL 2743238 (E.D. Ark. March 31, 2023).
On August 19, 2021, the United States Court of Appeals for the Tenth Circuit affirmed that three subsections of the Kansas Farm Animal and Field Crop and Research Facilities Protection Act (the Act) were unconstitutional. The Act provides criminal sanctions for using fraud or deception to obtain consent to engage in various activities at an animal facility with the intent to damage the facility.
In this study conducted in conjunction with the Center for Agricultural and Rural Development, Kristine Tidgren and Wendong Zhang analyze Iowa farmland data, including estimated basis and fair market value, to estimate the impact of the proposed tax provisions in the American Families Plan on Iowa farmland owners during lifetime and at death and gift. The study reviews only potential impact arising from farmland holdings and does not provide an estimate of an owner's overall potential tax liability.
We have been seeing renewed interest and activity associated with a market for carbon credits, in particular credits created through new land management and conservation practices farmers implement on their land. Last week, we participated in a webinar providing information on this emerging topic. You can watch the webinar here. Topics include:
On July 28, 2021, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of lawsuit challenging a California law, finding that even though the complaint plausibly alleged that “Proposition 12 will have dramatic upstream effects and require pervasive changes to the pork production industry nationwide,” it did not state a violation of the dormant Commerce Clause under existing precedent.
On July 26, 2021, the District Court of Hawaii considered whether the County of Maui must obtain a National Pollution Discharge Elimination System (NPDES) permit for releasing pollutants into injection wells a half a mile from the ocean. On remand, this district court, using factors set forth by the Supreme Court, held that the circumstances surrounding how the Lahaina Wastewater Reclamation Facility (LWRF) conveyed pollutants through groundwater was the “functional equivalent of a discharge.”
On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. The order targets consolidation across many different industries and contains several provisions specifically concerning agricultural markets.
On June 30, 2021, IRS issued Rev. Proc. 2021-14, which details special elections and revocations available to taxpayers with farming loss net operating losses (NOLs) in 2018, 2019, and 2020. The guidance was necessary to instruct taxpayers on how to comply with a special legislative fix for farming loss NOLs implemented by the Consolidated Appropriations Act, 2021 (CAA), enacted December 27, 2020.
As of July 1, 2021, Florida has a new Right to Farm Act (RTFA). On April 30, 2021, Governor DeSantis of Florida signed SB 88 into law, amending Florida’s RTFA in several ways. See Fla. Stat. § 823.14. Concerned with the COVID-19 pandemic encouraging urban sprawl into rural areas, the new law seeks to provide stronger protection against nuisance lawsuits for producers who comply with government regulation and best management practices.
On Friday, June 25, the United States Supreme Court issued an opinion determining the availability of an extension to the small refinery[i] hardship exemption within the renewable fuel standards program (RFS).
On June 18, the Iowa Supreme Court—in a 4-3 decision—dismissed a water quality lawsuit filed against the State of Iowa[i] by two social justice groups, Iowa Citizens for Community Improvement and Food and Water Watch. The lawsuit, filed March 29, 2019, alleged that the State of Iowa had violated the public trust doctrine by failing to protect the public’s recreational and drinking water use of navigable waters.
On May 28, 2021, the Treasury Department released the "Green Book," a description of revenue proposals within President Biden’s fiscal year 2022 budget.
UPDATE: On June 23, a judge from the Middle District of Florida also granted a preliminary injunction halting the debt relief program. Wynn v. Vilsack, 2021 WL 2580678 (M.D. Fla. June 23, 2021).
The Center for Agricultural and Rural Development recently posted this policy brief discussing the possible implications of the Growing Climate Solutions Act of 2021 on the carbon market for agriculture:
Update: On June 16, 2021, Governor Reynolds signed this bill into law.
After several years of litigation flowing from dicamba drift damage to cotton, soybeans, and other crops,[i] Monsanto (owned by parent company Bayer) agreed to enter into a Soybean Producers Master Settlement Agreement. This December 16, 2020, Agreement provides a mechanism, apart from litigation, for eligible producers to resolve dicamba-related soybean injury claims.
As President Biden wrapped up his first 100 days, he rolled out the last of three proposals forming the backbone of his tax and spending policies, the “Build Back Better” plan. With his COVID-19 relief plan—the American Rescue Plan—signed into law, his focus now turns to the latter two proposals, a physical infrastructure plan and a “human infrastructure” plan. Significant tax increases would fund each proposal, the first mostly impacting corporations and the second directly impacting individuals.
On March 29, 2021, the Iowa Department of Revenue announced a filing and payment extension for individual taxpayers, from April 30, 2021, to June 1, 2021. In the same notice, IDOR provided instructions for reporting unemployment compensation on 2020 returns.
Update: Sign-up for this program opened April 5. https://www.farmers.gov/cfap/apply
By a vote of 92-7, the Senate today passed HR 1799, the PPP Extension Act of 2021. The House had passed this bill on March 16, 2021, by a vote of 415 to 13. This new provision, once signed by President Biden, will extend the time for lenders to submit PPP loan applications to the SBA from March 31, 2021, through May 31, 2021. It will also allow the SBA to process these applications through June 30, 2021.
It’s been difficult enough to keep up with federal tax changes this year, let alone worry about how Iowa is treating these changes. Confusion has been complicated by the fact that many software companies have not adjusted their products to comply with Iowa law. The good news is that, although not always clear-cut, Iowa's rolling conformity has made things a bit easier, even if it doesn't feel like it.
On March 17, 2021, IRS issued the following news release:
The U.S. Department of the Treasury and the Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.
President Biden signed the American Rescue Plan Act of 2021 (ARPA), H.R. 1319, into law on March 11, 2021. The $1.9 trillion package includes money for states and localities, schools, socially disadvantaged farmers, public health, small business relief, and much more. The law also includes a number of tax provisions, most intended to assist struggling taxpayers, but a few intended to raise revenue. This post summarizes key tax provisions within the ARPA.
Note: This post has been updated to include new guidance and forms published March 12 and March 18 at the bottom.
Between the pandemic, a trade war, and assorted natural disasters, agricultural producers, like most other businesses, faced a difficult 2020. As many farmers file 2020 income tax returns, they and their tax professionals are sorting through unusual sources of income, analyzing whether new COVID-19 tax benefits apply, and determining how to report these items on their income tax returns. This article provides a brief summary of several key issues, with the caveat that pending legislation could change the rules again at any time.
With tax software missing key updates and some important questions remaining unanswered, some farmers who did not pay estimated tax by January 15 may not be in a position to file their returns by March 1. Although missing the March 1 deadline may subject these farmers to an underpayment of estimated tax penalty, April 15 remains the filing deadline for most individual taxpayers, including farmers. This post reviews the special estimated tax rules for farmers and the significance of the March 1 deadline.
It’s almost March 1, which means that many farm leases around Iowa are beginning anew.[i] This key date is a good time to remind landlords of several available options to reduce the risks associated with nonpayment.
Update: On March 11, the American Rescue Plan Act was signed into law. The new law extends the ERC through December 31, 2021, with some modifications to quarters 3 and 4. On April 2, IRS issued guidance as to the CAA expansion for quarters 1 and 2 of 2021. This guidance, Notice 2021-23, did not address the ARPA expansion.
On February 10, I had the opportunity to speak at the Illinois Soybean Association's 2021 Soybean Summit regarding recent updates to the Paycheck Protection Program and the tax law. The information in this presentation is up to date through February 10, 2021. A copy of the slides may be downloaded below.
On February 4, 2021, the Iowa Department of Revenue issued guidance on its nonconformity with the Consolidated Appropriations Act of 2021. Because Iowa generally has rolling conformity with federal tax law beginning with tax years 2020, the nonconformity guidance specifically applies to taxpayers with tax years that began in 2019.
Note: On January 19, the PPP was opened to all lenders. SBA released guidance regarding how to calculate revenue reduction and loan amounts for a Second Draw PPP loan.
On November 18, 2020, IRS issued Rev. Rul. 2020-27, directing that a taxpayer who received a Paycheck Protection Program loan and paid otherwise deductible expenses with the proceeds, may not deduct those expenses in the year they were incurred if the taxpayer reasonably expects to receive forgiveness of the loan. In conjunction with this guidance, the IRS issued Rev. Proc.
As October comes to an end, it may be helpful to review the Iowa Department of Revenue’s tax filing deadlines during this crazy year. A recent news release from IDOR details this information.
It has certainly been a year of challenges. COVID-19 triggered widespread economic harm, a once-in-a-lifetime derecho flattened fields and pummeled grain bins, and drought compounded the damage. Because of these disasters, most farmers received some unexpected payments in 2020. These payments kept many farmers afloat through a very tough year, but proper management of this income is important to maximize its benefit. This article summarizes key payments received by cash basis farmers in 2020 and their tax consequences.
On October 27, 2020, the EPA announced that it had approved the applications of Bayer and BASF for new registrations of dicamba-based XtendiMax and Engenia for over-the-top use on dicamba-tolerant cotton and soybeans. It also approved Syngenta’s application for a label amendment to extend the December 20, 2020, expiration date for dicamba-based Tavium. These five-year registration decisions were issued under section 3(c)(5) of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA).
With the election just around the corner, American tax policy faces uncertainty. The Tax Cuts and Jobs Act of 2017 ushered in the most significant changes to the tax code in 30 years. Depending upon the outcome, the 2020 election could significantly alter the landscape again. While details are slim, this post reviews Vice President Biden’s tax proposals, as posted on his campaign website and discussed during his time as a candidate.
Late Thursday, October 8, the Small Business Administration issued a new Form 3508S forgiveness application and instructions promising simplified forgiveness for Paycheck Protection Program loans in the amount of $50,000 or less.
Update: On October 6, Clinton County was added to the list.
On September 1, individual assistance was extended to:
Many are reeling from the damage caused by the derecho which tore through the Midwest on August 10, 2020. Farmers lost grain bins, outbuildings, crops, and much more. Clean up is ongoing with hundreds of trees uprooted and strewn across lawns. This post provides an overview of some of the tax issues associated with the destruction, clean-up, and rebuilding.
The period for making Paycheck Protection Program loans through the CARES Act ended August 8. The program enabled 5.2 million loans, with $525 billion in proceeds disbursed to U.S. small businesses. When all was said and done, nearly $137 billion was left on the table. Although Congress could authorize a PPP round two under potential Phase IV stimulus relief, attention for borrowers under PPP round one has turned to forgiveness. A new interim final rule was issued on August 24, which answers a few outstanding questions.
On August 28, 2020, IRS issued Notice 2020-65, 2.5 pages of guidance related to the President’s August 8 payroll tax deferral Memorandum (Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster). Based upon the risk this new program would impose upon employer and employee alike, it appears likely that many employers will not participate in this program.
On August 25, 2020, Governor Reynolds announced that she was allocating $100 million of Iowa CARES Act relief funds to new agricultural programs created to offset the impact of COVID-19 on farmers and renewable fuel businesses. Several of these programs are administered by the Iowa Economic Development Authority (IEDA) and the others are administered by the Iowa Department of Agriculture and Land Stewardship (IDALS). The requirements of these programs, as well as the rapidly approaching application deadlines, are detailed below.
A recent case from the Iowa Court of Appeals illustrates how redemption works after a farm foreclosure and warns debtors that they must strictly follow the letter of the law to redeem their land.
After a judicial foreclosure in Iowa, a debtor can generally redeem or buy back their agricultural land within one year after sale. See Iowa Code §§ 626.95, 628.3. That right may be assigned to another party.
Update: On August 28, 2020, IRS issued guidance on this new program. Read about it here.
After the breakdown of COVID-19 stimulus ("Phase IV") negotiations between Democrats and the Administration, the President took executive action on August 8, 2020, designed to assist those impacted by COVID-19 disruptions. Many questions remain regarding the details and implementation of these actions, which are detailed below.
As of September 2, no progress has been made on a stimulus package. Congress returns from the Labor Day Recess on September 8.
Despite the recess for COVID-19, the Iowa Legislature passed many laws this term, many of them effective July 1, 2020. Below is summary of the new Iowa laws impacting agricultural producers and rural landowners.
Called the 2020 Omnibus Bill, HF 2641 makes a number of changes to Iowa tax law. Signed into law by the Governor on June 29, 2020, the primary intent of the bill was to streamline the administration of Iowa’s tax laws and coordinate their interaction with federal law.
On June 23, 2020, IRS issued Notice 2020-51, providing guidance for the waiver of 2020 required minimum distributions (RMD) made possible by the CARES Act. The guidance also provides sample plan amendments.
Update: On July 4, 2020, President Trump signed S.4116 into law. This new law allows new PPP loans to be made through August 8, 2020. The law does not allow businesses that have already obtained a loan to receive a second one.
On June 19, 2020, the Iowa Supreme Court ruled that the Iowa Department of Revenue rationally interpreted Iowa Code § 422.7(21)(a) to prevent a typical cash rental landlord from taking the Iowa capital gain deduction.
On Friday, June 19, IRS issued Notice 2020-50, expanding the definition of “qualified individuals” eligible for coronavirus-related distributions from eligible retirement accounts. The Notice also provides detailed guidance for coronavirus-related distributions and expanded plan loans made available by the CARES Act.
On June 16, the Small Business Administration and the Treasury issued guidance on forgiveness, as it applies to the self-employed, in light of the Paycheck Protection Flexibility Act enacted June 5.
On June 8, 2020, IRS and Treasury issued proposed regulations (REG-109755-19) that will (once they become final) open the door for those involved with health care sharing ministries and direct primary care arrangements to realize tax savings for the cost of these programs.
Update: On June 19, the Ninth Circuit denied the plaintiff's emergency motion to enforce the vacature and hold EPA in contempt.
Update: Late on June 8, the U.S. EPA issued a final cancellation order for the registrations of the three herbicides impacted by the Ninth Circuit's ruling. The cancellation order allows for the limited sale and use of existing stock of these herbicides through July 31, 2020, allowing farmers to complete their spraying.
On May 29, 2020, Katie Kramer and Justin Muir, agricultural program specialists from the Iowa USDA-FSA office, and ISU agricultural economist Chad Hart joined us for a webinar on the Coronavirus Food Assistance Program. The panel reviewed eligibility information and the application process for the new program and answered a number of producer questions. We were grateful to have them present the program!
A replay of the webinar is available here.
Please join us for a free webinar on Friday, May 29, to review the CFAP application process.
Update: USDA has released more guidance, including an example of AD-3114, the CFAP application, in Notice CFAP-4.
Update: Late on May 13, Treasury extended the deadline for repaying a PPP loan without review from May 14 to May 18.
Update: On May 13, 2020, SBA and Treasury issued additional guidance providing a safe harbor and extending the deadline for returning a loan to May 18.
Note: On May 4, SBA began accepting applications for EIDL advances from agricultural businesses only.
It’s official. The President signed H.R. 266, the Paycheck Protection Program and Health Care Enhancement Act, into law today. This law provides another opportunity for some small businesses, including agricultural producers, to get in line for a potential loan to help them through the next few months.
Late on April 30, 2020, IRS issued Notice 2020-32, stating that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan under the Paycheck Protection Program (PPP).
The question before the U.S. Supreme Court was whether the Clean Water Act requires a permit when pollutants originate from a point source but are conveyed to navigable waters by a nonpoint source, in this case, groundwater. Many had hoped the Court’s answer to this question would clarify longtime ambiguity under the CWA. But given the complexity of the issue, that was not to be.
Note: This case was reversed on appeal on 11/25/2020.
A bankruptcy court recently ruled in a Chapter 12 case that federal and state taxing authorities do not have the right to offset a refund with tax debt stripped of its priority by 11 U.S.C. § 1232. This was a court’s first opportunity to rule on this question since the passage of the Family Farmer Bankruptcy Clarification Act of 2017. The case was In re DeVries, No.19-00181 (Bankr. N.D. Iowa April 28, 2020).
The Iowa Supreme Court recently issued a decision in a key case involving competing claims by a secured lender and a grain elevator over the costs of storing and drying the grain. The April 17, 2020, case--MidWestOne Bank v. Heartland Co-op, No. 19-1302 (Iowa 2020)--has caused grain warehouses and lenders to take a closer look at their business practices.
Late Friday, April 17, U.S. Secretary of Agriculture Sonny Perdue announced the creation of the Coronavirus Food Assistance Program (CFAP). This new USDA program will use the money allocated by Congress through the CARES Act, as well as other sources, to assist farmers and ranchers and maintain the integrity of the food supply chain during the COVID-19 national emergency.
Update: On June 29, IRS stated via FAQ that taxpayers will have until July 15, 2020, to file a Form 1139 or Form 1045 that otherwise would be due June 30. This is because of the general extension relief provided by Notice 2020-26.
On April 9, 2020, IRS issued Notice 2020-23, which significantly expands the deadline relief for filings and payments earlier provided through Notices 2020-18 and 2020-20.
This broad-sweeping relief now applies to taxpayers with a filing or payment deadline on or after April 1, 2020, and before July 15, 2020, for the following.
Update: On April 24, Congress replenished the PPP fund. Additional guidance was also provided: Congress Authorizes More Funds for PPP and EIDL and Says Farms Can Apply
Update: As of April 16, 2020, funds allocated to the PPP have been exhausted. We are watching to see if additional funds will be authorized.
Update: On April 9, 2020, IRS issued Rev. Proc. 2020-24, providing guidance to taxpayers with net operating losses that are carried back under the CARES Act.
Update: On April 10, IRS launched a new tool to help non-filers provide information so they can receive Economic Impact Payments.
The Senate has been discussing provisions contained in what's being called the Coronavirus Aid, Relief, and Economic Security (CARES) Act or Phase 3 Coronavirus legislation. The proposal would include $2 trillion of spending. Full text of the legislation has not been publicly released, but Chairman Grassley from the Senate Finance Committee has released a summary of provisions under consideration.
In a March 22, 2020, Proclamation of Disaster Emergency related to the COVID-19 crisis, the Iowa Governor temporarily suspended foreclosures of residential, commercial, and agricultural real property.
Update: After Iowa issued its notice, the IRS issued a notice extending the filing deadline for federal returns to July 15.
Update: On March 20, 2020, the IRS superseded this notice with Notice 2020-18. An automatic extension now applies to payments AND tax return filings otherwise due on April 15, 2020.
IRS has just issued guidance regarding the tax payment deadline extension Secretary Mnuchin announced on March 17. The relief is granted in response to the Stafford Act Emergency Declaration President Trump issued on March 13 in response to the COVID-19 crisis.
Eligible producers and crop share landlords should finally begin receiving interim payments from the Syngenta settlement this month. On February 28, 2020, the U.S. District Court for the District of Kansas authorized the claims administrator to make interim payments to class members that have:
On February 24, 2020, IRS issued proposed regulations, REG-100814-19, to address the deductibility of food and beverage expenses in light of the disallowance of entertainment expenses under IRC § 274(a)(1)(A) by the Tax Cuts & Jobs Act (TCJA). The new guidance largely tracks the transitional guidance issued in Notice 2018-76, but adds clarity with respect to several issues.
On February 21, IRS issued a long-awaited revenue procedure, IRS Rev. Proc. 2020-13, to allow farmers who had elected out of UNICAP prior to the Tax Cuts and Jobs Act to revoke that election if they qualify as a small business taxpayer. Owners of orchards and vineyards, in particular, have been waiting for this revenue procedure since the Tax Cuts and Jobs Act went into effect.
With filing season well underway, IRC §199A (Section 199A) has been generating a lot of questions, particularly with respect to patrons of agricultural and horticultural cooperatives. Below we discuss several common issues.
On January 23, 2020, the Environmental Protection Agency (EPA) and the U.S. Department of the Army signed the final Navigable Waters Protection Rule (NWPR), a rule that defines “waters of the United States” or the jurisdictional scope of the Clean Water Act (CWA). The NWPR will be effective 60 days from its publication in the Federal Register.
It’s always good to get answers to unresolved questions, and it’s even better when the answer provides good news. IRS recently provided such an answer in PMTA 2020-01, posted to the IRS website on January 15. In this memo, the Office of Chief Counsel answered an important lingering question we’ve had since 2018:
As we move into 2020, we're dedicating this post to reviewing important agricultural law developments from the past year. Most of these issues continue to evolve, and we look forward to providing updates as they occur. Happy new year!
On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, 2020, HR 1865, part two of a spending bill designed to keep the government running through September 2020. Buried within the law’s 715 pages are hundreds of other provisions, including an estimated $426 billion (over 10 years) tax package.
On December 20, 2019, President Trump signed into law the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). The SECURE Act, originally passed by the House last May, was inserted into the Further Consolidated Appropriations Act, 2020, HR 1865, a massive spending bill approved by a vote of 297-120 in the House and 71-23 in the Senate. The SECURE Act makes significant changes to many long-time retirement plan rules.
On December 18, 2019, a divided panel of the United States Court of Appeals for the Fifth Circuit affirmed a Texas district court’s December 2018, ruling that the individual mandate in the Affordable Care Act is unconstitutional in light of changes made by the Tax Cuts and Jobs Act of 2017 (TCJA). Texas v. U.S., No. 19-10011 (5th Cir. Dec. 18, 2019).
The $1.4 trillion year-end spending package passed by Congress and signed into law on December 20, 2019, contains a number of provisions impacting taxpayers. The package, including the Consolidated Appropriations Act, 2020, H.R. 1158, and the Further Consolidated Appropriations Act, 2020, HR 1865, will keep the government running through September 2020.
On November 22, 2019, IRS released TD 9884, finalizing regulations confirming that individuals taking advantage of increased gift and estate tax exclusion amounts in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to pre-2018 levels. These regulations finalized proposed rules issued on November 20, 2018, with a few clarifications.
On October 29, 2019, USDA issued an interim final rule for the establishment of a Domestic Hemp Production Program. The rule implements provisions within the 2018 Farm Bill[i] authorizing the production and transportation of hemp. The rule is effective from October 31, 2019, through November 1, 2021. USDA is accepting comments through December 30, 2019.
On October 16, 2019, the United States Tax Court issued an opinion determining the correct way for an agricultural cooperative to characterize payments made to patrons and to calculate its DPAD deduction. Although IRC § 199 (DPAD) was repealed by the Tax Cuts and Jobs Act for tax years beginning on or after January 1, 2018, the opinion remains timely and relevant.
On September 30, 2019, IRS released proposed regulations clarifying the application of the employer shared responsibility provisions and nondiscrimination rules to individual coverage HRAs, authorized by final regulations issued June 20, 2019 (effective August 19, 2019). The new proposed rules provide safe harbors for applicable large employer (ALEs) who choose to provide individual coverage HRAs to their employees in 2020.
On September 24, 2019, IRS issued Rev. Proc. 2019-38, the final safe harbor under which a rental real estate enterprise will be treated as a trade or business for purposes of IRC § 199A. This revenue procedure finalizes rules proposed by the IRS on January 18, 2019, in Notice 2019-07. After reviewing comments on the proposed revenue procedure, the IRS and Treasury made few changes when finalizing the guidance. Below is a summary of the final revenue procedure.
On September 26, 2019, the USDA announced that producers participating in the federal crop insurance program who had a 2019 prevented planting indemnity because of flooding or excess moisture will receive an automatic “top-up” payment on their indemnity. Approved Insurance Providers (AIPs) will begin issuing these payments in mid-October. These top-up payments are made possible by the Additional Supplemental Appropriations for Disaster Relief Act of 2019.
On Thursday, September 12, 2019, the Environmental Protection Agency and the Department of the Army released a final rule to repeal the embattled 2015 Clean Water Rule, also known as WOTUS. The repeal will be effective 60 days after the rule’s publication in the Federal Register.
The Seventh Circuit recently ruled that the USDA acted arbitrarily and capriciously when it treated several acres of an Indiana couple’s farm as a converted wetland and rendered their entire farm ineligible for USDA benefits. Boucher v. USDA, No. 16-1654 (7th Cir. 2019).
On August 29, 2019, IRS issued draft instructions for Form 8995, Qualified Business Income Deduction Simplified Computation. The instructions provide some useful soft guidance, as well as a new QBI flowchart. Detailed below are some highlights. We we will watch for the instructions for Form 8995-A.
As many farmers continue to struggle with high debt and uncertain markets, new attention is focused on remedies for financially distressed farmers. President Trump signed into law the Family Farmer Relief Act of 2019 on August 23, 2019. This law increases the amount of debt a farmer may have, yet still remain a “family farmer” eligible for Chapter 12 bankruptcy protection. The new law raises this threshold from $4,411,400 (indexed for inflation) to $10,000,000.
On August 21, 2019, the United States District Court for the Southern District of Georgia became the second federal court in the past three months to rule that the 2015 Waters of the United States Rule (the WOTUS Rule), was improperly issued by the Environmental Protection Agency and the U.S. Army Corps of Engineers. Rather than vacate the rule, the court remanded it to the agencies for further action. This case is Georgia v. Wheeler, No. 2:15-Cv-00079 (S.D. Ga. August 21, 2019).
A recent case from the Tax Court explains the special “qualifying child” rule for children of divorced parents. Although it has been in place for decades, the rule still causes confusion, especially among clients. A divorce decree may grant a noncustodial parent the “right” to claim a child as a dependent. Without a signed release, however, the noncustodial parent has no such right. An attached divorce decree is insufficient.
IRS unveiled many new draft forms this month. Although these forms are not final, several are worth reviewing.
Update: President Trump signed this bill into law on August 23,2019.
On July 25, 2019, USDA published details as to how payments will be made under the 2019 Market Facilitation Program (MFP). First announced May 23, 2019, the 2019 MFP will include up to $14.5 billion in direct payments to producers. Payment details are now posted on the MFP page of the USDA website. Signups for this program will begin Monday, July 29, and end December 6, 2019. Specific application procedures are yet to be posted.
Generally, cash basis farmers must include proceeds from crop insurance and federal disaster programs in gross income for the tax year during which they receive the payments. IRC § 451(f), however, provides a special deferral provision for insurance proceeds received as a result of “destruction or damage to crops.” Farmers who meet the requirements of the statute may elect to include the proceeds in gross income for the tax year following the destruction or damage.
On June 21, the Iowa Supreme Court held that three siblings failed to show that their father was a “vulnerable elder” subject to elder abuse by their brother and nephew. The siblings had argued that the brother and nephew unduly influenced their father to enter into a below-market-rate farmland lease and to gift land to them.
The United States Supreme Court Supreme Court issued a decision on June 21, 2019, holding that landowners are no longer effectively required to exhaust state remedies before filing Fifth Amendment federal takings claims in federal court. Knick v. Township of Scott, Pa., No. 17-647 (U.S. 2019). This case, which overruled precedent established in 1985, broadens the options available to landowners who claim that a state or municipality has taken their property without just compensation.
A June 18 update posted to the Syngenta settlement claims administration page states that eligible class members will receive notices of determination showing their "compensable recovery quantities" as early as July. This is the number of bushels for which they can recover, not the amount of the payment to which they are entitled. Those claimants who provided insufficient information in their claims are receiving notices of rejection this month. These claimants can respond to the notice with an attempt to cure the deficiency.
On June 18, 2019, IRS and Treasury issued proposed regulations for the application of IRC §199A to cooperatives and their patrons. These rules were a missing piece of the initial §199A regulatory package.
Update: On June 10, USDA issued this Q & A.
In a case of significant import to Iowa property owners, the Iowa Supreme Court today ruled that the use of eminent domain for the Dakota Access pipeline was not an unconstitutional taking under either the Iowa or U.S. Constitutions. In Puntenney v. Iowa Utilities Board, No. 17-0423 (Iowa May 31, 2019), the Court also held that the Iowa Utilities Board (Board) acted within its discretion in determining that the pipeline would promote the “public convenience and necessity.”
On May 30, 2019, IRS issued a draft W-4 for the 2020 tax year. This is IRS’ second attempt to unveil a restructured W-4 in light of changes made by the Tax Cuts and Jobs Act. The last attempt, in June of 2018, was met with general disapproval over the amount of personal information taxpayers would be encouraged to disclose to their employers. IRS ultimately withdrew the draft and issued a 2019 W-4 that was much the same as the 2018 form.
On May 28, 2019, the United States District Court for the Southern District of Texas determined that the EPA and U.S. Army Corps of Engineers violated the Administrative Procedure Act (APA) when they promulgated the final Clean Water Rule in 2015. This rule—frequently referred to as WOTUS because it defines “waters of the United States” subject to Clean Water Act jurisdiction—has been the subject of litigation since its inception. Rather than vacate the Rule, the Texas court sent it back to the agencies.
Update: On the evening of June 3, 2019, the House passed H.R. 2157, sending the disaster relief bill to the President for his signature.
Several bills with general bipartisan support are pending in Congress. These bills, if passed, would impact farmers and ranchers across the country. We will keep you posted as developments unfold.
Disaster Relief – H.R. 2157: Additional Supplemental Appropriations for Disaster Relief Act, 2019
Note: On June 10, USDA issued this Q & A.
On May 31, CRS published a report outlining the proposed trade aid package.
On May 21, 2019, IRS issued Rev. Proc. 2019-26, which updated depreciation deduction limits for passenger automobiles purchased after September 27, 2017, and placed into service during 2019.
No Bonus Depreciation
The revenue procedure specifies that the amount of the depreciation and expensing deduction for a passenger car or light duty truck or van where bonus depreciation is not taken shall not exceed—
During Iowa’s 2019 Legislative Session that ended Saturday, April 27, legislators passed a number of bills impacting agricultural producers and rural landowners. Below is a review of the highlights.
Last week, the Iowa House and Senate passed HF 768, a bill to enhance Iowa’s Beginning Farmer Tax Credit Program. Once signed by the Governor, the new law will strengthen a program that faced significant cuts in 2018. Under the bill, the Iowa Finance Authority may issue up to $12 million in tax credit certificates each tax year, an increase from $6 million under 2018 law.
May 13, 2019 Update: The Governor has signed the Iowa Hemp Act.
The Iowa Legislature has now sent SF 599, the Iowa Hemp Act, to the Governor. Passed by an overwhelming majority, the bill, once signed, would pave the way for future legal production of hemp within the state. This passage, however, is just one in a series of hurdles that must be crossed before growers can legally plant and market industrial hemp within the State of Iowa.
It’s a fair question. The $1.5 billion Syngenta settlement was approved December 7, 2018, and the settlement agreement specified that payments could issue as early as the second quarter of 2019. Now that we are in that second quarter, do we know when the payments will issue?
The answer, unfortunately, is no.
On April 17, 2019, the Iowa Court of Appeals issued a ruling concerning negligent destruction of a tractor and attachment. The court affirmed the lower courts decisions on all evidentiary issues, but reversed the district court’s decision regarding interest accrual.
On April 23, 2019, R-CALF and others filed a lawsuit in the Northern District of Illinois claiming several large packing companies “conspire[ed] to suppress the price of fed cattle they purchased in the United States from at least January 1, 2015 through the present.” The plaintiffs, which consist of Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF) and several cattle ranchers, seek class action status, injunctive relief, punitive and triple damages, as well as attorney fees.
The Iowa Supreme Court recently addressed the question of whether a mechanic’s lien arising from the provision of materials and labor to a tenant can attach to the real property of the landlord where the landlord and the tenant are engaged in a mutually beneficial business arrangement. In Winger Contracting Co. v. Cargill,[i] the Court said that it cannot.
On March 27, 2019, two environmental groups—Iowa Citizens for Community Improvement and Food and Water Watch—filed a petition in state court seeking injunctive and declaratory relief against the State of Iowa, the Department of Natural Resources and others.[i] It’s not the
The United States Justice Department has changed its position and is now supporting the position that the Affordable Care Act (ACA) was rendered unconstitutional when Congress set the individual shared responsibility payment to zero in the 2017 Tax Cuts and Jobs Act.
Update: On December 2, 2019, The U.S. District Court for the Southern District of Iowa issued a preliminary injunction preventing Iowa from enforcing this law.
Update: On April 22, 2019, five advocacy groups filed a lawsuit challenging this new law.
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On March 14, 2019, the Iowa Governor signed into law a new agricultural production facility trespass statute. Senate File 519, which was passed by the Iowa House and Senate on March 12, makes it a crime to obtain access to or employment with an agricultural production facility by use of deception with the intent to cause “physical or economic harm or other injury.” A person who violates this law is guilty of a serious misdemeanor for the first offense and an aggravated misdemeanor for any subsequent offense.
Update: Governor Reynolds signed SF 220 into law on March 15, 2019. It is effective for tax years beginning on or after January 1, 2018, but before January 1, 2019.
Late yesterday, the Iowa House passed SF 220 by a vote of 87-7. This followed passage of the bill in the Iowa Senate on February 18, 2019, by a vote of 48-0. The bill now goes to Governor Reynolds for an expected signature.
Another March 1, the first day of most Iowa farm leases, arrives soon. This post addresses two common questions we've been receiving this month.
My tenant and I signed a written lease for the 2019 crop year. The lease provides that the rent is due, up front, on March 1. It’s March 6 and my tenant hasn’t paid. I am afraid that he does not have the money. What can I do?
IDOR announced on February 28, 2019 that it too would grant an extension to the March 1 deadline for farmers and fishermen who did not make estimated tax payments by January 15, 2019. These farmers will have until April 30 to file their Iowa returns and pay their income taxes without incurring estimated tax penalties. The notice states:
It's official. IRS has announced in Notice 2019-17 an extension to the March 1 deadline for farmers who did not make estimated tax payments by January 15, 2019. Under this Notice, farmers have until April 15 (April 17 in Maine or Massachusetts) to file their 2018 returns and pay in full any tax due. The Notice waives the IRC section 6654 penalty for failure to make estimated tax payments for these farmers and fishermen, but the relief must be requested.
On February 19, 2019, the United States Supreme Court granted certiorari in a Clean Water Act (CWA) case with far-reaching implications for many industries, including agriculture. The case is Hawai‘i Wildlife Fund v. Cnty. of Maui, 886 F.3d 737 (9th Cir. 2018).
On February 15, 2019, President Trump signed the Consolidated Appropriations Act, 2019, into law. This new law averted a second government shutdown and funded the IRS through the end of September, 2019. The law did not include any provisions to retroactively revive and extend 26 temporary tax breaks that expired at the end of 2017. It is unclear whether such legislation may be addressed in the near future. In the meantime, taxpayers are filing 2018 returns without the benefit of the following tax provisions:
Update: SF 220 passed the Senate by a vote of 48-0 on February 18, 2019. They immediately messaged the House. Read the Iowa Legislative Agency Report about this bill here.
On January 22, 2019, USDA announced that all FSA offices nationwide would reopen on January 24 to provide additional services to farmers and ranchers during the lapse in federal funding. Full-time hours will be in place through February 8. The agency also announced that the deadline to apply for Market Facilitation Program Payments has been extended to February 14, 2019. Other program deadlines may also be modified.
On January 18, 2019, Treasury and IRS issued final IRC §199A regulations. Because they were issued in 2019, they are not binding on taxpayers for the 2018 tax year. However, taxpayers may rely on the final rules, in their entirety, or on the proposed regulations issued on August 16, 2018, in their entirety, for taxable years ending in calendar year 2018. The new rules clarify a number of issues, but leave others unresolved.
Today, Treasury and IRS issued long-awaited final IRC §199A regulations. In conjunction with these regulations, the agencies also released IRS Notice 2019-07, a proposed revenue procedure to provide a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of IRC § 199A.
On January 9, 2019, the United States District Court for the Southern District of Iowa declared Iowa’s Agricultural Production Facility Fraud statute to be unconstitutional. Animal Legal Defense Fund v. Reynolds, No.4:17-cv-00362 (S.D. Iowa 2019). This is one in a series of several recent rulings federal courts have made invalidating laws created to protect agricultural production facilities from unauthorized intrusion.
A new IRS Lapsed Appropriations Contingency Plan released January 15, 2019, states that 57.4 percent of the IRS workforce will be required to work during the Tax Year 2018 filing season as long as a shutdown continues. This compares to 12.5 percent of the 80,265 IRS workers who have been working under the prior (non-filing season) plan. These workers who are "excepted" from furlough will not be paid as long as the shutdown continues.
On this, the last day of 2018, we look back at key agricultural and taxation developments from the past year. Many of these issues continue to significantly impact agricultural producers, and we will continue to monitor these evolving issues as we head into 2019. Happy New Year!
The Tax Cuts and Jobs Act modified IRC § 5000A(c) to set the individual shared responsibility payment to 0 for months beginning after December 31, 2018. This means that, beginning in 2019, individuals will no longer be subject to a penalty tax when they do not have Affordable Care Act (ACA) compliant health insurance. Because so many taxpayers already avoided the penalty because of affordability, hardship, religious, and other exemptions, the actual impact this change will have on the healthcare market is unclear.
The grain glitch and the fix to the grain glitch were big news during the first quarter of 2018. Then the excitement subsided.
But now with filing season approaching for the 2018 tax year, it’s important for producers and their tax advisors to review what the new law means for income received from transactions with agricultural and horticultural cooperatives in 2018, particularly the less-discussed transition rule.
On December 17, 2018, the USDA announced that President Trump had authorized the second round of market facilitation program payments (MFP) to be made. The payment will be issued based upon the remaining 50 percent of total production, multiplied by the MFP rates for the commodity:
President Trump signed the 2018 Farm Bill into law on December 20, 2018.
On December 11, 2018, the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers proposed a revised definition for “waters of the United States” or WOTUS. This definition, if finalized, would determine which waters are subject to the jurisdiction of the federal Clean Water Act. As proposed, the rule would significantly narrow the scope of WOTUS, particularly in comparison to the 2015 Clean Water Rule.
A recent case from the Iowa Court of Appeals assesses the impact of a below-market-value purchase on the priority of related security interests in farm equipment. It’s a timely review during this current farm downturn.
On November 20, 2018, IRS issued a proposed rule providing that individuals who make gifts while the basic exclusion amount (BEA) is temporarily doubled will get to take full advantage of that increased BEA for those gifts, even if the BEA is lower at the time the donor dies. In other words, the proposed regulations would eliminate a so-called “clawback.” The regulations would be effective after publication of a Treasury decision adopting them as final.
On November 7, 2018, Treasury issued final regulations to implement new due diligence requirements applying to tax return preparers making head of household eligibility determinations for their clients. The final regulations largely track the proposed regulations, which were issued July 18.
For tax year 2018, Iowa has coupled only with selected federal changes. With those exceptions, Iowa tax law looks to the Internal Revenue Code as it existed on January 1, 2015. This non-conformity has presented some challenges. Recently, the Iowa Department of Revenue issued guidance on several provisions that have created the greatest number of questions. Yesterday, the Department also issued its 2019 tables for income tax brackets, interest rates, and standard deductions.
Newly published proposed regulations from the U.S. Departments of Treasury, Health and Human Services, and Labor, if implemented, would significantly change the landscape in the healthcare market, reinstating (in new form) some health care reimbursement options that existed prior to the Affordable Care Act.
As tough times continue in the farm sector, more farmers are calling it quits. In particular, many operators who do not own ground and are dependent upon renting the land of others are struggling to hold on. Many are selling farm assets and securing full-time off-farm employment to make ends meet. It’s a quiet exodus, but it comes with hidden danger.
A recent summary opinion from the tax court illustrates a real danger of the advance premium tax credit for taxpayers who may end the year with more income than they expected. The result in this case was especially harsh since the unexpected income flowed from assets the couple liquidated to pay living expenses and their son’s college tuition while the husband battled terminal cancer.
On October 3, 2018, IRS issued Notice 2018-76, which was welcome news for many business owners. The Notice provides transitional guidance on the deductibility of business meal expenses in light of the Tax Cuts & Jobs Act's disallowance of deductions for entertainment expenses.
Last week, the Iowa Department of Revenue issued proposed rules for implementing changes to section 179, brought about by Iowa’s 2018 tax reform legislation (S.F. 2417, enacted May 30, 2018). The rules are open for public comment through October 17, 2018.
Just when many thought the 2015 Clean Water Rule or “WOTUS” was relegated to the archives of history, it has been revived. In fact, as of mid-September 2018, WOTUS is the controlling definition for “waters of the United States” in 22 states. As of September 18, 2018, Iowa was no longer among them. And the status for the remaining states could change at any time. The saga—a case study on the intricacies of administrative law—is far from over. In the meantime, landowners planning activities potentially impacted by WOTUS face uncertainty.
On August 27, 2018, Secretary of Agriculture Sonny Perdue announced details of new programs designed to assist farmers in response to ongoing trade disputes. USDA will authorize $12 billion for three primary programs:
It is generally advisable for business owners to form a separate legal entity to limit personal liability stemming from business contracts or torts. Incorporating or organizing as an LLC can limit owners’ personal liability to the extent of their investments. This liability shield, however, is not without exception. In a recent case from the Iowa Court of Appeals, a plaintiff was able to “pierce the corporate veil” in an attempt to collect on a $410,067 breach of contract judgment.
Treasury and the IRS released IRC § 199A proposed regulations, REG-107892-18, on August 8, 2018. The regulations will not officially apply until they are adopted as final; however, taxpayers can rely on §§1.199A-1 through 1.199A-6 until final rules are adopted. Following is a summary of significant highlights from the proposed regulations. More detailed analysis will follow in the days ahead.
Treasury and the IRS released IRC § 199A proposed regulations, REG-107892-18, on August 8, 2018. These are proposed regulations, but taxpayers can rely on them until final rules are adopted. The proposed regulations define “trade or business” as an IRC § 162 trade or business (other than the trade or business of performing services as an employee). (Proposed § 1.199A-1(b)(13)). They do not provide bright-line standards or a safe harbor regarding this definition.
We’ve been patiently (or maybe not so patiently!) awaiting guidance for many of the key provisions in the Tax Cuts & Jobs Act for months now. As July turns to August, we continue the wait.
On July 18, 2018, the Iowa Court of Appeals affirmed a trial court judgment declaring a testator’s will invalid on the grounds of lack of testamentary capacity and undue influence and finding her son liable for intentional tortious interference with a bequest.
The Senate and the House have passed their respective versions of the 2018 farm bill. The Senate passed its bill by a vote of 86-11 on June 28, 2018, and the House passed its more partisan bill by a vote of 213 – 211 on June 21. Now, the debate moves to conference committee, where significant differences between the bills must be resolved. It is not clear how long this process may take.
Many laws passed during the 2018 Iowa Legislative Session impact agricultural producers and landowners. A number of these laws went into effect July 1, 2018. Following is a summary of the highlights.
IRS officially unveiled its draft 2018 Form 1040 today, stating that it will work with the tax community to finalize the form over the summer.
Iowa’s agricultural nuisance law has perhaps become a little clearer, albeit no simpler to apply. On Friday, June 22, 2018, the Iowa Supreme Court issued a key ruling analyzing the constitutionality of Iowa’s embattled right-to-farm statute, Iowa Code § 657.11(2). Honomichl v. Valley View Swine, LLC, No. 16-1006 (Iowa June 22, 2018).
Today, the Iowa Court of Appeals ruled that two shareholders of a family farming corporation did not prove their claim of minority shareholder oppression. In making its ruling, the court relied upon the Iowa Supreme Court’s holding in Baur v.
The Tax Cuts and Jobs Act contains a number of provisions that apparently do not accord with legislative intent. This is, in some cases, evidenced through discrepancies between the committee report and the language in the code. Today, we will highlight two apparent errors with significant impact to many taxpayers. The technical correction process is underway; however, it remains to be seen whether those changes will make it through Congress.
Note: The Iowa Department of Revenue has launched a new webpage, where it will be publishing its latest guidance and information on the new Iowa law.
Generally, the uniform capitalization rules (UNICAP) have required all farmers, regardless of size, to capitalize pre-productive costs of plants that have a pre-productive period of more than 2 years. IRC§ 263A(a)(1), (d)(1)(A)(ii). Pre-productive costs are the costs of raising plants after they are planted and before they are placed in service, including those associated with management, irrigation, fertilizing, depreciation, & repairs on buildings and equipment.
On April 12, 2018, the United States Court of Appeals for the Fourth Circuit vacated a district court’s judgment and held that a discharge that passed from a point source through groundwater to navigable waters could support a Clean Water Act (CWA) claim. The Fourth Circuit in Upstate Forever v. Kinder Morgan Energy Partners, L.P.,[i] became the second federal court of appeals to make such a ruling in 2018.
An entirely renovated Iowa partition law will go into effect on July 1, 2018. On April 11, 2018, Governor Reynolds signed SF 2175 into law. This new law reorganizes and replaces the current Iowa Code chapter 651 and integrates many provisions from the Iowa Rules of Civil Procedure (Division XII), which currently govern partition actions in Iowa.
Judge Lungstrum granted preliminary approval for the $1.51 billion Syngenta settlement on April 10, 2018. This means that formal notice (sample here) will be mailed to class members on May 11, 2018, at which time the formal claims process will begin. Corn producers and landlords who are members of the class will be able to go online to www.cornseedsettlement.com to file their claims.
On April 2, 2018, Governor Reynolds signed SF 2349, into law. The new law is designed to address the mounting difficulties faced by many Iowans seeking to purchase health insurance on the individual market.
Update: On May 2, the D.C. Circuit Court of Appeals issued the mandate vacating the 2008 final rule.
The Consolidated Appropriations Act, 2018 (Omnibus Bill), signed into law, on March 23, 2018, has exempted the reporting of "air emissions from animal waste at a farm" under CERCLA. This exemption is included in Title XI of the Act, called the “Fair Agricultural Reporting Method Act” or “FARM Act."
President Trump signed the Consolidated Appropriations Act, 2018, H.R. 1625, on March 23, 2018. At the end of the 2,232-page legislation, Congress included a section written to “fix” the “grain glitch.” This is, of course, the provision in the Tax Cuts and Jobs Act that provided significantly higher tax deductions (in most cases) to patrons who sold commodities to cooperatives rather than to non-cooperatives.
Yesterday, plaintiffs filed a motion asking for preliminary approval of a settlement reached with Syngenta. The proposed settlement, which would comprise $1.51 billion, is described by plaintiffs’ counsel in a court filing as a “record-breaking achievement in agricultural litigation, the largest-ever GMO settlement in the United States.”
Last fall, we wrote about the health care crisis facing many Iowa farmers and other small business owners. Many of those with incomes above 400 percent of the federal poverty limit faced 2018 health care insurance premiums surpassing $30,000 per year on the individual market. Consequently, many have been left with few options in 2018.
The Tax Cuts and Jobs Act has significantly changed the tax landscape for agricultural producers. We’ve detailed a number of the changes, many of them positive, in prior articles. In light of the federal changes, Iowa must now decide how to respond. As Iowa lawmakers turn their attention to tax reform, we review several key IRC § 179 issues with great impact to Iowa agriculture and suggest they warrant attention, especially a glitch in the law that can deny owners of certain pass through entities cost recovery altogether.
The Tax Cuts and Jobs Act (TCJA) made significant changes impacting the depreciation and expensing of vehicles used in a trade or business.[i] In this post, we review the current law.
The Iowa Court of Appeals recently found that Fayette County improperly granted permits to a wind energy group to build three wind turbines on agricultural land. This opinion leaves in effect a district court order that directed the group to remove the turbines.
A Fayette County couple granted easements to several wind development companies to construct three wind turbines on their farmland. The wind group applied to the Fayette County Board of Adjustment (Board) for special use permits to construct the turbines, and the Board denied the application.
A case that has again found it's way to the Iowa Court of Appeals could give the Iowa Supreme Court another opportunity to refine the doctrine of promissory estoppel.
A farmer claimed that his neighbor granted him an oral option to purchase his farm for approximately $3,000 an acre at an unspecified time in the future. The farmer leased the property and made substantial improvements, which he alleged were consideration for the option agreement.
On February 12, 2018, the Iowa Supreme Court heard oral arguments in a case that will shape Iowa nuisance law, as it applies to animal feeding operations.
President Trump signed the Bipartisan Budget Act of 2018 into law on February 9. The Act, which was passed to fund the federal government and avoid another shutdown, includes a number of changes to the Internal Revenue Code. Many of these changes retroactively extend--generally for one year--tax provisions which had expired at the end of 2016.
Update: Governor Reynolds signed SF 512 into law on January 31, 2018.
The Tax Cuts and Jobs Act preserved like-kind exchange treatment for real property, but eliminated it for personal property. Today, we take an initial look at what that means for farmers or other taxpayers looking to trade equipment or livestock in 2018. We will soon write separately about vehicle depreciation and trades in light of the new law.
Iowa law has been clear, and it is perhaps even more clear today. Unlike most other states, Iowa is “unequivocal in favoring partition by sale." Newhall v. Roll, 888 N.W.2d 636, 640 (Iowa 2016). In December of 2016, the Iowa Supreme Court issued an opinion reversing a partition in kind and ordering the property sold. In Newhall, the Court reviewed Iowa law, stating that under Iowa R. Civ. P.
Update: On March 13, 2018, Senators Grassley, Hatch, Roberts, Thune, and Hoeven issued a joint statement, including the following:
As the year concludes, we’re taking some time to review the most significant happenings in agricultural law and taxation in 2017. Some closed chapters on drawn-out litigation or administrative action. Others signal the beginning of much more activity to come. In any event, 2017 did not disappoint in terms of lots to discuss. We review these highlights below, in no particular order. And we’ll continue to keep you posted as the calendar rolls ahead to 2018. Happy new year!
On April 11, 2017, the United States Court of Appeals for the District of Columbia vacated an EPA final rule that had been in place for nine years. The rule—called the CERCLA/EPCRA Administrative Reporting Exemption for Air Releases of Hazardous Substances from Animal Waste at Farms—exempted most farms from CERCLA and EPCRA reporting requirements for air releases from animal waste. The court ruled that the EPA had exceeded its statutory authority in granting the exemptions.
We told you last April about changes that would come to the Iowa Beginning Farmer Tax Credit program in 2018, absent legislation. Because those legislative changes did not occur, cuts to the program are now being felt by beginning farmers and landlords around Iowa.
Update: President Trump signed H.R.1 into law on December 22, 2017.
The Iowa Court of Appeals recently affirmed a judgment in favor of a borrower, against his banker, for claims of fraudulent misrepresentation and nondisclosure.
Update: The conference committee released its report on December 15, 2017. Congress will vote on this final bill next week. Read our summary of the final bill here.
On October 31, the IRS issued Notice 2017-67, detailing requirements for the qualified small employer health reimbursement arrangements (QSEHRAs) implemented last December by the 21st Century Cures Act. The law removes from the definition of “group health plan” reimbursement arrangements that follow the law’s requirements.
Update: The House of Representatives passed H.R. 1 on November 16 by a vote of 227-205. Later that day, the Chairman's Mark cleared the Senate Finance Committee by a vote of 14-12. The Senate legislative text has been released here.
Note: These provisions have been significantly modified by the Chairman's second amendment. In particular, the SE tax modifications have all been removed in the Bill that passed out of the Committee. A lower bottom threshold rate was also added for small pass-through businesses. Read new summary of current proposals here.
Many farmers and other self-employed Iowans not eligible for Medicare or Medicaid have few choices when it comes to 2018 health insurance. Last week, due to a lack of federal response, Iowa officials withdrew their proposed Stopgap proposal. They submitted the waiver application in an attempt to prop up Iowa’s individual insurance market in the face of skyrocketing premiums. It was hoped that the measure would stabilize the individual market through "innovative solutions."
A case from the Iowa Court of Appeals today illustrates the operation of the Iowa fence law. If they receive a written request from their neighbor, adjoining landowners are required to contribute half of the cost to maintain a partition fence, even when they don’t want to. A resistant landowner found that out the hard way.
Update: On October 26, 2017, President Trump signed this bill into law.
It was not unexpected. In 2012, the Iowa Legislature passed and Governor Branstad signed Iowa Code § 717A.3A. This legislation, titled Agricultural Production Facility Fraud, has been called Iowa’s “Ag-Gag” law. It’s a law specifically protecting animal production facilities from unauthorized intrusion. But since the law’s passage, opponents have vowed to challenge its constitutionality on First Amendment grounds.
Update: IRS formally withdrew these proposed regulations (REG 163113-02) in FR Doc. 2017-2776, filed October 17, 2017, for publication on October 20, 2017.
The following was originally published on October 4, 2017:
First there was the Blueprint, then the Bullet Points, and now the “Framework.”[i] On September 27, the White House, the House Committee on Ways and Means, and the Senate Committee on Finance made public an outline of their proposals for long-awaited tax reform.
On September 27, the U.S. Tax Court ruled that a Texas farm couple was not liable to pay self-employment tax on rents they received from the S corporation through which they conducted a poultry growing operation. The decision in Martin v. Commissioner, 149 T.C. 12 (Sept. 27, 2017), adopted the analysis of McNamara v. Commissioner, 236 F.3d 410 (8th Cir. 2000), and comes 14 years after the IRS announced its non-acquiescence[i] with that key 8th Circuit case.
It was announced on September 26, 2017, that Syngenta agreed to settle claims brought against it by U.S. farmers on account of its allegely premature marketing of Viptera and Duracade GMO corn. These claims include those in the Syngenta MIR 162 Corn Litigation, as well as those in the class action in Minnesota state court. The initial settlement agreement was reached in the middle of a multi-week trial occurring in Hennepin County District Court in Minnesota. This trial involved more than 20,000 Minnesota farmers seeking $400 million in damages.
Update: On October 13, 2017, the EPA announced an agreement with Monsanto, BASF, and Dupont regarding measures to minimize damage from dicamba drift. Read the press release here.
Update: On February 23, 2018, the Iowa Supreme Court vacated this Court of Appeals decision and reinstated the district court's judgment.
The Iowa Court of Appeals recently affirmed a jury verdict awarding a plaintiff $70,100 after her neighbor built a trail encroaching upon her property. The damages included $50,000 for trespass and loss of lateral support and $20,100 in treble damages for the loss of trees. The jury found the neighbor 75 percent responsible for the damage and his contractor 25 percent responsible. The case should remind landowners and contractors to conduct a survey before engaging in any construction or removal of trees near a neighbor’s property.
A recent case out of the tax court ruled that IRS had the power to examine the estate tax return of a predeceased spouse for the purpose of lowering the DSUE (deceased spousal unused exclusion) claimed by the second-to-die spouse’s estate. The tax court opinion stands for the proposition that there is no limit to the number of years the IRS can go back to review (and correct) a DSUE reported by the estate of the spouse who died first. This lends a bit of uncertainty to the benefit of portability.
IRS’ Office of Chief Counsel recently weighed in on an important question for small partnerships: Are they automatically exempted from the requirement of filing a Form 1065, U.S. Return of Partnership Income, because of Rev. Proc. 84-35, 1984-1 C.B. 509?
Simply put, the answer was, “No.”
Time is running out to avoid automatic renewal of a 2017 farm lease in Iowa. Whether you’re a landlord or a tenant, Iowa law requires that you formally notify the other party by September 1 if you don’t wish to continue the current lease under its existing terms for another year.
Update: On October 23, 2017, Iowa withdrew its proposal for a stopgap measure.
The Iowa Court of Appeals recently affirmed a Winterset couple's right to ownership of an asphalt driveway and two carports through adverse possession. The case presents a good overview of this powerful, yet sometimes-forgotten legal doctrine.
The doctrine of adverse possession provides that sometimes a trespasser can become a rightful owner. This often arises when there is an honest mistake regarding a boundary line and mistaken possession continues for more than 10 years (in Iowa). That’s exactly what happened in Summit Veterinary Services v. Tindle.
During a financial downturn, even secured creditors often find themselves with no real recourse. Junior lienholders, in particular, are often left in the cold, even when It seems there is enough collateral to go around.
A recent bankruptcy case illustrates this fact.
The tax code allows an enhanced deduction for the donation of a qualified conservation easement. IRC § 170(b)(1)(E). This deduction is generally limited to 50% of the donor's “contribution base,” which is the taxpayer's adjusted gross income (computed without regard to any net operating loss carryback for the taxable year), less the value of other charitable contributions for the year. IRC § 170(b)(1)(G).
Update: On October 12, 2017, President Trump announced that he would be ending CSR payments effective October 18, 2017.
The Iowa Court of Appeals recently decided a case that well illustrates how contractual damages are to be calculated: the non-breaching party is generally entitled to be placed in as good a position as he or she would have occupied had the contract not been breached, nothing more, nothing less.
On June 30, 2017, the Iowa Supreme Court ruled that a 1977 injunction requiring a railway company to rebuild a dike, expired under a 20-year limitations period set forth in Iowa Code § 614.1(6). Consequently, a drainage district’s action seeking to enforce that injunction was dismissed.
The Iowa Court of Appeals recently interpreted a manure easement agreement and agreed that a farmer was entitled to damages for a hog facility’s breach of the agreement. The court did reduce the damages from $70,433.93 to $43,909.99 after finding that the farmer had failed to prove damages for the year he planted soybeans. In addition, the farmer received $15,451.81 in attorney fees and $3,000 in appellate attorney fees.
With the ink barely dry on the $217.7 million Kansas class verdict, Judge Lungstrum has set forth the plan for trying the additional class claims comprising the Kansas multi-district litigation. On July 6, the court ordered the following schedule:
On June 27, 2017, the EPA and the U.S. Army Corps took the first step to rescind and replace the embattled Clean Water Rule, also called "Waters of the United States" or WOTUS. The agencies formally submitted a proposed rule to rescind the 2015 WOTUS rule and recodify (on an interim basis) the same regulatory text that existed prior to the 2015 rule.
The jury returned a big verdict against Syngenta this morning in the first trial of the massive Syngenta GMO litigation. This case was presented on behalf of a class of more than 7,000 Kansas corn producers, specifically those Kansas producers who priced corn for sale after November 18, 2013, and who did not purchase Viptera or Duracade corn seed. Any Kansas producers who met that definition and did not affirmatively opt out of the class were automatically part of this action.
Today Senate Republican leaders unveiled a “discussion draft” of their bill to replace many provisions of the Affordable Care Act (ACA). As with the American Health Care Act of 2017 that passed the House on May 4, 2017, the Better Care Reconciliation Act of 2017 (BCRA) is designed to stay within the constraints of the budget reconciliation process. As such, the bill could pass with the approval of only 50 Republican Senators (the Vice President could cast the tie-breaking vote). It also means that the BCRA cannot include provisions that do not change the level of spending, revenues, or the debt limit. In other words, the provisions have to be budget related, and they cannot increase the deficit for any period beyond the budget reconciliation period (usually 10 years). These restrictions greatly limit the extent to which the bill can actually “repeal and replace” the ACA.
This week I had the pleasure of attending the Iowa Bar Annual Meeting. The meeting allows attorneys from around the state to gather in Des Moines, connect with colleagues, and attend some great educational sessions. The Agricultural Law Section of the Bar always provides its own track of programming focused on issues important to rural clients. It's wonderful to meet with this group and to see the expertise and concern these attorneys bring to their work.
Last summer, a federal court found a California landowner liable for violating the Clean Water Act (CWA)[1] because he tilled a 450-acre parcel of his land to plant wheat. He is now preparing for an August 14, 2017, trial. At issue in the trial will be (1) the scope of his CWA violations, (2) the appropriateness of the United States’ requests for restoration and mitigation, and (3) the amount of his civil penalty.
The U.S. Court of Appeals for the District of Columbia issued a blow to the Federal Aviation Administration (FAA) last week when it vacated the portion of a 2015 FAA Rule requiring registration of model aircraft.
The Iowa Supreme Court recently blessed a class action, paving the way for roughly 4,000 Muscatine residents to potentially obtain damages from a local corn wet milling plant.
“Ademption” isn’t a doctrine often discussed outside of law school classrooms. But a recent case from the Iowa Supreme Court signals that it’s time for a refresher. Steinberg v. Steinberg, 2017 Iowa Sup. LEXIS 44 (April 28, 2017) illustrates the sometimes unexpected impact this doctrine can have on an estate plan. It’s also an exemplar for the need to regularly review estate planning instruments.
Iowa SF 505, signed into law on May 9, 2017, authorizes tax-preferred “First-Time Homebuyer Savings Accounts” (FTHSA). These new accounts will be available beginning in tax year 2018.
The Iowa Legislature’s 2017 session drew to a close on April 22, 2017. For agriculture, the session was largely marked by the state’s revenue shortfall, which left tax cuts important to farmers on the table. It also meant the session adjourned for another year without a long-term water quality funding mechanism.
Nonetheless, the legislators passed a number of bills impacting agriculture or rural landowners this session. Following are highlights.
As President Trump’s first 100 days were winding down, his Administration unveiled a purported tax reform proposal designed to stimulate “economic growth” and increase “American jobs.” The proposal was unveiled during a press conference April 26. It was accompanied by a one-page list of bullet points. The headline from the media event was that President Trump is seeking to implement a “massive tax cut,” reducing corporate taxes from 35% to 15%.
Last week, the United States Court of Appeals for the District of Columbia vacated an EPA final rule that had been in place for nine years. The Rule exempted most farms from CERCLA and EPCRA reporting requirements for air releases from animal waste.
Update: The 2017 legislative session ended without passage of any legislation relating to the Beginning Farmer Tax Credit. As such, the changes detailed in this posting will occur January 1, 2018.
As the 2017 Iowa legislative session winds down, a program key to Iowa’s beginning farmers could see some significant changes. Unless the Iowa Legislature acts to extend various provisions of the Iowa Beginning Farmer Tax Credit (BFTC) program, it will look very different in 2018.
Last December, we told you that the Grain Inspection, Packers and Stockyards Administration (GIPSA), the USDA division tasked with interpreting the Packers and Stockyards Act of 1921, 7 U.S.C. 181 (the Act), unveiled an interim final rule and two proposed rules that had been in the works for many years. The Interim Final Rule (§ 201.3(a), (b)) specified that conduct or action can sometimes violate the Act without a finding of harm or likely harm to competition.
A jury returned a verdict in favor of the Kansas class plaintiffs in the amount of $217.7 million on June 23, 2017. Read more here.
Note: The first bellwether trial in the Minnesota litigation was scheduled to begin April 24, 2017. It has been postponed to July 10.
Last week, the Iowa Supreme Court considered its first case challenging an Iowa Department of Revenue’s (IDOR) assessment of corporate income tax since 2010.[i] In both cases, the taxpayers lost, but this time it was because the taxpayer did not have a taxable nexus in Iowa. The question before the Court in 2017 was whether the parent company of an affiliated group had properly joined a consolidated Iowa return.
Today, Governor Branstad signed SF 447 into law. The new law, designed to curb damage awards in nuisance cases brought against responsible animal feeding operations, went into effect immediately.
Update: On April 11, 2017, DMWW announced that it would not be appealing this decision.
Two years and one day after the Board of Water Works Trustees for the City of Des Moines (DMWW) filed its controversial lawsuit against the drainage districts in three northwest Iowa counties, a federal court has dismissed the action in its entirety.
Last year, many of us were surprised by an Iowa Court of Appeals decision that held that a single grazing horse was sufficient to establish a farm tenancy. Why did this matter? Because under the court’s ruling, the owners of the horse (and arguably anyone with backyard chickens or a pet emu) were entitled to the protection of the Iowa farm tenancy termination statute.
Update: The 2017 Iowa Legislative Session ended on April 22, 2017. No water quality legislation was enacted.
Update: On March 24, House Speaker Paul Ryan cancelled a vote scheduled for that day on the Republicans proposed repeal and replacement plan. Officials have stated that they will now turn their attention to tax reform. It is unclear whether Republicans will take another stab at crafting repeal and replacement legislation before the budget reconciliation window closes later this year. We will keep you posted.
HSB134 passed out of an Iowa House agricultural subcommittee on February 22. The bill would limit allowable damages in nuisance lawsuits filed against animal feeding operations that have used “existing prudent and generally utilized management practices reasonable” for their operations. The bill would also allow animal feeding operations that prevail in a nuisance lawsuit brought against them to recover reasonable attorney fees from the losing plaintiff.
In a 4-3 decision, the Iowa Supreme Court today ruled that a 69-year-old woman was a “vulnerable elder” under Iowa’s Elder Abuse statute because of her age.
A Polk County District Court judge has ruled that the Iowa Utilities Board properly acted within its discretion in determining that the Dakota Access pipeline would promote the “public convenience and necessity.” The court also found that the Board had statutory authority to grant Dakota Access eminent domain over impacted parcels of agricultural land.
In a filing last evening, the parties to the Des Moines Water Works lawsuit—the Board of Water Works Trustees and the drainage districts—again showed they are miles apart in their interpretation of the law. This time, the difference is in how they interpret the answers by the Iowa Supreme Court to four certified questions posed to the Court by the federal district court hearing the case.
The Iowa Court of Appeals yesterday upheld a jury verdict awarding a brother more than $1.5 million in damages against his two sisters. The court found that substantial evidence supported the jury’s finding that the sisters exerted undue influence over their father, causing him to execute a will that disinherited the brother. The court agreed that the evidence supported a finding that the sisters had tortiously interfered with the brother’s inheritance. Finally, the court upheld the jury’s finding that the brother was entitled to punitive damages.
Facts
Last week, the Iowa Court of Appeals upheld a trial court’s order specifically enforcing a partition fence agreement between neighbors. The opinion illustrates that such an agreement does not necessarily preclude costly litigation. It also demonstrates the importance of engaging legal counsel at the beginning of a dispute.
Open enrollment for purchasing 2017 health plans on the Marketplace ends January 31. In the meantime, Congress and President Trump have been paving the way to unwind and recalibrate the Affordable Care Act, a massive chunk of (largely) tax legislation.
Trump concluded his first day on the job by signing an Executive Order stating that, pending repeal of the ACA:
On February 10, 2017, Iowa Department of Revenue issued helpful documents to help preparers contend with nonconformity.
A custom feeding endorsement may not cover growers for unexpected or negligent losses to livestock. An opinion from the Iowa Court of Appeals yesterday again raises this important warning.
In light of the tough farm economy, dealers are offering producers even more options when it comes to purchasing upgraded equipment. Because different tax implications flow from different contractual arrangements, it is crucial that a producer understand the true nature of a lease or purchase contract before he signs it. This will avoid big surprises come tax time.
The Iowa Supreme Court recently provided an excellent overview of the rules governing the partition of concurrently owned property in Iowa. In reversing a court of appeals decision ordering a partition in kind, the Court reiterated that Iowa law favors partition by sale. In the case before it, the Court ruled that the party seeking an in-kind division had not established that such a split would be both equitable and practicable.
“Midnight” action by the USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) caused a stir this week. GIPSA, the USDA division tasked with interpreting the Packers and Stockyards Act of 1921, 7 U.S.C. 181, (the Act) unveiled an interim final rule and two proposed rules that have been in the works for many years. Controversy over the set of rules—which GIPSA has tagged the Farmer Fair Practices Rules—highlights a split between the meat industry on one side, and some livestock producers and growers on the other.
While death may be beneficial for tax purposes, it is difficult to regard it as a tax avoidance scheme.
This line is a great summary of the reasoning of the Tax Court in a recent case that illustrates an interesting interplay between cash accounting and death.
The Senate today overwhelming concurred with the House, sending the 21st Century Cures Act to the President for signature. It is expected that President Obama will sign the bill into law.
In a case study of the balance of governmental powers, the United States Court of Appeals for the Ninth Circuit ruled this month that local ordinances passed by three Hawaii Counties to ban the cultivation of GM (genetically modified) plants were preempted by state and federal law.
The November 8, 2016, election will be long-remembered. Although the result was surprising to many, it was largely driven by rural Americans seeking change to the status quo. But, what will a new Administration actually mean for rural America? If this election taught us anything, it taught that predictions aren’t often worth a whole lot. Even so, as the dust settles, it may be helpful to consider the potential impact of the election on several major policy issue facing agriculture. In the days ahead, we'll begin to look at the details of various tax proposals.
The Iowa Court of Appeals today affirmed a half a million dollar judgment against Prestage Farms in a neighboring landowner’s nuisance lawsuit alleging that the company’s hog confinement substantially deprived her of the comfortable use and enjoyment of her property.[i]
I’ve called it the “Hokey-Pokey” law. The California Legislature passed AB 1437 in 2010 to make it a crime to sell a shelled egg in California if that egg came from a hen confined in a cage that did not allow it to “lie down, stand up, fully extend its limbs, and turn around freely” (hence the Hokey-Pokey reference).
Larry died intestate, survived by his third wife and sons from a previous marriage. So begins a recent opinion from the Iowa Court of Appeals.
The word intestate often signals difficulty, but it can mean special difficulty when it's found in the same sentence as third wife and sons from a previous marriage. Life can get complicated. A recent Iowa Court of Appeals decision illustrates why estate planning in these complicated situations is especially important.
The Iowa Supreme Court today issued an opinion clarifying the reach of Iowa Const. art. I, § 24. The Court ruled that the provision does not apply to lands suitable for agricultural purposes if only an incidental portion of the land is used for farming purposes. Iowa Const. art. I, § 24 states:
No lease or grant of agricultural lands, reserving any rent, or service of any kind, shall be valid for a longer period than twenty years.
Last year, the Iowa Department of Revenue unveiled a new form for claiming the Iowa Capital Gain Deduction. IA 100 was designed to collect key information up-front, rather than after the fact, regarding transactions qualifying for the rather unique Iowa deduction. The change was met with some concern and confusion, particularly among taxpayers (and preparers) reporting transactions involving cattle, horses, or breeding livestock (by far the most common trigger for the deduction). But, rest assured, help is on the way. A new series of forms is in the works.
This morning, the Iowa Supreme Court issued an opinion clarifying that an at-will contract with an independent contractor can be unilaterally modified prospectively, upon reasonable notice. A proposal for modification effectively terminates the original contract and offers new terms for acceptance. The modification can be accepted by performance or the contract terminates. This is the same rule that has applied in Iowa for at-will employment contracts.
In the case at hand, the court affirmed a district court ruling finding that the City of Bettendorf violated that principle by initiating a new streambank-stabilization project without acquiring expanded easements from the impacted landowners.
During this election season, we’ve had a number of questions regarding what the candidates' tax proposals would mean for typical taxpayers, particularly farmers. In this post, I’ll provide a high level summary of several of the key provisions proposed by the two major candidates. Because both tax plans lack key details, it is impossible to assess the actual impacts of the provisions if they were enacted. Rather, this high level overview is designed merely to objectively review several of the key proposals, as they pertain to small businesses and farms.
A case from the Iowa Court of Appeals today highlights a little provision in an Iowa wind energy agreement that may have killed a contract for the sale of farmland. This case should remind anyone negotiating a wind energy agreement to understand the provisions and their consequences before you sign the agreement.
Last Friday, the United States Court of Appeals for the District of Columbia vacated guidance from the Occupational Safety and Health Administration (OSHA). The guidance, which was issued in the form of a 2015 Memorandum, required farm supply companies selling anhydrous ammonia to--for the first time--comply with a complex safety program designed to protect workers from highly hazardous chemicals.
Background
Note: On July 13, 2017, the Iowa Supreme Court granted a petition for further review of this case. We will keep you posted!
The Eighth Circuit Court of Appeals granted a big win to CAFO owners last Friday when it ruled that the EPA abused its discretion by concluding that the release of personal information about CAFO owners would not invade substantial privacy interests.
It is well-known that fewer people in the United States are getting married. In fact, according to the CDC, marriage rates in the United States have been in a steady decline since the 1980s. Conversely, cohabitation rates are steadily rising.
A recent case from the Iowa Court of Appeals reminds us that sometimes a cohabitation relationship can lead to a common-law marriage. This means that when the relationship ends, a party can seek standard dissolution remedies such as alimony or an equitable property division.
During the past several years it often seemed like the day would never come. But Monday, August 29, the new FAA rule for integrating small unmanned aircraft systems (UAS) into the U.S. airspace is effective. The rule applies to all UAS weighing less than 55 pounds (sUAS) that are flown for commercial (not hobby) purposes. Any farming use falls into the commercial-use category. Operators can continue to fly a sUAS for fun without permission from the FAA.
Just next door to the location of next week’s Farm Progress show (and across Iowa), Dakota Access is working to construct its pipeline to transport crude oil from the Bakken oil fields in North Dakota to a refining station in Illinois. Last March, the Iowa Utilities Board (IUB) granted Dakota Access a hazardous liquid pipeline permit, clearing the way for the company to construct their 346-mile pipeline across Iowa.
It was the wrong procedural posture to create new law. But a recent case from the United States District Court for the District of Connecticut has some interesting discussion regarding limits to the FAA’s right to regulate airspace.
The American Taxpayer Relief Act of 2012 has ensured that only a select few pay any estate taxes in America. To be liable for estate tax in 2016, for example, you must die with more than $5.45 million in assets. The news gets better for married taxpayers.
A case from the Iowa Court of Appeals last week should warn attorneys and clients that they must remain on the same page during settlement negotiations. If they don’t, the result can be bad…both for the client and the attorney.
The background facts are summarized in these short sentences from the court’s opinion:
The Iowa Court of Appeals issued its opinion today in the seemingly never-ending Baur Farms litigation. The court affirmed the district court’s order, which dismissed the minority shareholder’s lawsuit seeking to dissolve the corporation on grounds of “shareholder oppression.”
By now you’ve probably read about the Pennsylvania woman who was recently sentenced to prison for various crimes stemming from her decades-long scam of posing as a lawyer. She had no law license and had never gone to law school, yet she practiced tax and estate law for 10 years, even becoming a partner of her small firm in rural Pennsylvania and president of her local bar association. Which, of course, begs the question, “How was this possible?”
It’s legislation that completely satisfies no one. However, to the majority of lawmakers, it is a better choice than the prospect of food manufacturers, producers, and retailers facing 50 different standards for disclosing the presence of genetically engineered ingredients in food.
When a court orders a farm lease to continue in light of a contentious relationship, additional litigation is likely to ensue. And that's just what happened in a case decided by the Iowa Court of Appeals yesterday.
Barring unexpected immediate Congressional action, Vermont Act 120, the nation’s first mandatory GMO labeling law, will go into effect tomorrow. What does this mean for the rest of the nation? Most likely it means that we will see preemptive federal GMO labeling legislation in place by at least year-end .
No, the Des Moines Water Works lawsuit has not been settled! Rather, the Iowa Court of Appeals today issued an opinion interpreting a section of Iowa drainage law and determining that it imposes no legal duties on a county board of supervisors.
The Iowa Court of Appeals—while denying a minority owner’s request to have his family LLC dissolved—breathed life back into his quest to receive “fair value” for his 27% ownership interest. The court reversed a trial court order that had directed the brother to transfer his interest in the LLC to the other two owners for no consideration.
A federal bankruptcy case has been shaping interpretation of the Iowa agricultural supply dealer lien statute since the operator of a farrow-to-finish hog facility declared bankruptcy in 2009.
This week, the Iowa Court of Appeals issued two opinions analyzing farm leases. We told you Wednesday about a most interesting case where the court held that a residential acreage tenant with a single horse was entitled to September 1 statutory termination notice. Although the second farm lease case of the week is less surprising, it’s helpful to review. The court analyzed several common farm lease provisions, and the court's analysis is useful to both producers and their advisors.
In a most interesting case from the Iowa Court of Appeals today, the letter of the law prevailed, and the court ruled that a single, 38-year-old grazing horse was all that was needed to create a “farm tenancy” on a six-acre parcel. Thus, the court found that landlords were required to send statutory termination notice by September 1 to properly terminate a lease for a residential acreage (less than 40 acres) where the only "agricultural activity" was one grazing horse.
A recent case from the Iowa Court of Appeals shines the spotlight on Iowa’s private condemnation statute, Iowa Code § 6A.4(2). The statute, which takes some people by surprise,[i] grants private landowners a narrow power of eminent domain to acquire an access route to a landlocked parcel. The Iowa case, Middle River Farms, LLC v. Antrim,[ii] demonstrates the importance of “firming up” casual rights of way.
Last week, the Iowa Legislature enacted new legislation to require that an agreement to terminate a farm lease be in writing. The Governor signed HF 2344 into law on April 13, 2016.
The multidistrict Syngenta litigation, which is now deep in discovery for the first bellwether trial, saw several important developments last week. Judge Lungstrum entered several orders worth noting.
If there’s a takeaway sentence from the latest Iowa Court of Appeals decision to analyze a breach of warranty claim, it is this: The doctrine of unconscionability…does not rescue people from bad bargains.
In other words, be careful what you sign, it could come back to bite you.
A case from the Iowa Court of Appeals yesterday demonstrates the need for clear contractual language in farm leases. Some may say this principle is important even when family members are involved. This case demonstrates the importance of this principle especially when family members are involved.
The drainage districts in the Des Moines Water Works (DMWW) lawsuit have now filed their second motion for partial summary judgment. Last fall, they asked the judge to rule in their favor as a matter of law on DMWW’s state law tort claims, such as nuisance and negligence. Several questions of Iowa law raised by that motion are currently pending as certified questions before the Iowa Supreme Court.
The 2016 Iowa Legislative Session is still underway, but many bills have already become law this session. Most of the high profile debate has centered on school funding, water quality, and tax coupling, which we have written about extensively. Along the way, however, several lesser-known bills impacting agriculture have found their way to the Governor’s desk and he has signed them into law. Following is a short summary of several new Iowa laws that impact agriculture to some degree.
Ambiguous wills often lead to unfortunate family disputes. And such a dispute came before the Iowa Court of Appeals recently.
Although the disagreement arose because of a seemingly ambiguous section in their mother’s will, the fight between a brother and sister came before the court as a claim for adverse possession.To understand this dispute, it is helpful to see the portion of the mother’s will that fueled it (the relevant portions have been bolded for effect):
ARTICLE THREE
The Iowa Utilities Board voted 3-0 today 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.
Yesterday, the Iowa Court of Appeals granted a new trial to an excavation company in a trespass action. At trial, the jury found the excavation company liable for $118,900 in damages for trespassing onto a farmer’s property and clearing trees and brush from a 12-foot wide strip of his fence row. The new trial was not granted because of any question as to the actual trespass. That had been admitted at trial. Rather, the court was concerned that the defendant was prejudiced by evidence that the excavation company would be indemnified by the farming company that hired the work done.
Welcome to March 1, a day with much significance for farmers:
Parents often make lifetime gifts to their children, often as part of a farm or business transition planning strategy. These gifts often come under great scrutiny when the party receiving the gift is divorced from his or her spouse. During the dissolution proceeding, the spouse often argues that the gifted property should be subject to a fair division between the parties. The family members who gave the gift are often called to testify that they intended only their son or daughter to receive the gift.
In a divided 2-1 opinion, a three-judge panel ruled yesterday that the United States Court of Appeals for the Sixth Circuit has original jurisdiction to determine the validity of the Clean Water Rule.
Although recent talk of eminent domain has centered on high profile projects such as the Dakota Access pipeline, a less discussed provision of Iowa law confers a narrow power of eminent domain upon private citizens in certain cases where a landowner has a “land locked” parcel. A recent case from the Iowa Court of Appeals details how this law is applied.
This month has seen several important developments in the Des Moines Water Works (DMWW) lawsuit against drainage districts in three northwest Iowa counties. On January 11, Judge Bennett ruled that the Iowa Supreme Court should decide four questions of Iowa law implicated by the lawsuit's tort and constitutional claims. Consequently, he certified these questions to the Iowa Supreme Court.
In Iowa we see a large variation in the way farm leases are structured. Many are oral, one-year leases that automatically renew from year to year. Others are written, five-year leases that must be recorded. And still others have their own unique approach. The Iowa Supreme Court recently reviewed one such lease and found it constitutionally infirm.
A recent case from the Iowa Court of Appeals should again remind landowners to protect their boundaries or lose them.
As March 1 approaches, many landlords will see new tenants farming their property. Others will face lingering disputes from last crop year. This is a good time to review several important rights and obligations of landlords and tenants under Iowa farm leases. While these rights and obligations are primarily determined by the terms of a written lease, general legal principles apply to all Iowa leases. This article addresses several issues that often arise this time of year. Those wondering about their specific legal rights should consult with an attorney.
Yesterday saw a big development in the Des Moines Water Works case against three northwest Iowa drainage districts. Judge Bennett certified four questions of Iowa law to the Iowa Supreme Court.:
Question 1: As a matter of Iowa law, does the doctrine of implied immunity of drainage districts as applied in cases such as Fisher v. Dallas County, 369 N.W.2d 426 (Iowa 1985), grant drainage districts unqualified immunity from all of the damage claims set forth in the Complaint?
The Iowa Supreme Court issued an opinion today that may change the way many cases against insurance companies are tried. Because insurance coverage and farming operations go hand in hand, agricultural law attorneys should pay attention to Villarreal v. United Fire and Casualty Co.* and its implications.
On December 18, President Obama signed into law an 887-page package of legislation designed to fund the government through 2016. Called the Consolidated Appropriations Act, 2016, the legislation made permanent or further extended many tax breaks important to farm producers and small businesses. These updates are discussed in a December 20, 2015, article found here.
The legislation also impacts producers in several other important ways.
The Federal Aviation Administration (FAA) announced a new rule today requiring registration of small unmanned aircraft systems (UAS) weighing more than 0.55 pounds and less than 55 pounds.. The official weight of the UAS includes any payloads, such as cameras.
The defendants included a husband and wife who owned a number of poultry-related companies. They each owned a 50 percent share of an LLC they established in August of 2010. The purpose of the LLC was to purchase eggs for hatching, coordinate delivery of hatched chicks to contracted growers, and coordinate the delivery of the grown birds to a family-owned poultry processing company.
The Iowa Court of Appeals recently affirmed a dissolution decree involving a self-employed farmer and his ex-wife who was employed off the farm.
The Tax Court recently found that a petitioner had not made a taxable gift in 1972 when he transferred stock to his children to settle a family lawsuit. Although the transfer had occurred decades earlier, the IRS issued a notice of deficiency to petitioner in 2013, asserting that the taxpayer (who was deceased at the time) owed $737,625 in unpaid gift taxes and an addition to tax of $368,813 for fraud. As an alternative to the fraud claim, the IRS contended that the petitioner owed an addition to tax of $36,881 for negligence and $184,406 for failing to file a timely gift tax return.
The Iowa Court of Appeals issued another boundary by acquiescence case today, affirming a district court order establishing such a boundary between two residential properties.
The case originated under the oft-applied Iowa law, Iowa Code § 650.14:
If it is found that the boundaries and corners alleged to have been recognized and acquiesced in for ten years have been so recognized and acquiesced in, such recognized boundaries and corners shall be permanently established.
“Acquiescence” is defined under the statute as follows:
Another development arose this week in the Des Moines Water Works lawsuit. The Board of Water Works Trustees (DMWW) filed its (very long) resistance to the drainage districts’ motion for partial summary judgment, which the districts had filed on September 24.
The U.S. Secretary of Transportation held a press conference today announcing that a new registration system for unmanned aircraft systems (UAS) (including hobby aircraft) should be in place by mid-December.
The plaintiff was a trucker who entered into an oral agreement in 2001 with a milk cooperative. The trucker agreed to pick up milk from dairy farms and deliver it to the cooperative’s plant. Under the oral agreement, the cooperative was to pay the trucker a certain amount per gallon of milk delivered, plus $100 for each delivery trip. On July 31, 2013, the cooperative informed the trucker, in writing, that it was reducing the trip charge by $25 per month beginning in September, fully eliminating the trip charge by December of 2013.
The United States Court of Appeals for the Sixth Circuit has now stayed the Clean Water Rule nationwide. This temporary ruling brings uniformity to the patchwork of enforcement that has existed since the Rule’s August 28 effective date. As we’ve detailed in past articles, a United States District Court for the District of North Dakota temporarily enjoined enforcement of the Rule on August 27.
A federal judge from the United States District Court for the District of Columbia recently granted summary judgment to the EPA in a lawsuit challenging the agency’s decision to withdraw a proposed rule impacting confined animal feeding operations (CAFOs). The proposed rule, which was withdrawn in 2012, would have for the first time imposed information reporting requirements on CAFOs as part of the EPA’s administration of the Clean Water Act.
The drainage districts being sued by the Board of Water Works Trustees (DMWW) have filed their first dispositive motion. On September 24, the districts filed a motion asking the court to enter summary judgment in favor of the drainage districts on the common law claims alleged by DMWW. These claims--which are all asserted under Iowa common law--include negligence, trespass, public nuisance, and private nuisance.
Yesterday, a federal judge for the United States District Court for the Western District of Texas vacated the U.S. Fish and Wildlife Service’s (FWS) final rule[i] in which the agency listed the lesser prairie-chicken as a "threatened" species.
On the eve of the official effective date of the new Clean Water Rule (Fed. Reg. 37,054-127,), a North Dakota federal judge has issued a preliminary injunction to stop the EPA and the U.S. Army Corps of Engineers from enforcing it. The court stated:
It’s a rather small detail, but those small details often make all the difference when it comes to litigation. And that’s what happened in a recent case from the Iowa Court of Appeals.
The court explained that the limitations period for claims alleging a breach of an express warranty differs from that for claims alleging a breach of an implied warranty. The difference lies not in the actual limitations period—which is five years for both types of warranties (as long as they are not written)—but in the application of the discovery rule to the underlying claim.
The Iowa Court of Appeals recently issued an opinion demonstrating a sometimes misunderstood feature of an occurrence-based liability policy: Insurance coverage ends when the policy lapses. In other words, if a business owner is covered by a liability policy when it performs faulty work, it may not be covered for damage stemming from that work if the damage occurs after the policy expires. This is an important distinction that impacts both businesses and consumers.
Perhaps the most misunderstood portion of Iowa farm lease law is that governing the proper termination of a lease. Iowa law is unique in that under Iowa Code §562.6, a farm lease renews automatically—under the same terms and conditions as the original lease—absent specific action by one or both parties to the lease. The automatic renewal provision applies to both oral and written leases. It also applies to leases covering any size of crop ground.
We’ve been keeping you informed about a Texas company’s proposal to build a crude oil pipeline across Iowa to transport oil from North Dakota to Illinois. Dakota Access has formerly requested a hazardous liquid pipeline permit from the Iowa Utilities Board and has been seeking to acquire voluntary easements from landowners along the pipeline’s proposed route.
The Iowa Court of Appeals recently affirmed that negligence must be proved and that merely showing that an accident occurred is not evidence.
The case involved a trial court’s denial of a requested res ipsa loquitur instruction in a negligence case stemming from a hog building fire. The case provides a helpful review of the little-discussed—but potentially mighty—res ipsa loquitur doctrine.
The Kansas Supreme Court recently disbarred a lawyer. It wasn’t the first disbarment of the year, and it likely won’t be the last.[i] The case of In re Rankin, however, may be the most head shaking. It’s a case study of a lawyer who apparently did not believe that the rules applied to him. A case study in how to let personal interest overcome professional obligation. A case study in how to be disbarred.
They wasted no time. The day the new Clean Water Rule was officially published, June 29, 2015, the lawsuits began. As of today, 27 states have joined lawsuits challenging the validity of the new Rule unveiled May 27 by the Environmental Protection Agency and the U.S. Army Corps of Engineers.
Federal Judge Susan Mollway has struck down a Maui County Ordinance banning GMO crops. "A Bill Placing a Moratorium on the Cultivation of Genetically Modified Engineered Organisms" was passed by ballot initiative on November 4, 2014. Litigation over the Ordinance ensued immediately. On November 12, 2014, a group of citizens opposed to GMO technology filed a state court action seeking a declaration that the Ordinance was valid. The defendants removed the case to federal court and in Atay v. County of Maui, No. 14-00582, 2015 U.S. Dist. LEXIS 26951 (D.
Mistakes happen. Sometimes mistakes lead to legal liability, as in the case of negligence. But sometimes, where it’s apparent that a mistake in an instrument was a mutual one, equity steps in to “reform” the mistake. No harm. No foul. The document is reformed to reflect the true intent of the parties. A recent case from the Iowa Court of Appeals demonstrates the application of this doctrine. It also shows that trying to take advantage of such a mistake in a court proceeding can lead to costly sanctions.
The Facts
A recent opinion from the Iowa Court of Appeals reminds us of the importance of written plans for family farming businesses.
On January 20, 2015, Dakota Access, LLC, filed with the Iowa Utilities Board a petition for a hazardous liquid pipeline permit. The proposal to construct a crude oil pipeline from the Bakkan oil fields to an Illinois refinery includes 346 miles of 30-inch pipeline through 18 Iowa counties. Since filing its petition, Dakota Access has been attempting to negotiate voluntary easement agreements with the landowners who would be impacted by the proposed project.
A recent case from the Iowa Court of Appeals reminds us that in order to acquire title to the property of another through a prescriptive easement (a non-exclusive form of adverse possession), the plaintiff must strictly prove the elements of the claim. In this case, the plaintiff proffered no such proof.
The Minnesota Department of Revenue announced special relief last week for poultry producers in Minnesota who were impacted by the H5N2 avian influenza outbreak. The Department announced that these producers will not be assessed penalties or interest if the outbreak prevented them from filing state returns or paying state taxes on time. This relief applies for all returns and tax payments due between April 23 and May 27, 2015.
A recent Fifth Circuit opinion established that a federal court has jurisdiction to review the EPA’s denial of a rulemaking petition. It did, however, go on to establish a “highly deferential” standard of review, placing upon the agency only a “slight” burden to justify its decision to decline a necessity determination. Although the case is on remand to the district court for further review, this decision was a win for the agency.
Financial stress in agriculture creates numerous legal issues. One of those that may not necessarily be high on the “radar screen” involves the purchasing of machinery and equipment. Does it matter if the purchase is from a private party or an implement dealer? It just might. There are at least a couple of common scenarios to watch out for.
A federal court in Vermont recently denied the request of food manufacturers to enjoin the enforcement of Vermont’s new Genetic Engineering (GE) labeling law set to go into effect next year. The court did, however, also refuse to dismiss the majority of the plaintiffs’ claims. As such, the validity of the law remains unsettled, and more opinions will issue down the road.
We all know that the deadline for filing the federal income tax return is April 15.
The Iowa Court of Appeals Wednesday reduced a damages award granted to a couple who claimed their neighbor intentionally removed trees along their fence line. The plaintiffs, were self-described “tree people” who lived on a five and one-half acre rural land parcel. Their property adjoined that of the defendant, who was a farmer. The plaintiffs’ land was covered with timber and the property abutting the farmer’s crop ground was covered by an assortment of overgrown volunteer trees.
In 2013, the Iowa Supreme Court ruled that the Iowa Recreational Use Statute did not bar a negligence action brought by a parent chaperone against dairy farmers giving a gratuitous farm tour to a kindergarten class. The dairy farmers had invited the kindergarten class to tour their farm to learn about a “typical day on the farm.” While touring the hayloft, a chaperone stood on a bale of hay covering a hole in the loft floor. The bale gave way, she fell through the hole, and she broke her leg. The chaperone then filed a negligence action against the farmers.
The United States Supreme Court is today hearing oral arguments in a raisin growers’ case raising important Fifth Amendment questions. The key questions, which stem from the operation of a 66-year-old USDA marketing order, include: (1) Whether a governmental mandate to relinquish specific, identifiable property as a "condition" to engage in commerce effects a per se taking and (2) Whether the Fifth Amendment requirement that the government pay just compensation for the taking of property applies only to real property or also to personal property.
A Missouri statute designed to limit the damages recoverable by landowners in nuisance actions against farming operations has survived its first major challenge.
In 2011, Missouri enacted Mo. Rev. Stat. §537.296, a "right to farm" statute designed to supplant the common law of private nuisance where the alleged nuisance stems from an agricultural operation.
The Iowa Court of Appeals again set forth the requirements to prove an easement by prescription as yet another family feud played out in the court system.
This case involved brothers and their mother. The plaintiffs, a husband and wife, lived on Tract A, a property they purchased in a partition auction stemming from the death of the husband’s father. In that same auction, the husband’s brother and mother purchased an adjacent 2.1-acre tract, subject to the mother’s life estate. The mother resided on the property. The brother had a remainder interest.
The Iowa Court of Appeals recently had the opportunity to interpret Iowa Code §562.5A, which, in the absence of a writing to the contrary, grants tenants the right to harvest corn stalks until the lease terminates. Little has been written about his law, which was enacted in 2010 in response to the growing value of corn stalks. Agricultural attorneys must be aware of this law and its impact on their clients. The recent case provides a good overview of its significant implications and sets forth key parameters for its application.
Most U.S.
In a blogpost yesterday, EPA Administrator Gina McCarthy and Assistant Secretary of the Army Jo-Ellen Darcy announced that their offices had sent a draft final version of what's been called the Waters of the United States (WOTUS) rule to the Office of Management and Budget on April 3. The controversial rule, which the EPA and the U.S. Arny Corps of Engineers have attempted to rebrand as the "Clean Water Rule," will now undergo an interagency review before becoming final.
As the general economy continues to struggle, the farm economy will have another tough year. Crop prices have declined significantly from where they were a couple of years ago, and financial stress among producers is increasing. In the general economy, the March 2015 jobs report tells an awful tale – a record 93.175 million Americans 16 years old and older are not working, the January and February jobs numbers were dramatically revised downward, and the Federal Reserve has cut its growth forecast to zero. The labor force participation rate is at its lowest since 1978.
On April 1, 2015, the United States Court of Appeals for the Sixth Circuit admonished the USDA for denying farm program benefits to a farmer and forcing him to “navigate a bureaucratic labyrinth,” all the while “demonstrat[ing] a disregard for its own regulations.”
The Court made these statements while reversing a decision from the district court that supported wetlands and penalty determinations made by NRCS and FSA, both USDA agencies. The Court remanded the case to the agencies for further consideration.
April Fool's Day seems the appropriate time to highlight what's become a near daily mantra: beware of tax-related scams and schemes. Unfortunately, these warnings continue because the sophistication of the scammers is exploding. No longer is it merely the naive who are being sucked in by these scams. While many artless tactics remain (if you just wire this money to Nigeria by Friday...), the emerging scams come wrapped in a cloak of credibility. It's often difficult for even the wary to separate fact from fiction in this new age.
The United States Bankruptcy Court for the Northern District of Iowa recently ruled in favor of the debtors in an adversary action brought by their bank. The bank argued that the debtors’ obligations under a promissory note and an agricultural security agreement should be excepted from discharge in their Chapter 7 bankruptcy under 11 U.S.C. § 523(a)(6).
USDA has just announced that owners and producers will have one more week to reallocate base acres or elect between Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). The new deadline for both activities is now April 7, 2015. This marks the second extension for owners to update their yield histories or reallocate base acres. Originally the deadline for this activity was February 27. On that date, however, USDA extended that deadline to March 31, which was also the deadline for producers to elect between ARC and PLC.
The drop in crop prices in recent months has introduced financial strain for some producers. Bankruptcy practitioners that we know are reporting an increase in clients dealing with debt workouts and other bankruptcy-related concerns. We will produce a technical article for TaxPlace on the debt discharge rules for farmers, but below is an outline of the basics.
The 2014 Farm Bill was enacted into law in early 2014. It contains the farm program rules that will govern participating farmers for the next five years. Under the new rules, the total amount of payments that an individual or entity can receive either directly or indirectly (except for a joint venture or general partnership) for any crop year is $125,000. Spouses are able to double that amount, and a separate limit applies to peanuts. Any amount received from forfeiting a non-recourse loan is not subject to the payment limit. This only applies, of course if adjusted gross income is at
The ACA "relief" saga continues. On Friday, March 20, after discovering more erroneous Form 1095-As, the Treasury Department issued "expanded" relief .
There have been numerous cases in recent years involving farmers who have been found to have violated a patent on seeds and had to pay a tidy sum as a result. One question came into us recently about whether a payment a farmer had to make to settle a claim concerning patented seeds that he illegally saved, replanted and also resold could be deducted.
We’ve received a lot of questions recently involving how to treat unharvested crops at death for tax purposes. It’s a great question. We’ll develop a technical piece for TaxPlace on the topic, but here we go over the basic issues that arise and the general rules.
Readers interested in the new Des Moines Board of Water Works federal lawsuit may have followed another federal lawsuit last year, the "California egg case" as it was often called. These readers may be wondering, “What ever happened to that egg case?” The answer is that it’s still winding its way slowly through the federal court system. The status of Missouri v. Harris, No. 14-17111[i], which is pending in the 9th Circuit, is illustrative of the federal litigation process.
The Des Moines Board of Water Works Trustees has filed its complaint against the Supervisors of Calhoun, Sac, and Buena Vista Counties in their capacities as trustees of Iowa drainage districts.
The Iowa Utilities Board ruled this week that Dakota Access, LLC, substantially complied with Iowa law when it notified landowners of its plans to seek a permit to build an oil pipeline across their property.
We had an interesting question come into the office recently. The question involved the tax treatment of a biofiltration system for a farmer. I wasn’t familiar with the concept so I did a little research to find out exactly what a biofiltration system is. Basically, biofiltration removes contaminates (such as nitrates) in water by metabolizing microorganisms as the water flows past.
As threatened in January, the Des Moines Board of Water Works Trustees voted today to proceed with a federal Clean Water Act (CWA) citizen lawsuit against the supervisors of three Iowa Counties. The DMWW will sue the supervisors of Sac, Buena Vista, and Calhoun Counties in their capacity as trustees for 10 Iowa drainage districts. The lawsuit will primarily allege that the drainage districts are discharging pollutants into waters of the United States without a permit in violation of the CWA.
The legal wrangling over the validity of local ordinances seeking to stop the growing of Genetically Engineered Organisms (GMO) continues in Hawaii. At the center of the litigation is United States Magistrate Judge Kurren, who, last Thursday, ruled that a state court action seeking a declaration that a Maui County GMO ban is legally valid was properly removed to federal court. In Atay v. County of Maui, No. 14-00582, 2015 U.S. Dist. LEXIS 26951 (D. Hawaii March 5, 2015), Judge Kurren ruled that the defendants, which included Monsanto Co.
State laws differ in the protections they grant to landowners facing eminent domain. In Iowa, for example, the Iowa Utilities Board can grant a company, such as a utility company, the right to condemn an easement through a private landowner's property if it finds that the proposed project would "promote the public convenience and necessity.” If the Board vests a company with the right of eminent domain, the landowner is forced to convey the easement. "Just compensation" is awarded, and the landowner retains actual ownership in the property.
Last fall, we fielded a number of calls at the Center from Iowa landlords whose tenants failed to make their rental payments on time. In most of these cases, the tenant was offered the right to make the yearly payment in two installments, one at the beginning of the lease term and the other six months later. It was the September payments these tenants failed to make, and the landlords were wondering about their legal rights. In some cases, their rights were minimal because they had failed to perfect a landlord's lien.
A recent decision by the Illinois Court of Appeals involved a small farm that a town tried to zone out of existence. The case involved the town's ability to zone agricultural activities and the state's right-to-farm law. The plaintiff, a small town of 230 people, sued the defendants, a married couple, for violating a town ordinance which declared commercial farming within the town boundaries to be a nuisance. The defendants bought a 57-acre farm in north-central Illinois, six acres of which were within the town's boundaries.
In a last-minute announcement, the IRS has declared that farmers waiting for a corrected 1095-A will have until April 15 to file their returns and pay their taxes. If they file Form 2210-F along with their return, the penalty for failure to pay quarterly estmated tax will be waived.
As we near the end of February, several key Farm Program deadlines are looming.
Today (February 27, 2015) was supposed to be the last day that a landowner could update crop base acres and payment yields. Secretary of Agriculture Tom Vilsack, however, has just announced that this deadline has been extended to March 31, 2015. This is a decision that landowners, not tenants, must make.
Iowa Governor Branstad signed S.F. 257 into law today, raising the Iowa excise tax on fuel for motor vehicles (including gasoline and diesel fuel) by 10 cents per gallon. Iowans will likely face the increase by Sunday, the first day of the first month following the enactment of the law. The increase, the first one in Iowa since 1989, is expected to raise one billion dollars over five years to improve Iowa's aging roads and bridges. The bill, which passed the House by a vote of 53-46 and the Senate by a vote of 28-21, moved from first vote to law in the span of two days.
We learned late last week that Healthcare.gov sent out about 800,000 incorrect 1095-A Forms to taxpayers. Apparently, some states with exchanges, including California, did the same thing. These forms incorrectly reported the premium amount for the second-lowest priced Silver plan from 2015, not 2014. This information is required to calculate the amount of the premium tax credit to which the taxpayer was entitled in 2014. Using the wrong Silver plan premium amount means calculating the wrong premium tax credit on Form 8962 and either overpaying or underpaying your tax bill.
A recent Iowa Court of Appeals decision should alert landlords of all kinds to their potential premises liability to third parties. Although the basic Iowa rule is that a lessor is not liable for injuries occurring after a lessee has taken possession of the property, there are a number of exceptions to the rule. In this case, the court found that the corporate landlord did have a duty of care toward the third party because it had (1) retained some control over the property and (2) contractually agreed to keep the premises in “good repair.”
I'm not trying to sound ungrateful for the much-needed guidance we received from IRS yesterday in Notice 2015-17. Relief from penalties, even if limited, is always welcome.
When I was in journalism school, my professors had a policy that if you spelled a name wrong in a story, you flunked the assignment. The Iowa Court of Appeals recently ruled that if you describe the wrong property in your quiet title petition, you get your case dismissed.
The FAA released proposed rules on February 15, 2015, that would, if implemented, finally open the door for the use of small unmanned aircraift systems (UAS) in agriculture and other industries. Although the rule is not in its final form and does not authorize the immediate use of UAS, it is the first regulatory step toward acceptance and integration of the technology that has outpaced its necessary regulatory framework.
Rock Island Clean Line (RICL) is seeking a franchise from the Iowa Utitlies Board (IUB) to build a high voltage direct current line across Iowa. The line would transport wind energy generated in northwest Iowa to Illinois. It would cross 16 Iowa counties and 1,540 parcels of land, impacting 2,295 different owners. Last December, RICL filed its second motion asking the IUB to split the necessary hearing into two.
