News and Updates
Iowa Supreme Court Shoots Down Hunting Rights - December 9, 2013 - In a recent opinion, the Iowa Supreme Court ruled that landownership rights do not include the right to hunt beyond the extent the state allows by statute and regulations. The case involved three Iowa landowners that were deemed to be nonresidents and treated differently than residents under the Iowa hunting rules and regulations.
Failure to Comply With DNR Consent Order Results in Large Fine - December 5, 2013 - An Iowa salvage yard owner repeatedly failed to comply with a DNR consent order and renew an NPDES permit and earned a large civil fine.
Wind Energy Company Nailed For Violations of Federal Law At Wyoming Wind Power Station - November 28, 2013 - A major U.S. energy company has entered into a settlement with the federal government for criminal violations of the Migratory Bird Treaty Act for killing protected species of birds at its wind power station near Casper, Wyoming. Under the settlement, Duke Energy Corporation has agreed to pay $1 million for killing the protected birds, including 14 eagles, without a federal permit. You can read the news story, click here
Court Says Pollution-Exclusion Clause Does Not Bar Hog Odor Suit - November 21, 2013 - The Illinois Court of Appeals has held that an insurer's standard "pollution exclusion" clause in an insurance policy does not apply to hog odor. As a result, insurers may have a greater obligation to defend farmers against lawsuits involving hog (or similar) odors. Or, insurance companies may make attempts to change the exclusion language.
Social Security Administration Provides Inflation-Adjusted Figures for 2014 - November 5, 2013 - The Social Security Administration has released the 2014 inflation adjusted numbers for numerous items of importance including the COLA adjustment, tax rate, maximum taxable earnings and exempt amounts for the retirement earnings test, among other things. You can access the SSA Fact Sheet at this URL:http://www.ssa.gov/pressoffice/factsheets/colafacts2014.pdf
Inflation Adjusted Amounts for 2014 - November 1, 2013 - The IRS has released the inflation adjusted amounts for various tax items for calendar year 2014. Included are the new numbers for the tax rate schedules, standard deduction, limitation on itemized deductions, limits for various credits and other important information. You can access the new numbers here (IRS Notice 2013-35).
Farm Bill. With the number of days that the Congress will be in session the remainder of the year dwindling away, it is looking more likely that there won’t be a new Farm Bill. The Senate passed its bill last June (S. 954) and the House passed their bill in September (H.R. 2642). The two versions differ vastly and it just doesn’t look likely that a compromise can be reached by the end of the month. Differences remain on crop insurance, the replacement mechanism for direct payments and various other provisions. Also, a major sticking point is the Food Stamp program. Historically, Food Stamps have been included in the Farm Bill for purely political reasons – to get non-farm legislative support for its passage. But, in reality, the only true way to reform farm programs is to pull Food Stamps out of the Farm Bill and deal with it in separate legislation or make reauthorization of the Food Stamp program (if included in the Farm Bill) come up for reauthorization at a time different than that for the actual farm-related provisions. Food Stamp spending has skyrocketed in recent years, with the 2012 amount doubling the 2008 amount. Neither the Senate nor House versions of the Farm Bill make any meaningful attempt to rein in Food Stamp spending. The House bill proposes a five percent reduction (according to the Congressional Budget Office (CBO), and the Senate bill a mere one-half of one percent (according to the CBO). Presently, recipients of Food Stamps don’t have to be working or looking for work. The House version of the Farm Bill does contain a provision that attempts to tie work requirements to receipt of Food Stamps, but the Senate version does not. Likewise, “broad-based categorical eligibility” allows Food Stamp recipients to avoid otherwise applicable asset eligibility tests. The House bill tries to bar such eligibility, but the Senate bill does not.
As noted above, another sticking point is crop insurance. Crop insurance spending has also ballooned in recent years (according to the Government Accounting Office) from an average annual cost of 3.1 billion (2000-2006) to a projected $8.9 billion annually from 2013-2022 under present law. Neither the House nor Senate versions of the Farm Bill really do anything to deal with the increased subsidies that assist farmers in paying crop insurance premiums.
NIIT Final Regulations. In late November, the Treasury Dept. issued final regulations (and some proposed regulations) with respect to the Net Investment Income Tax (NIIT). The final regulations differ in material respects from the proposed regulations, and in many respects are friendlier to taxpayers. Under the final regulations, self-rentals are not passive, the grouping rules are explained and guidance is given when changes on an amended return would impact the grouping election or require a regrouping. Also, a special rule is included concerning self-charged interest. The rule is mostly favorable, but there is a unique twist to the rules when self-employment tax is involved. For a summary review of the final rules (and the new proposed rules as applied to partnerships and S corporations) see our tax school handout on the rules prepared by Paul Neiffer: Final Regulations on the Net Investment Income Tax Explained.pdf
The rules will be covered at the remaining tax schools, and were covered at the Kansas schools earlier this month.
The Parsonage Exclusion. On November 22, a federal judge in Wisconsin ruled that the cash allowance provision of I.R.C. §107(2) was unconstitutional. That’s the provision that allows a minister of the gospel to exclude from income the amount a church provides for housing costs for a home that the minister owns. The court viewed that provision as providing a benefit to ministers that other taxpayers do not have available and is not necessary to alleviate a burden on religion. However, the exclusion is still available for an allowance provided to a minister who lives in a parsonage that is owned by the church. The Treasury Department is the defendant in the case, so the Obama Administration will have to decide whether to appeal the case. The judge said that an injunction will be entered in the case on the later of 30 days after the decision (Dec. 22, 2013) or upon the finality of appeals. The case is Freedom From Religion Foundation, Inc., et al. v. Lew, et al., No. 11-cv-626-bbc, 2013 U.S. Dist. LEXIS 166076 (W.D. Wisc. Nov. 22, 2013) and appears on our annotation list.
LLC Valuation Issues in the Tax Court. The U.S. Tax Court recently issued an opinion in a case involving a family-owned LLC that involved valuation issues. The LLC’s operating agreement said that if an LLC interest was transferred outside the family, the new owner was a mere assignee that couldn’t participate in management unless all of the other owners agreed to allow such participation. When the decedent died, the LLC interest involved in the case was owned in trust as a full member interest. It was included in the decedent’s gross estate under I.R.C. §2038, but the estate valued it at less than fair market value as an assignee interest. The Tax Court disagreed with the estate’s valuation, and said it should be valued as a full member interest. But, the Tax Court also said that a willing buyer would take into account the transfer restrictions in the LLC’s operating agreement in determining the price to offer for the interest. The estate also wanted to value the interest based on the income approach (historical distributions), but the IRS valued the interest in accordance with the net asset approach (fmv – liabilities multiplied by the percentage of the LLC attributable to the LLC interest). The court largely used the IRS approach, but appears to have not eliminated a mixed valuation approach if supported by the facts. The case is also instructive to estates that try to argue a lower valuation that what was reported on Form 706. That tactic rarely works. The case is Tanenblatt v. Comr., T.C. Memo. 2013-263, and is referenced in our annotation list.
Case and Ruling Annotations
Make sure to keep up on the annotations list. The list is updated daily with the most current cases and rulings of importance to agricultural producers and agricultural businesses. New developments are added on a daily basis. Since November 15, 59 annotations have been added to the list. This list is the most current and comprehensive listing of case and ruling developments of relevance to agricultural law that you can find anywhere. The following annotations highlight those that were added to the list since mid-November.
Bankruptcy: In re Clark, 714 F.3d 559 (7th Cir. 2013), cert. granted, Clark v. Rameker, No. 13-299, 2013 U.S. LEXIS 8421 (U.S. Sup. Ct. Nov. 26, 2013); In re Vecchione, No. 13-42201-MSH, 2013 Bankr. LEXIS 4978 (Bankr. D. Mass. Nov. 20, 2013); In re Acee, No. 12-61632, 2013 Bankr. LEXIS 4789 (Bankr. N.D. N.Y. Nov. 12, 2013).
Business Planning: Estate of Tanenblatt, T.C. Memo. 2013-263.
Civil Liabilities: Edwards v. Lombardi, No. 3-12-0518, 2013 Ill. App. LEXIS 806 (Ill. Ct. App. Nov. 20, 2013); Pauley, et al. v. City of Circleville, No. 2012-1150, 2013 Ohio LEXIS 2313 (Ohio Sup. Ct. Oct. 16, 2013); Einhorn v. Johnson, et al., No. 50A03-1303-CT-93, 2013 Ind. App. LEXIS 495 (Ind. Ct. App. Oct. 10, 2013).
Contracts: Gilder, et al. v. Cedar Ridge Farms, Ltd., 213 Ark. App. 686 (2013); Central Stone Co. v. Warning, No. ED99480, 2013 Mo. App. LEXIS 1301 (Mo. Ct. App. Nov. 5, 2013); Hintz v. Jorde Certified Seed, LLC, No. 13-CV-0100-TOR, 2013 U.S. Dist. LEXIS 144905 (E.D. Wash. Oct. 4, 2013).
Environmental Law: Swinomish Indian Tribal Cmty. v. Dep't of Ecology, 178 Wash.2d 571, 311 P.3d 6 (2013).
Estate Planning: Newell, et al. v. Johns Hopkins University, No. 1861, 2013 Md. App. LEXIS 158 (Md. Ct. App. Nov. 21, 2013); Estate of Tanenblatt v. Comr., T.C. Memo. 2013-263; Estate of Trombetta, T.C. Memo. 2013-234.
Insurance: Alma Brightleaf, Inc. v. Federal Crop Insurance Corporation, No. 13-11692, 2013 U.S. App. LEXIS 21205 (11th Cir. Oct. 21, 2013), aff’g., No. CV 511-091, 2013 U.S. Dist. LEXIS 37967 (S.D. Ga. Mar. 20, 2013).
Real Estate: Voga v. Younes, No. 3-1021/13-0657, 2013 Iowa App. LEXIS 1215 (Iowa Ct. App. Nov. 20, 2013); Brann, et al. v. Hulett, 2013 Ark. App. 687 (2013).
Secured Transactions: Westco Agronomy Co. v. Wollesen,et al., No. 3-652/12-2305, 2013 Iowa App. LEXIS 1131 (Oct. 23, 2013).
Taxation: Li v. Comr., T.C. Sum. Op. 2013-97; Brown v. Comr., T.C. Memo. 2013-275; Dudek v. Comr., T.C. Memo. 2013-272; Fish v. Comr., T.C. Memo. 2013-270; Freedom From Religion Foundation, Inc., et al. v. Lew, et al., No. 11-cv-626-bbc, 2013 U.S. Dist. LEXIS 166076 (W.D. Wisc. Nov. 22, 2013); Rand, et al. v. Comr., 141 T.C. 12 (2013); Nelson v. Comr., T.C. Memo. 2013-259.
Water Law: The Edwards Aquifer Authority v. Bragg, No. 04-11-00018-CV, 2013 Tex. App. LEXIS 13854 (Tex. Ct. App. Nov. 13, 2013).
Donate to CALT
As you know, our work at the Center is dependent on the fees generated by seminar registrations and gifts. If you would like to donate to further the Center's efforts, please contact our Program Administrator, Tiffany Kayser at firstname.lastname@example.org or (515) 294-5217. You can also give online with a credit card. We thank you for your generous support.
The Farm and Urban Tax Schools are winding down. We hope to see you at one of the remaining schools either in Denison or Ames.
- On December 19, Roger McEowen and Kristy Maitre will conduct a live, 90-minute ethics webinar for lawyers that need ethics CLE.
Here’s the schedule for the remaining Iowa Tax Schools:
- December 9-10: Denison - Boulders Conference Center
- December 16-17: Ames - Quality Inn & Suites
Summer 2014 Seminars
Presently, we have one of our summer seminars booked for June of 2014. That seminar will be on June 26 and June 27 at the Holiday Inn in West Yellowstone, Montana. The seminar is co-sponsored by the Idaho, Montana, Washington and Wyoming CPAs. We are presently working on a second summer seminar for a location in the eastern third of the U.S. Keep watching the website (and your e-mail) for developments.
CALT Director – November Activities
During November, the Director conducted a national on-line farm tax seminar for participants across the U.S. Also, during November, the Director conducted multiple tax seminars in Kansas, and North Dakota in addition to Iowa. In addition, during November, the Director participated in the Iowa Farm Bureau farm tax update with CALT Board Member, Charles Brown.
During November, the Director was a guest on eights radio programs and was interviewed by numerous media outlets concerning topics related to agricultural law and taxation.
CALT Staff Attorney
CALT is pleased to announce Kristine A. Tidgren as the new staff attorney. Kristine is excited to join the work of the Center as the new staff attorney. She was raised on a farm near Logan, Iowa. She received her B.A. from Iowa State University, and a J.D., with honors, from The University of Texas at Austin. During her 15 years as an attorney, she has worked as a litigation associate in Kansas City, an attorney editor for LexisNexis, and most recently as a solo practitioner in Carroll, Iowa. She has a deep appreciation for agriculture and its people and a passion for legal research and writing. She looks forward to providing you with timely information regarding important developments in agricultural law and taxation. Don’t hesitate to call Kristine at (515) 294-6365 or email her at email@example.com.
The Center for Agricultural Law and Taxation does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. The Center's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.