December 2018

December 2018

Reviewing Key 2018 Developments in Agricultural Law & Taxation

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! Reviewed in this post are the following developments:

  1. Tax Cuts & Jobs Act significantly changes tax rules for agricultural producers.
  2. New Farm Bill passes, making modest changes.
  3. Proposed rule would narrow the scope of WOTUS.
  4. U.S. Supreme Court may decide whether Clean Water Act jurisdiction exists over point source discharges passing through groundwater.
  5. Trade disruptions trigger Market Facilitation Program payments.
  6. Final approval granted for $1.51 billion Syngenta settlement.
  7. Ag nuisance verdicts worry producers.
  8. Changes to Affordable Care Act increase uncertainty regarding health care choices.
  9. EPA extends dicamba registration for two years.
  10. Farms are officially exempt from animal waste air emissions reporting, again.

To read this post, click here.

Cooperative DPAD Transition Rule Presents Difficulties

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.

The grain glitch fix is complicated and creates a separate qualified business income deduction (QBID) calculation for income flowing to a patron from a sale to an agricultural or horticultural cooperative. Details of this new calculation and the law that created it can be found here.  Also included in this “fix” was a transition rule. Our March article summarized it as follows:

The new law also includes a transition rule for farmers who receive a cooperative payment in 2018 that is attributable to QPAI for which the old DPAD deduction was applicable. This will include any QPAI attributable to a cooperative tax year beginning before 2018. See Section 101(c)(2). With the original DPAD gone in 2018, taxpayers were left to wonder how to report such DPAD allocations. The law clarifies that such farmers will still be able to take the old DPAD deduction in 2018, as long as it is attributable to QPAI which was allowed to the cooperative for a tax year beginning before 2018. No 199A deduction, however, will be allowed for such payments.

This rule will impact a lot of 2018 returns. Unanswered questions remain regarding how to handle this rule. Continue reading here.

New Farm Bill Signed into Law

2018 ended with President Trump signing a new farm bill into law on December 20, 2018. The Agricultural Improvement Act of 2018, generally referred to as the 2018 Farm Bill, stems from the work of a conference committee convened to reconcile differences between Senate and House versions passed earlier this year. The final bill is a compromise, prompted by the need to implement programs to assist farmers struggling with market and price uncertainties. Generally the bill veers little from status quo.

The new Act overhauls the failed dairy margin protection program, legalizes the production of hemp as an agricultural commodity, and tweaks funding for various conservation programs. The new law does not, however, change payment limitations or enhance “active participation” requirements. In fact, it extends an exception from “actively engaged in farming” requirements to first cousins, nieces, and nephews within family farming operations.

For a more detailed review of provisions in the new farm bill, click here.

Proposed Rule Would Narrow Scope of WOTUS

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.

WOTUS has been the subject of litigation and controversy since the final Clean Water Rule was unveiled on May 27, 2015. Because of the pending litigation, the 2015 rule is currently in effect in only 22 states. The rule is stayed for the remaining states because federal courts have determined that states challenging the rule were likely to succeed on the merits of their legal claims. In those states, a pre-2015 legal framework applies. 

The 2018 proposed rule sets forth six specific categories of jurisdictional WOTUS, as compared to the 2015 rule’s eight categories. It also eliminates provisions and definitions that would subject isolated lakes, streams, and wetlands to federal jurisdiction. Continue reading here.



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