In Memory of Philip E. Harris
We are very sad to announce the death of Phil Harris on January 12, 2018.
Phil was an emeritus professor of agricultural and applied economics at the University of Wisconsin at Madison and a nationally known expert in agricultural tax matters. Phil was an alumnus of Iowa State University and a great friend to the Center. Phil's obituary can be viewed here.
U.S. Supreme Court Decides WOTUS Jurisdictional Question
On January 22, 2018, the United States Supreme Court ruled that lawsuits challenging the validity of the Clean Water Rule, also known as WOTUS, were property brought in federal district court. The Court found that the petitions were improperly consolidated and transferred to the Court of Appeals for the Sixth Circuit, which had determined it had jurisdiction. In National Association of Mfrs v. Department of Defense, No. 16-299, the Court specifically found that because the WOTUS Rule fell outside the ambit of 33 U.S.C. §1369(b)(1), challenges to the Rule must be filed in federal district courts.
For background information on this issue, click here.
EPA Has Sought another Delay for Emissions Reporting Requirements
On Friday, January 19, 2018, EPA filed a motion with the D.C. Circuit Court of Appeals to again delay issuance of a mandate requiring CERCLA and EPCRA reporting for air releases from animal waste by many commercial animal farms previously exempt from the requirement. As of January 29, the court had not responded to the request. EPA has stated that no reporting is required until the court issues an order enforcing its decision to eliminate the reporting exemptions for farms. For the latest on this issue from the EPA, click here. For background information, click here.
How Does the New Tax Law Impact Equipment Trades?
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.
Pre-Tax Cuts and Jobs Act Law
Under 2017 law, IRC § 1031 non-recognition treatment was mandatory for a qualifying exchange of personal property. Those who did not want to apply §1031 like-kind exchange rules to a trade typically had to structure the transaction as a clear sale and purchase to avoid being automatically deemed a like-kind exchange by IRS and the courts. Taxpayers could generally accomplish this by selling the old asset to a different party than the one from whom the new asset was purchased. With a §1031 exchange, gains or losses on the exchange of like-kind personal property used in a trade or business were generally deferred. This meant that if a farmer traded a fully depreciated piece of equipment for a newer model, the like-kind exchange rules applied, and recognition of IRC § 1245 recapture was deferred. If a farmer traded several raised breeding heifers for some like-kind cows, § 1231 gain would be deferred on that transaction as well. In a like-kind exchange, the basis of the relinquished property was carried over to the basis of the replacement property, and gain recognition was rolled ahead until such time as the replacement property was sold.
To continue reading, click here.
Water Quality Funding Bill Awaits Governor Reynolds' Signature
On January 23, 2018, the Iowa House finished work that was started last year by the Iowa Senate by passing a new water quality funding bill by a vote of 59-41. SF 512, which was passed by the Iowa Senate last April, is now awaiting the signature of Governor Reynolds. She has publicly supported the legislation and has stated that she will announce a signing ceremony “at a later date.” The legislation provides $282 million over 12 years to fund edge-of-field and in-field infrastructure projects designed to meet Iowa Nutrient Reduction Strategy goals, as well as to fund projects to improve the quality of Iowa’s surface water, ground water, and drinking water.
Initial Source of Funds
SF 512 initiates its funding stream by exempting from state sales tax the sale of metered water by utilities and instead creating a new Water Service Excise Tax. This money, collected by the Iowa Department of Revenue, would be deposited into the general fund, through fiscal year 2030. The excise tax will be repealed on July 1, 2029, or any time before that if the state increases its sales tax. Money from the excise tax will be used to create two new funds, beginning in fiscal year 2019, a Water Quality Infrastructure Fund and a Water Quality Financial Assistance Fund.
Continue reading here.
Partition in Kind Receives Another Blow from the Iowa Supreme Court
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 partion in kind and ordering the property sold. In Newhall, the Court reviewed Iowa law, stating that under Iowa R. Civ. P. 1.1201(2), the party seeking a partition in kind has the burden to prove it would be both equitable and practicable. In Newhall, the Court ruled that an in-kind partition of a family farm requested by a sister would not be practicable or equitable. Specifically, the Court ruled that the sister's proposed in-kind division had to be rejected "because the division into separate parcels would depreciate their aggregate value. On January 12, 2018, the Court relied on Newhall to reverse another partition in kind that had been ordered by the Iowa Court of Appeals
Continue reading here.
Donate to CALT
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Filing Season is Underway!
The IRS began accepting returns on January 29, 2018. The deadline for individuals is April 17, 2018. Remember that we're here to support you throughout the season!
199A Deduction for Qualified Cooperative Dividends Clouded with Uncertainty
This month we've been keeping you posted on a provision of the new tax law that has been causing quite a stir: the 20 percent section 199A deduction for qualified cooperative dividends. It now appears that the extent of the discrepancy between the deduction provided to farmers selling commodities to cooperatives and that provided to farmers selling commodities to non-cooperatives was unintentional. The question remains, however, whether and how Congress will "fix" the unintended consequences of this new provision. To read an overview of this issue, click here.
New Tax Law Replays Available on TaxPlace
We recently hosted two webinars to introduce key provisions in the new tax law. They are both available for replay to TaxPlace subscribers:
We will continue to provide education on the Tax Cuts and Jobs Act throughout the year, particularly as IRS guidance issues.
Also New on TaxPlace this Month
January 24: The Scoop - January 24, 2018
January 17: Applicable Federal Rates (AFRs): February 2018
January 11: IRS Has Issued Updated 2018 Withholding Tables
January 10: The Scoop - January 10, 2018
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.