May 2018

May 2018


Iowa Tax Law Makes Some Changes Now, But Others are Far Off and Contingent

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. 

On May 5, 2018, the Iowa Legislature passed S.F. 2417, a significant overhaul of the Iowa tax code. Federal tax reform implemented by the Tax Cuts & Jobs Act set the stage for this legislation. Following is a review of key provisions included in the bill that Governor Reynolds signed into law on May 30, 2018.

The law makes a number of changes beginning with the 2018 tax year. These changes apply retroactively to January 1, 2018. The law increases Iowa’s section 179 deduction from $25,000 to $70,000 for tax year 2018 for individual taxpayers. The phase-out threshold for this deduction is increased from $200,000 to $280,000. The law also addresses the section 179 glitch we’ve written about in prior newsletters. This problem arises when a taxpayer is allocated greater section 179 deduction amounts than are allowed under Iowa law by multiple partnerships or S corporations, or from an out-of-state entity. In these cases, the Iowa taxpayer has been unable to use the excess deduction at all, even though the taxpayer has been required to reduce his or her basis to correspond with the amount of the federal deduction passed through.

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Many Orchards and Vineyards Now Exempt from UNICAP

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. Whether a plant has a pre-productive period of more than two years is based on the national average pre-productive period for that plant. IRS periodically publishes non-inclusive lists of such plants. Treas. Reg § 1.263A-4(b)(2)(i)(B). IRS Notice 2013-18 published the following non-inclusive list of plants with a pre-productive period of more than two years:

almonds, apples, apricots, avocados, blueberries, cherries, chestnuts, coffee beans, currants, dates, figs, grapefruit, grapes, guavas, kiwifruit, kumquats, lemons, limes, macadamia nuts, mangoes, nectarines, olives, oranges, peaches, pears, pecans, persimmons, pistachio nuts, plums, pomegranates, prunes, tangelos, tangerines, tangors, and walnuts

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Stray Voltage and Dairy Farms Can Lead to Large Damage Awards

During this past semester, we have been privileged to have Mary Francque, a 2L from Drake Law School, working for us as a legal intern. During her time with CALT, Mary wrote an article about stray voltage and dairy farms that we'd like to share with you this month. We appreciate the work that Mary did and wish her the best of luck with her final year of law school!

Stray voltage causing damages to dairy farms is a problem that has been facing the dairy industry for year with damages cases dating back to 1984. Stray voltage is caused when a power line’s neutral line is “leaking” electrical currents into the ground. A common cause of stray voltage is a neutral wire that is either too small or damaged and allows the current to go into the ground. Even when the stray voltage current is at a low level, specifically anything above 0.5 volt, it can still be harmful to livestock. These currents put stress on the animals, which in turn lowers their immune systems, leading to a variety of issues. Dairy cows have shown to be more sensitive to stray voltage than any other livestock. Voltage has been shown to cause decreased milk production, due to a lowered water intake and in turn a lowered feed intake. Farmers have also noted a range of issues relating to breeding and calving. Dairy farmers have even reported extremely sick cows, some of which have later died.

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CALT 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. CALT'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.

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