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.
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).
The August 2019 ruling ends a 16-year battle with NRCS that began nearly a decade after a farmer cut down nine trees on his property. In a stinging rebuke, the Court recounted how USDA repeatedly failed to follow applicable law and agency standards, disregarded compelling evidence showing that the acreage never qualified as wetlands, and kept shifting its explanations for treating the acreage as converted wetlands. The court reversed a district court order that had supported the USDA ruling, and remanded with instructions to enter judgment in favor of the farmer’s widow.
On September 25, 2019, the Iowa Court of Appeals issued a ruling regarding a will created by a man who suffered from schizophrenia. His sister claimed that he lacked the testamentary capacity to create a will and that it should be set aside. The court affirmed the district court’s decision and held that the decedent did have testamentary capacity to create a will and deed his portion of the farm to his distant relatives.
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. Language in the final rule that differs from that in the proposed guidance is in italics.
The IRS and Treasury created the safe harbor to address concerns that whether an interest in rental real estate rises to the level of a trade or business for purposes of section 199A is the subject of uncertainty for some taxpayers. The safe harbor is designed to “help mitigate this uncertainty.”
The revenue procedure states that the safe harbor is available to taxpayers who seek to claim the section 199A deduction with respect to a “rental real estate enterprise.” If the safe harbor requirements are met, the rental real estate enterprise will be treated as a single trade or business for purposes of the qualified business income deduction, including for the application of the aggregation rules set forth in Treas. Reg. § 1.199A-4. Relevant pass through entities (RPEs) may also use the safe harbor. If an enterprise fails to satisfy the requirements of the safe harbor, the taxpayer or the IRS may still establish that an interest in rental real estate is a trade or businesses for purposes of section 199A if it otherwise meets the definition of trade or business in Treas. Reg. § 1.199A-1(b)(14).
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. These individual coverage HRAs may provide new savings to some employees without employer-provided group health care coverage. They do, however, come at the cost of rendering employees ineligible for a premium tax credit (PTC).
The June regulations sought to implement President Trump’s October 12, 2017, Executive Order 13813, which directed the agencies to propose guidance to expand employers’ ability to offer HRAs to their employees. The rules sought to restore some employer health plan options that existed before the Affordable Care Act.
Before the ACA, many small businesses, including farming businesses, reimbursed their employees for the cost of coverage they purchased on their own. This reimbursement was tax free to the employee and deductible by the employer. The ACA imposed a number of new “market reforms” that had to be included in all group health insurance policies.
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.
This repeal finalizes step one of a two-step process the Trump administration began in 2017 to replace the 2015 Rule, which has been the subject of court challenges since its inception. Step two will be to finalize the replacement rule. Last December, the agencies released a proposed replacement rule, which has generated approximately 620,000 comments. It is expected that they will finalize the replacement rule in the near future.
The rule repealing the 2015 Rule “recodifies” pre-2015 “waters of the United States” regulations until such time as the replacement rule is finalized. This means that the agencies will again apply pre-2015 guidance, informed by U.S. Supreme Court decisions, on a nationwide basis. Because of ongoing litigation, more than half the states never were subject to the 2015 Rule. Pre-2015 rules remained in place because court injunctions blocked the enforcement of WOTUS. Twenty-two states, however, were subject to the 2015 Rule, establishing a patchwork system where landowners were treated differently depending upon the state in which they lived. The repeal of WOTUS means that all U.S. landowners will again be subject to the same rule.
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In September, the Iowa Department of Revenue finalized rules to require that withholding agents only need to file forms for employees from whom
tax was withheld. The Department also moved the relevant filing deadline from January 31 annually
to February 15 annually. Since January 31 is a filing deadline for a variety of other forms and claims,
moving this deadline should improve the Department’s ability to respond to withholding agents who
contact the Department for assistance.
The 46th Annual Federal Income Tax Schools are fast approaching. We hope to see you you at one of our seven locations or online at our Ames webinar:
- Maquoketa, Thursday, October 31 - Friday, November 1, 2019
- Mason City, Thursday, November 7 - Friday, November 8, 2019
- Fairfield, Monday, November 11 - Tuesday, November 12, 2019
- Le Mars, Thursday, November 14 - Friday, November 15, 2019
- Atlantic, Thursday, November 21 - Friday, November 22, 2019
- Waterloo. Monday, November 25 - Tuesday, November 26, 2019
- Ames - In Person and Online, Monday, December 9 - Tuesday, December 10, 2019
Our webinar will be streamed with live video to enhance your experience. All attendeees will receive the 2019 edition of the National Income Tax Workbook designed to fully prepare you for the 2020 filing season. We will be joined by a representative from the IRS and the Iowa Department of Revenue at all schools. Don't miss out!
Our September Seminars are behind us, but it's not too late to watch video replays of the Farm Tax Workshop and the Agricultural Law Seminar. A TaxPlace membership, which costs $150 per year, allows you to watch replays of all CALT seminars and webinars. You also receive access to tables, articles, and other resources.
September 24 Replays of Farm Tax Workshop sessions covering depreciation, contract production, timber tax, getting out of the farming business, recapture, entity selection, discounted sales and leases, and more
September 23 Replays of Agricultural Law Seminar sessions covering a number of timely agricultural law topics
September 18 2019 Special Use Valuation Interest Rates
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.