Lamson, Dugan and Murray, LLP, Attorneys at Law

OSHA Backing Off Grain Bin Inspections

Posted in Farm Management, Government Regulations

grain bin wide

The fear of OSHA inspecting the storage facilities of small farming operations seems to have been quelled.

In 2011 OSHA issued a memo which led some inspectors to believe they were authorized to inspect grain storage facilities on private farms.  The memo led to the inspection of a private grain storage facility in Atkinson, Nebraska resulting in approximately $132,000 in fines.

In December, 2013, U.S. Senator Mike Johanns  (R-Neb.) drafted a letter, signed by 42 other senators, to the Department of Labor (DOL) questioning OSHA’s authority to inspect private grain storage facilities.  Addressing the 2011 memo, Johanns wrote “[i]t has come to our attention that OSHA is now interpreting this provision so narrowly that virtually every grain farm in the country would be subject to OSHA regulations.  OSHA’s interpretation defies the intent of Congress in exempting farming operations from the standards of the Occupational Safety and Health Act.” Sen. Johanns Press Release Dec. 20, 2013; including full copy of the letter.   

In response to the letter, the Department of Labor withdrew the 2011 memo and re-emphasized the limitations of OSHA’s authority to inspect small farming operations.  The DOL explained the “2011 memorandum was intended to provide clarification and not to change longstanding OSHA policy.”  Admitting the confusion caused by the 2011 memo, the DOL agreed to work with USDA in issuing new guidance.  Furthermore, OSHA inspectors have been  instructed to check with the DOL when determining whether a farming operation is exempt.

OSHA has essentially agreed to let small farm operations police themselves with grain bin safety for the time being.

 

Iowa DNR and EPA Come Together on Concentrated Animal Feeding Operations Regulations

Posted in Government Regulations
Authority

Fall Into Line!

A year ago the EPA threatened to pull Iowa’s police power over Iowa’s Concentrated Animal Feeding Operations (CAFOs) due to perceived shortcomings of Iowa’s inspection and permitting process.

On September 11, 2013 Iowa DNR (IDNR) and the EPA came to an agreement on actions the IDNR would take to bring their inspection and permitting process in line with EPA’s requirements.

Iowa agreed to the following:

-     Adopt updated federal regulations for CAFO requirements and setback distances;

-     Revise DNR application forms and templates to adopt minimum federal requirements;

-     Complete inspections of all National Pollutant Discharge Elimination System (NPDES) permitted CAFOs within 5 years, and complete inspections of 20% of such CAFOs annually;

-     Timely issue NPDES permits;

-     Hire 7 new inspectors; and

-     Document enforcement decisions and increase penalties

- Work Plan Agreement Between Iowa DNR and EPA Region 7 -

Looks like Iowa will keep its police powers over Iowa’s livestock confinements but the EPA will keep a close eye on Iowa’s enforcement procedures.

 

CRP Payments Likely Subject to Self Employment Tax

Posted in Tax

Farm

The following was posted by Dan Waters on the Midwest Business Law Journal on August 15, 2013.   

The Conservation Reserve Program (CRP) is a USDA land conservation program administered by the Farm Service Agency.  In exchange for annual “rent” payments from the FSA, farmers enrolled in a CRP agree to remove select parcels of land from agricultural production and plant species in order to improve environmental health and quality.  The long-term goals of the CRP are to preserve valuable land, improve water quality, prevent soil erosion and reduce loss of wildlife habitat.

Because CRP land is not used for production agriculture purposes, the term “rent” can be confusing to farmers receiving CRP payments.  This is particularly evident in the area of self-employment taxes.  Generally speaking, income from an active farming trade or business is subject to self-employment tax while rental income, which is passive in nature, is exempt from self-employment tax.

The IRS has taken the position that CRP rent payments are not “passive” rent payments exempt from self-employment taxes because a farmer’s performance of conservation and maintenance obligations under CRP contracts is an active farming trade or business.  According to the IRS, CRP payments – even though referred to as “rent” under the CRP contract – are in fact compensation for conducting certain farming activities.

In June 2013 the United States Tax Court addressed this issue for a non-farmer enrolled in a CRP in South Dakota.  The taxpayer hired a retired farmer to assist the taxpayer with his land conservation and maintenance obligations under the CRP contract.  The taxpayer argued that his CRP activities were minimal and did not give rise to the level of a farming trade or business.  Not surprisingly the Tax Court disagreed, finding that the taxpayer’s actions in (1) purchasing materials, (2) working with the retired farmer and paying him for fulfilling obligations under the CRP contract, and (3) expanding the amount of his land enrolled in the CRP were regular and continuous enough to constitute a farming trade or business.  Thus, according to the Tax Court, the taxpayer’s CRP rent payments were subject to self-employment tax.

It appears that the confusion and uncertainty of this issue is settling in favor of the IRS.  CRP payments will likely be subject to self-employment tax once the farmer becomes obligated to maintain and conserve land under the CRP contract.  The label of “rent” is irrelevant in this context because the IRS views CRP rent payments as compensation for the conservation and maintenance activities required under the CRP contract.  Farmers enrolled in a CRP program should consult their legal and tax professionals to determine the proper reporting of their CRP rent payments.

- Dan Waters is an attorney with the firm, Lamson, Dugan and Murray LLP and one of the authors at the Midwest Business Law Journal.

Update: The Morehouse case is being appealed to the 8th Circuit Court and an Appeal Fund is set up if you would like to contribute to overturning the decision: Checks can be made to the following:

Halleland Habicht Client Trust Account—CRP Appeal Fund

33 South Sixth Street, Suite 3900

Minneapolis, MN 55402

http://www.farmcpatoday.com/2013/07/28/help-prevent-se-tax-on-crp-rents/

 

Guest Blogger Irv McQuarrie: Discussion on Investments and Agriculture.

Posted in Uncategorized

As a member of the Nebraska Agribusiness Club, I have had the great pleasure to meet Irv McQuarrie who runs the website http://www.investtuneretire.com/.  We discussed investment opportunities and strategies.  I asked him specifically about investment opportunities for agriculture and if he would provide his response in this blog.  

Where should farmers be putting their money?

Most of us are of two minds when it comes to investing. Our left brain (that’s the rational side) thinks about safety. Our right brain (that’s the poetic side) thinks about taking a chance.

Safety has been hard to find in recent years. But after a long enough time period, it comes into better focus. Over the past 21 years, the US stock market (as measured by Vanguard’s S&P 500 Index Fund) has returned 8.8%/yr and the US bond market (as measured by the T. Rowe Price New Era Fund) has returned 5.6%/yr. Gold bullion is in between at 6.9%/yr and US savings bonds have returned 6.3%/yr (including a tax benefit worth ~1.1%/yr). If you think that the volatility of an asset is the opposite of safety, then stocks come in last and savings bonds come in first. But we live close to Omaha, and know that Berkshire Hathaway is invested in all sectors of the economy with an eye to safety. Stock in that holding company has returned 14.9% over the past 21 years. So there is a way to have your cake and eat it too!

Now for a few observations about how a farmer might take a chance with his or her investments. That part is personal: you need to go with what you understand: farmland, agronomy, irrigation, sustainability, and access to markets. Stock picking is an interesting hobby, and can be rewarding if you do a lot of research on companies that make products (or provide services) that you know about. But keep in mind that food is priced on the basis of worldwide supply and demand for agricultural commodities. Stock in those companies, which facilitate food production or place products in grocery stores or restaurants, will be volatile. I can only think of 4 stocks that are reasonable to hold (and keep adding to) over the long term: Coca-Cola, PepsiCo, Wal-Mart, and General Mills.

Irv McQuarrie

Please Note the following disclaimer from www.investtuneretire.com which also applies to this blog:
 
We are writing this blog as an educational and supportive tool directed to an “average, middle class” American investor. We expect this investor to use our blog as one part of her investment strategy. When we find additional materials, podcasts, books, or web links that support our discussion points and are of high quality, we will pass those resources along to our readers. We are not personal investment counselors: This blog is not intended for use without additional reading and perusal of reference materials. Your investment choices and decisions are still YOUR choices and decisions.

 

RMA Removes “Normal Weather Condition” Requirement for Prevented Planting Eligibility…

Posted in Crop Insurance
Prairie Pothole Region Map US Geographic Survey

Prairie Pothole Region Map
US Geographic Survey

…for acres found in the Prairie Pothole National Priority Area, which extends to regions of Iowa, Minnesota, Montana, North Dakota and South Dakota. 

Beginning in 2014, acres planted in the Prairie Pothole region will be eligible for prevented planting payments if those acres were planted in at least one out of the last four years.  The acres are eligible even if one or more of those four years was abnormally dry.  USDA: RMA Clarifies Prevented Planting Standards in Prairie Pothole Region. 

The 2013 rule prohibits prevented planting payments for acres in the Prairie Pothole region, where normal area “weather and other conditions” would have prevented planting.  Simply put, you can’t collect prevented planting on acres which under normal weather conditions you would not have been able to plant anyway.  USDA Memorandum: 2012 Prevented Planting Eligibility in Prairie Pothole National Priority Area.  

Determining “normal” weather and other conditions for an area can be very subjective and open to interpretation.  Producers in the Prairie Pothole regions have pushed the RMA to create a more objective determination for acres eligible for prevented planting since recent dry spells have opened up tillable acres in areas where it was normally too wet.

The Prairie Pothole National Priority Area was created when glaciers left thousands of shallow depressions (potholes) as they receded from the northern prairies of Iowa, Minnesota, South Dakota, North Dakota and Montana. The potholes normally fill up with snowmelt and spring rains to create seasonal wetlands making farming difficult if not impossible during normal weather conditions.     

While Prairie Pothole farmers won’t have to worry what constitute “normal” conditions in determining eligibility for a prevented planting payments, there is always a catch.  If the farmer is unable to plant and harvest a crop in at least one of the four most recent crop years, the land will only be eligible if the farmer can plant and harvest a crop two years in a row.   

Farming in the Prairie Pothole region comes with its own unique challenges and specifications regarding crop insurance.  Contact your local crop insurance agent for any questions regarding your coverage.   

To see whether your county falls in the Prairie Pothole National Priority Area, check out this USDA Map.

Florida’s Constitutional Ban on Gestation Crates = $505,000 Award for Hog Producer

Posted in Government Regulations

Berkshire Sow

A July decision by the Florida appellate court awarding a Florida hog producer over $500,000 for damages that occurred as a result of the State’s 2003 ban on gestation crates may cause legislatures to take a second look before enacting legislation to rid the pork industry of those very crates. 

In 2010, Stephen Basford filed an “inverse condemnation” lawsuit against the State of Florida, claiming he was forced to shut down his hog operation after the ban on gestation crates was enacted.  The court agreed with Stephen Basford and found the ban prevented Mr. Basford from using the pig-raising facilities and that Mr. Basford would incur over $600,000 in costs to modify the facilities to operate without gestation crates. 

An “inverse condemnation” suit is akin to a “takings claim” which we previously discussed in Rezoning Your Backyard.  The 2003 constitutional ban rendered Mr. Basford’s hog operation useless and essentially “took” approximately $505,000 in value from Mr. Basford.  Therefore, the court found Mr. Basford had a right to receive compensation for the government’s taking of such value.  For more information check out the US Agricultural & Food Law and Policy Blog.   

The ruling is not going to stop animal rights groups from pushing for gestation crate bans in all states.  Furthermore, the court emphasized the ruling was limited to Mr. Basford’s narrowly tailored circumstances.  However narrowly tailored the ruling, legislatures should take note of the decision when deciding how such regulations may affect existing agricultural industry and may create litigation.  

You can find the full decision at State of Florida v. Stephen D. Basford.      

 

Property Rights Along Waterway: What Nebraska Land Owners and Float Trippers Need to Know.

Posted in Government Regulations, Property Rights, Water Law

Float trips on the Dismal River, Platte River, and Niobrara in Nebraska, the Gasconade, Little Piney and Big Piney in Missouri and the North Platte in Wyoming make up some of my fondest memories.  On every one of those float trips, without fail, nature calls on somebody in the group and a decision has to be made as to where can we stop, and how long can we stick around?

This issue came to a deadly end in Missouri on the Meramec River over the weekend of July 21st.  A group of tubers pulled off on a sand bar for a pit stop, wherein a landowner had posted a Keep Out sign.  The landowner confronted the tubers and an argument ensued.  During the argument the landowner shot and killed one of the tubers and was subsequently arrested and charged with second degree murder.

Nebraska had similar episode a while back when a landowner set up a firing range next to the Long Pine Creek which was routinely floated by families.  The landowner got himself in trouble when he fired bullets striking the embankment in front of a family tubing the creek, and fired more shots when the family attempted to walk back upstream.  The landowner was eventually convicted of making terroristic threats and sentenced to 18 months probation and a $2,000 fine.  They also took away his guns.   

So that begs two questions, what are the rights of those floating the rivers and those owning the land along the waterways?  While confusion remains in Missouri, the Nebraska rule is fairly clear.

For canoers, kayakers and tubers:

An individual is allowed to navigate all Nebraska rivers and streams even if such rivers and streams flow through private property.   The landowner owns the land adjoining and underneath the river and stream.  Therefore, an individual is trespassing if he/she gets out of the canoe, kayak or inner-tube, or drops anchor.  However, an individual is allowed to access private property if the individual is required to portage or otherwise transport their canoe, kayak or inner-tube around any fence or obstruction in the river or stream. 

(This was also the rule as I understood and lived by in Wyoming.)  

For landowners:

Landowners can string fences across rivers and streams as long as they don’t violate regulations set out by the Corps of Engineers.  Landowners can also use force in protecting their property if such force is immediately neccessary.  However, landowners cannot generally use “deadly force” to protect a sandbar, river bed, or embankment.  As the Nebraska landowner found out, firing a gun in the direction of another constitutes deadly force. 

Quoting the Missouri attorney from the St. Louis Dispatch, “we don’t have a stand-your-gravel-bar-law yet.”  No matter what your rights are, landowners and float trippers must realize that civility and courtesy is the best way to protect those rights.

Wet Weather Problems Pt. III: Gulf of Mexico Dead Zone and Iowa’s Response

Posted in Government Regulations

The Gulf of Mexico’s dead zone is a big problem and the problem may the biggest on record this year as a result of the wet spring.  

As can be expected, heavier-than-normal rains lead to heavier-than-normal fertilizer runoff from fields, yards, golf courses, etc, into Midwestern rivers, which eventually ends up in the Gulf of Mexico.  Algae feasts on the nitrogen from the fertilizer creating large algae blooms which die off and are decomposed by bacteria.  The bacteria use oxygen in the water decomposing the algae creating a large zone of oxygen-less water.  Fish, including commercialized shellfish, die off or flee the area; leaving fisheries and fishermen with empty nets.  As illustrated below by Dan Swenson.     

Dead Zone Formation

There are a lot of causes for the dead zone, but many point their fingers at Midwestern agricultural practices as the main source of the nutrients entering the Gulf of Mexico.  While acknowledging the problem, the nation’s crop production relies upon fertilizers applied in those Midwestern states surrounding the Mississippi River and its tributaries.   

In response, Iowa created the Iowa Nutrient Reduction Strategy to begin addressing the problems set out in the 2008 Gulf Hypoxia Action Plan.  The Strategy’s outline is

A pragmatic approach for reducing nutrient loads discharged from the state’s largest wastewater treatment plants and major industries, in combination with targeted conservation practices to reduce loads from nonpoint sources such as farm fields.

Those directly affected by the dead zone will argue the voluntary conservation measures outlined in the Strategy do not go far enough and complain Midwestern farmers are unable to police themselves.  From a legal perspective, Midwestern farmers must realize that government regulations are probably around the corner if voluntary conservation practices do not work. 

In any event, the Strategy is Iowa’s first step onto the high wire across the competing interests of the Gulf of Mexico and U.S. crop production.   

A chart outlining the recommended conservation practices and how such practices may affect crop yields can be found at: Nutrient Reduction Strategy

Wet Weather Problems Pt II: Crop Insurance and Your Options

Posted in Crop Insurance

Flooded Field

 

To plant or not to plant?  It is a question several farmers are facing this year in those areas of the Midwest where the rain hasn’t let up and the rivers have overtopped their banks.  In some areas, the decision has been made for them.  In those areas where the fields are beginning to dry out, farmers are well advised to speak with their crop insurance agent to determine how their decision may affect their crop insurance eligibility.

In light of the situation, I went to Greg McInnis from Ambank Insurance, in LeMars, Iowa to get his take on the weather conditions in relation to farmers’ options under their federal multi-peril crop insurance policies.  Born and raised in Plymouth County, Iowa, Greg McInnis has been handling farmers’ crop insurance needs for over 20 years and is currently the Managing Agent at Ambank Insurance’s LeMars branch. 

Planting deadlines are important for crop insurance eligibility.  What are the planting deadlines for a farmer to be eligible for a crop insurance claim?

I am in Northwest Iowa and plant deadlines vary per the crop and by location.  The final plant date for corn (May 31st) has come and gona and soybeans (June 15th) is fast approaching.  However, you can still plant an insurable crop within 25 days after those dates if you are insured for late planting.  A late planting results in a 1% reduction in coverage for every day past the plant deadline.  You cannot insure a crop which is planted 25 days after the plant deadline for most crops.  

What options does a farmer have when prevented from planting prior to the final plant date?

When you are prevented from planting you have a Prevented Plant claim.  After ensuring you have given proper and timely notice of the claim, you are left with a couple of options.  

First, you could take a 100% loss on a Prevented Plant claim of the first crop and plant a cover crop after the final plant date.  Remember, you cannot harvest the cover crop and cannot hay or graze the cover crop until November 1 under this option.   

Second, you could plant a second crop after the late plant date of the prevented crop.  The second crop is fully insured at 100% of the premium.  However, the premium and indemnity on the first crop will be reduced to 35%.  

What options does a farmer have when the original crop was damaged by the weather this early in the season?

If you believe your original crop was damaged by wind, hail or excessive moisture, you need to notify your agent who will contact the Approved Insurance Provider (AIP).  Thereafter, the AIP will introduce three scenarios.

First, you could replant the acres if the AIP determines it is practical to replant.  The policy provides coverage for the cost of the replant and the replanted acres are insured for the same production guarantee of the original crop. 

Second, you can take a 100% payment for the original crop loss minus appraisal and plant a second non-insured crop.  The acres and loss of the original crop will be used on your Actual Production History (APH).  You must also report the acres and production  on the second non-insured crop but such information will not be used for APH purposes. 

Third, you could choose to plant and insure a second crop with 100% premium and indemnity.  However, similar to the prevented plant claim, the original crop insurance premium and indemnity would be reduced to 35%. 

The original crop premium and indemnity can be returned to 100% if there is no claim on the second crop. 

-

Greg emphasized that crop insurance eligibility and options are very case specific.  Anybody with questions on how they should proceed under their policy given the weather issues needs to meet with their insurance agent immediately. 

Greg McInnis can be reached by phone at 712-546-7821. 

For more information please check out the attached Prevented Plant Flow Chart   

 

 

Wet Weather Problems Pt. 1: Manure Application and Iowa Law

Posted in Farm Management, Government Regulations, Uncategorized

This spring it rains 3 days for every 1 day it doesn’t rain in Iowa.  At least it seems.manure tank with tractor  

While the headlines concentrate on the delayed planting and replanting caused by flooded fields, livestock producers are scrambling to find ways to drain holding ponds filling up with rainwater.   

Livestock operators can relieve pressure on the holdings ponds by applying the manure onto the neighboring fields.  Manure application is an important aspect of any operation’s manure management plan and violations for over application of manure nitrogen can result in substantial fines.  Consequently, operators have to be careful where they apply the manure based on the nitrogen allowances for a given field. 

Generally, manure application is simple enough once a plan is established.  However, this year the weather has delayed planting for many farmers in Iowa and some farmers may decide to plant soybeans in fields orginally planned for corn.  Iowa generally limits manure nitrogen to 100 pounds of available nitrogen per acre for land planted to soybeans, which may be dramatically less than the nitrogen already applied or to be applied by the livestock operator.     

Luckily, the Iowa Administrative Code provides for changes in a farmer’s crop schedule.  Chapter 65.17(6) of the Iowa Administrative Code provides:

“The confinement feeding operation owner shall not be penalized for exceeding the nitrogen or phosphorus application rate for an unplanned crop, if crop schedules are altered because of weather, farm program changes, market factor changes, or other unforeseeable circumstances. However, the penalty preclusion in the previous sentence does not apply to a confinement feeding operation owner subject to the NPDES permit program.”

Furthermore, the 100 pound manure nitrogen limitation for soybeans does not apply after June 1 of each year.  ICA 65.17(18)(c)  After June 1, the nitrogen rate would be based on the “optimum crop yields as determined by IAC 65.17(6)” and the corresponding Table 4 at the end of the chapter.    

The Iowa Administrative Code provides some flexibility for manure management issues caused by the wet spring in Iowa.  However, that doesn’t mean livestock operators don’t have to be careful in their manure applications under the current conditions and should always consult their certified crop adviser. 

For more information on these issues and tips see: Manure Management Concerns Caused by Recent Wet Weather.