Lamson, Dugan and Murray, LLP, Attorneys at Law

State Senator Proposes One Board To Rule All Water Issues In Nebraska

Posted in Government Regulations, Water Law

On January 21, 2014, Nebraska State Senator Bill Avery, introduced a bill (LB1005), which would create a board to govern the use of surface and groundwater.  Currently, surface water is controlled by the State’s Department of Natural Resources while groundwater is regulated by 23 Natural Resource Districts (NRDs).

Recognizing a direct connection between surface water and ground water, Avery believes one board would provide a consistent regulation over the state’s water resources.  The bill would create the Surface Water and Ground Water Review Board to review and approve all ground and surface water uses, water well permits and water management activities.

The various NRDs are skeptical that one board of 10 volunteers can handle all of Nebraska’s water issues including “summarizing yearly water usage on more than 8.5 million irrigated acres and assessing consumptive use, water supply and regional and local aquifer trends.”  Nate Jenkins of the Upper Republican NRD, questioned ”whether a board of 10 volunteers, presumably people who also have busy careers, would have the time to adequately address all of these tasks.”  Via Lincoln Journal Star.

Sen. Avery is confident one board to rule all water issues will be more efficient and consistent.  Sitting on top of the nation’s largest aquifer, Nebraska’s regulation of its water resources is important for the entire country.

water drop

Crop Insurance Agents: No Rebates Allowed

Posted in Crop Insurance, Government Regulations

No entry glossy stickerIncentives work.  Trust me, I use incentives all the time to get my three year old to sit still, eat his dinner, and stop asking me “why?”  So why don’t you ever see crop insurance agents incentivizing clients with bargains on premiums?

Incentives on crop insurance rates, no matter how small, are not allowed.  In the crop insurance world such incentives are called “rebates” and offering rebates is illegal under the Federal Crop Insurance Act and Nebraska statutes.  7 U.S.C. Sec. 1508(a)(9) and Neb.Rev.Stat. 44-361

To most, the term rebate means a refund of a certain portion of the price you paid on a specific item.  However, the federal government and Nebraska define “rebate” more broadly.  For purposes of selling crop insurance the term “rebate” extends to ”any benefit (including money, goods or services for which payment is usually made), discount, abatement, credit, or reduction of the premium named in the insurance policy and any other valuable consideration or inducement not specified in the policy.”  Standard Reinsurance Agreement Pg. 7.

So don’t expect your agent to be offering you any discounts or deals on your crop insurance premiums when you sign up this year.  More importantly, be leery of any agent who does as accepting an incentivie may affect the validity of any subsequent crop insurance claim.

EPA Proposing New Pesticide Safety Measures

Posted in Government Regulations

The Environmental Protection Agency (EPA) is looking to implement new safety measures for handling and applying pesticides on the nation’s farm ground.  The proposed changes come on the heels of an “Agricultural Health Study” of pesticide impacts on human health overseen by the EPA, USDA, National Institute of Health and the National Institute for Occupational Safety and Health.

The proposed changes would include making pesticide protection training for applicators an annual requirement rather than once every five years.  Furthermore, children under 16 would be prohibited from handling pesticides unless they are member of a family farm.  No-entry buffer zones for fields treated with pesticides would be increased from 25 feet to 100 feet to limit exposure to overspray and fumes.  Finally, the EPA would expand requirements for posting warnings on new treated fields.

The study of approximately 90,000 people from Iowa and North Carolina linked pesticides use to health problems of various cancers and Parkinson’s disease.  It is likely the EPA views the proposed measures as a step, rather than a cure, in addressing the problems with handling pesticides.  Additional safety measures may be in the future as the impact of pesticides is further researched.

Public comments will be accepted before finalizing a decision on the proposed safety rules.

It Was Bound to Happen: Farmer Sues Neighbor for GMO Contamination

Posted in Biotechnology, Crop Damage Claims, Farm Management, Government Regulations, Organic and All Natural

canola field

Everybody saw it coming.  Sooner or later an organic farmer was going to sue a neighbor for genetic contamination of an organic crop.  It has happened in Western Australia when Steve Marsh sued his neighbor, Michael Baxter, for allegedly contaminating Marsh’s organic fields.  RT.com  The case will be monitored as groundbreaking for future cases worldwide.

Marsh alleges that wind blew Baxter’s Roundup Ready canola onto Marsh’s farm resulting in a loss of organic certification on approximately 70 percent of Marsh’s land.  Unlike the USDA’s National Organic Program, the National Association for Sustainable Agriculture Australia (NASAA) has a zero tolerance for genetically modified material when certifying land for organic farming.

Marsh’s attorneys allege Baxter recklessly planted his genetically modified canola crop in adjoining fields and failed to contain the GM seeds.  They also claim Baxter knew the canola seeds would naturally escape and contaminate neighboring fields.

Baxter’s attorneys counter the canola was planted within all buffer zone and notice requirements implemented by the Western Australian government since GM canola cultivation was allowed in 2010.

The lawsuit has global implications even though it will have no binding legal precedent outside Australia.  In the event Marsh prevails, organic farmers will have a model in which to build their claims for GM contamination.  However, a win for Marsh may result in Australia ditching the zero-GMO standard for organic certification to accomodate the growing use of genetically modified crops.

 

 

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.