Month: January 2010

Annie's Project Workshops Have Begun, But Still Time to Register for Several Workshops

Annie’s Project, a risk management program for women in agriculture, is being offered throughout Ohio over the next three months. Annie’s Project is a six-part course designed to strengthen women’s role in modern farm enterprises. The project’s namesake was a woman who grew up in a small rural community and spent her adult life learning how to be an involved, successful business partner with her husband. Annie’s daughter, Ruth Hambleton, became an Extension educator in Illinois and developed the program in 2000 in honor of her mother’s life experience. The program is for women who live and work in a complex, dynamic farm business environment, and it focuses on five broad aspects of risk typical in the agricultural setting: human, financial, marketing, production and legal.

This year, thanks to new collaborations with the Ohio Farm Bureau, Ag Credit, Farm Credit Services of Mid-America and the USDA Farm Service Agency, OSU Extension is offering 12 Annie’s Project workshops in areas around the state, with at least one in each of the organization’s newly formed Extension Education and Research Areas (EERAs). Registration cost is $65, which includes materials and meals or refreshments.

Ohio workshops are scheduled for January through March. Seating is limited, so early registration is encouraged. In most cases, workshops are sponsored by several county offices of OSU Extension; anyone residing in nearby areas may sign up for any of the workshops. To register or for more information, contact organizers listed below or Annie’s Project coordinators Julia Woodruff at woodruff.94@osu.edu or 419-627-7631 and Doris Herringshaw at herringshaw.1@osu.edu or 419-354-9050. A map of locations and other information can be found on the Erie County OSU Extension Web site, http://erie.osu.edu/ — click on “Women in Agriculture.”

Workshops are being hosted in the following counties:

— Erie County (Erie Basin EERA). Wednesdays 5:30-9:00 p.m. , Jan. 6 – Feb. 10. Recreation Center, 110 Cherry St., Bellevue. Contact Julia Woodruff at woodruff.94@osu.edu or 419-627-7631.

— Knox County ( Heart of Ohio EERA). Tuesdays 5:30-9:00 p.m. , Jan. 21 – Feb. 25, Knox County office of OSU Extension, 1025 Harcourt Road, Mt. Vernon. Contact John Barker at barker.41@osu.edu or 740-397-0401.

— Morgan County (Buckeye Hills EERA) . Mondays, 6-9 p.m., Jan. 25 – March 1. Morgan High School Vo-Ag Room, State Route 376, 3.2 miles south of McConnelsville. Contact Chris Penrose at penrose.1@osu.edu or 740-962-4854.

— Auglaize County (Top of Ohio EERA). Thursdays, 6-9 p.m., Jan. 28 – March 4. Auglaize County Administration Building, 209 S. Blackhoof St., Wapakoneta. Contact Lois Clark at clark.21@osu.edu or 419-738-2219.

— Wyandot County (Erie Basin EERA). Mondays 5:45-9 p.m., Feb. 1 – March 8. Solid Waste Management District Meeting Room, 11329 County Road 4, Carey. Contact Chris Bruynis at bruynis.1@osu.edu or 419-294-4931.

— Ross County (Ohio Valley EERA). Tuesdays, Feb. 2 – March 9. Ross County Service Center, 475 Western Ave., Chillicothe. Contact Dave Mangione at mangione.1@osu.edu or 740-702-3200.

— Defiance County (Maumee Valley EERA). Tuesdays and Thursdays, 4-6 p.m., Feb. 2 – 18. Defiance County office of OSU Extension, 6879 Evansport Road , Defiance . Contact Barb Rohrs at rohrs.3@osu.edu or 419-782-4771.

— Ashtabula County (Western Reserve EERA). Saturday, Feb. 6, and Thursdays 6-9 p.m. Feb. 11 – March 4. Ashtabula County office of OSU Extension, 39 Wall St. , Jefferson. Contact Abbey Averill at averill.10@osu.edu or 440-567-9008.

— Stark County (Crossroads EERA). Tuesdays 6-9 p.m., Feb. 9 – March 16. USDA Service Center, 2650 Richville Drive SE, Massillon. Contact Maureen Austin at austin.238@osu.edu or 330-830-7700.

— Montgomery County (Miami Valley EERA). Tuesdays, 6-9 p.m., Feb. 23 – March 30. Miami Valley Career Technology Center, 6800 Hoke Road, Clayton. Contact Suzanne Mils-Wasniak at mills-wasniak.1@osu.edu or 937-224-9654.

— Fairfield County (Heart of Ohio EERA). Tuesdays 1-4 p.m., Feb. 9 – March 16. Fairfield County Agriculture Center, 831 College Ave. (off Rt. 37), Lancaster. Contact Cora French-Robinson at : french-robinson.1@osu.edu or 740-653-5419.

– – Wood County (Erie Basin EERA). Tuesdays, time to be determined, Jan. 12-Feb. 16. Note: The workshop in Wood County will be focused on risk management topics specific to the green industry. Wood County office of OSU Extension, 639 S. Dunbridge Road , Bowling Green . Contact Beth Fausey at fausey.11@osu.edu or 419-354-6916.

Focus Issues in Labor

For almost a decade, Ag & Hort has participated in the FALCON interagency network’s annual Pre-Season Ag Conference for producers, labor and agencies in agriculture. The Conference reviews programs and services for the coming season and seeks to identify and address industry issues. The Pre-Season provides a forum for expressing opinions, concerns and possible solutions toward a successful season for all. Perspective and context are essential to a positive approach. And the expression and understanding of the views of all stakeholders has served as a strong basis for discussion.

Priority Issues Held in Common by Both Producer and Labor:

(1) Availability or lack of sufficient labor; (2) Ohio crops and employment available to workers; (3) Proper form of documentation/amnesty of “legal” labor.

Worker Concerns, as Viewed/Reported by Producers:

(1) Workers in supply states need more information on available Ohio crops/work before they travel north; (2) Workers also need information on services available through agencies; (3) Workers may need emergency services for car/travel enroute from supply states; (4) Workers sometimes need money for travel expenses enroute or family needs when they first get into Ohio. Growers sometimes provide cash advances to address this. (5) Families often don’t mix well with singles in the same labor housing.

Producer Issues, as Viewed/Reported by Farmworkers and Agencies:

(1) Need for sufficient skilled labor; (2) Sufficient interaction and communication with labor to be aware of their issues/problems; (3) Language gap between producers and labor could be improved by training farm labor contractors (crew leaders) and other lower management; (4) Producers need to identify provider for WPS pesticide training of labor, like AmeriCorps; (5) Producers need workers with good documents and good work ethics and values.

Good communication and interaction in the workplace will help lead both producer and labor to more positive results. The observations above also serve as a backdrop to recruitment efforts.

2009 Income Tax Planning for Dairy Farmers

Most dairy producers are glad see the end of 2009 and are looking forward to better conditions in 2010. Even though many farm families will have net operating losses, income tax management is still an important issue that must be high on the “to-do” list.

Why are income taxes a concern if a farm lost money this year?

It is possible for a farm that lost a considerable amount of money to have a positive cash farm income for tax purposes, and owe income taxes…and not have the dollars available to pay them.

How could a farm lose money all year and still owe income taxes?

This depends on how the family has been able to handle their cash shortfall. If the farm is current on their bills because they used savings, a line of credit or another loan to pay those expenses in 2009, then the expenses are deductible in the 2009 tax year. But, if the farm has open accounts, those dollars are not deductible expenses until they are paid.

What do you mean by open accounts?

Normally, a farm will purchase feed, supplies, parts, or services and then be billed for them. Current accounts are those which are paid within 30 days. Once the balance due has been unpaid for more than 30 days, it is considered an “open” account. After 30 days there is usually an interest charge on the dollars owed to the business. If the vendor is willing to extend this type of credit to a customer so they can keep purchasing inputs, these open account balances could become quite high.

Since the farm owes the money and will pay it eventually, why can’t they deduct the expenses now?

For tax purposes, the farm business that uses cash-based accounting can’t deduct the expenses until they have actually paid for them. If a line of credit is used to pay the expense, or the payment is financed with a longer term loan, it is considered paid for tax purposes. As the line of credit or loan is paid off, only the interest on that repayment is deductible, not the principal paid…because it represents that expense already deducted on the farm’s taxes.

Back to the original question, how can a farm that lost a lot of money still owe income taxes?

This is the frustrating situation that many unsuspecting families may face this year. Income was low and there were not enough dollars from the sale of milk, cull cows, crops, whatever, to stay current on their bills. If they did not have access to other dollars, their open accounts built up instead. All their dollars went to paying as many bills as they could plus family living expenses.

Even though their income could not cover everything, they can’t deduct the expenses they incurred but couldn’t pay for, those open accounts. On paper, that can leave them with a positive net farm income (their family living expenses are not deductible) for which they could owe income and self-employment taxes…and there isn’t money to pay for them.

What about farms that were able to stay current on their accounts but will still have a loss this year?

They will also need to be working with a good income tax practitioner. When there is a net operating loss, there are opportunities to either carry that loss back or forward to offset an income tax liability in a previous or future year. Since 2007 was an excellent year for many dairy farm families, there may be an opportunity to carry a loss back which would generate an income tax refund.

What if a farm won’t generate a refund by carrying a loss back?

If carrying this year’s net operating loss back will not generate an income tax refund, then the farm can elect to carry it forward for up to 20 years… in other words they could “save it” to use in a future good year.

How do you make these decisions?

This is not an easy question! You can’t simply say “I have a $50,000 net operating loss this year and I had a $50,000 net operating income 2 years ago, that would offset each other, so I’ll carry it back.” There are deductions that were made when calculating the previous years’ tax liabilities that will have to be adjusted for a carryback decision. This is probably one of the areas that we should say “this should be done by a professional!”

Timeliness of this decision is also critical. If the farm decides to carry this year’s loss forward, because it will result in little or no tax refund if carried back, then the election to forgo the carryback must be made on a timely filed tax return.

Where does a family find help with these issues? It sounds like they will have to get on top of this as soon as possible!

Even if a farm uses a tax professional to help them make good decisions and prepare their taxes, farm managers should also read up on current tax management issues. Two good sources of information are the IRS’s Farmers Tax Guide, available at your local Extension office, and Purdue Extension’s “2009 Income Tax Guide for Farmers” which can be downloaded at

http://www.agecon.purdue.edu/extension/pubs/taxplan2009.pdf

Future Trends for Profitability in Agriculture Conference

OSU Extension is pleased to announce the Future Trends for Profitability n Agriculture Conference will be held in Wyandot County on February 9, 2010.  At this conference, participants will learn future trends that will affect agriculture and strategies to capture profits as a result of these trends.  The workshop will be held at the Wyandot County Fairgrounds, Masters Building 10171 State Route 53 N located in Upper Sandusky, Ohio just south of US 23. The cost is $35.00 per person for registrations postmarked by January 29 and $45.00 for late or at the door registration. Registration opens at 8:30 a.m. with the meeting beginning at 9:00 a.m.

Speakers for this workshop include Dr. Danny Klinefelter from Texas A&M University speaking on the ten best farm management practices as well as peer advisory groups and alternative business arrangements; Dr. Brent Sohngen from The Ohio State University speaking about profiting from ecosystem services: a review of opportunities in new and emerging environmental markets; and Dr. Corinne Alexander from Purdue University speaking about adding value to your crops: ideas for specialty markets and commodity markets.

Participants will also have the opportunity to hear from the sponsors on other critical issues and trends affecting their clientele. Workshop sponsors include Ag Credit and Country Mortgages, Farm Credit Services, Silveus Insurance Group, Ohio Farm Bureau, and The Ohio State University Extension. See flyer at

http://extension-cms.cfaes.ohio-state.edu/counties/wyandot/topics/agriculture-and-natural-resources/2010/Future%20Trends%20Meeting%20Flyer.pdf

for more details.

For additional information on the key program speakers, please read their bios below:

Dr. Danny Klinefelter is a Professor and Extension Economist at Texas A&M University, specializing in agricultural finance and management development. He is the director of The Executive Program for Agricultural Producers (TEPAP), co-director of the Texas A&M Family and Owner-Managed Business Program, and co-director of the Texas A&M: Texas Tech Agricultural Lending School. In addition, he serves as the Executive Secretary for the Association of Agricultural Production Executives (AAPEX). He is also the coordinator of the Planning the Return to the Farm Program and a member of the board of the Global Agricultural Business Forum. Prior to his graduate work, he spent five years in commercial lending, credit analysis, and farm management with the Marine Bank of Springfield, Illinois.

Dr. Brent Sohngen is a Professor of Environmental and Resource Economics in the Department of Agricultural, Environmental and Development Economics at The Ohio State University. Sohngen conducts research on the economics of land use change, the design of incentive mechanisms for water and carbon trading, carbon sequestration, and non-market valuation of environmental resources.

Associate Professor Corinne Alexander serves as an Extension specialist in the area of grain marketing at Purdue University. Her goal is to assist farmers and agricultural businesses with the marketing of their grain both in commodity markets and in specialty markets.

Federal Estate Tax in Limbo for 2010

It is 2010, and there is officially no Federal Estate Tax. Why and for how long? While the House recently passed a bill to reinstate the federal estate tax in 2010, U.S. Senators failed to reach a deal to temporarily extend the estate tax into 2010. The extension proposed by the House would have kept the 2009 estate tax levels in place. If the bill passed in the House becomes law, the first $3.5 million of an estate will be exempt from federal estate tax and the estate tax rate on the taxable portion of an estate would be 45%. Senate Republicans want a permanent extension to a $5 million exemption and an estate tax rate of 35%. If no compromise can be reached, we may continue with existing law.

Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the federal estate tax exemption increased during the past decade from $1 million to its 2009 level of $3.5 million and the maximum rate decreased from 55 percent to 45 percent. In 2010, there is a full repeal of the federal estate tax. Starting in 2011, the federal exemption is scheduled to revert back to $1 million.

The lack of movement by Congress could cause a huge TAX headache for many of Ohio farm families if someone dies before a compromise can be reached. This is mainly due to the fact there will be only a limited step-up in basis. Under current federal estate tax laws (prior to 2010), the assets of the deceased get a step-up (or step-down) in basis to the fair market value at date of death (or 6 months later). The step-up simply means when heirs sell an inherited asset, they only owe capital gains tax on the asset’s appreciation from the day the asset was inherited to the date of sale rather than from the day the asset was originally purchased by the decedent.

In 2010, if the federal estate tax remains repealed, the step-up in basis is limited to $1.3 million for the overall estate, plus $3 million for assets transferred to a surviving spouse. The Executor will be able to add this extra basis to the existing basis of the property. This means that Executors or heirs will have the added complexity of determining the prior basis of the property, which might go back many years or even generations.

With the value of many of our farm estates, the lack of full basis step-up could trigger larger capital gains for farm families who inherit farm assets. As a reminder, tax liability due to capital gain is not triggered until sale of the appreciated asset. If the asset is inherited this tax will not be assessed until later when and if the asset is sold. It also may pass through another estate settlement (before it is sold) which may allow for the full step in basis if Congress passes legislation to allow such (as was allowed prior to 2010). The tax assessed on capital gain is calculated on only the appreciated amount and currently is at a much lower rate (10 to 15%) than the federal estate tax rate.

So what is on the horizon? It appears the full repeal of the federal estate tax in 2010 may be very short lived in 2010. Senate Finance Chairman Max Baucus, D-Mont., and House Ways and Means Chairman Charles Rangel, D-N.Y., have said they will try to repeal the repeal and get the federal estate tax reinstated retroactively for 2010 after the New Year. This will cause confusion, uncertainty and possibly very large tax headaches for those families who have someone pass between Jan 1, 2010 and whenever Congress reaches a compromise. Families in that situation who are inheriting estates exceeding $3.5 million (or for whatever $ level the new federal estate will be) may be surprised when they owe a large federal estate tax bill if the law is changed retroactively.

Farm families are encouraged to meet with professional council and monitor how these changes may affect their estate plan and be watching for further updates in the Ohio Ag Manager newsletter.

Two New Agriculture Blogs Available for Agricultural Producers

OSU Extension has unveiled two new agriculture blogs for agricultural producers in Ohio. These blogs have been developed to provide producers with timely updates in agricultural law and in succession planning. Producers can subscribe to have each new blog post delivered by e-mail.

Ohio Agricultural Law Blog

The Ohio Agricultural Law Blog is located at http://ohioaglaw.wordpress.com/ and is an outreach project of the Agricultural & Resource Law Program at The Ohio State University, a program supported by OSU Extension.  The blog updates Ohioans on legal issues affecting Ohio’s farms, food, animals, land and resources. Blog posts cover court cases, statutes, and legal issues from Ohio and around the country. The primary blog author is Peggy Kirk Hall, attorney and director of the OSU Agricultural & Resource Law Program.   She serves as the Chair for the Ohio State Bar Association Agricultural Law Committee and teaches Agricultural Law, AEDE 470, in the College of Food, Agricultural and Environmental Sciences at The Ohio State University. Additional information and resources on the program can be found at http://aede.osu.edu/programs/aglaw . More information about this blog can be obtained by contacting Peggy Kirk Hall at aglaw@osu.edu .

Ohio Farm Succession Blog

A team of OSU Extension faculty and staff are dedicated to helping farm families as they transition their family business to the next generation. The Ohio Farm Succession Blog is located at: http://ohiofarmsuccession.wordpress.com/ . This blog shares updates on estate planning legislation and tax changes which could affect the transfer of the farm business and provides information on educational programs on succession planning offered for Ohio farmers. Our team encourages producers to blog their thoughts and experiences in farm succession and share resources which can help families transition their business to the next generation. More information about this blog can be obtained by contacting David Marrison at marrison.2@osu.edu

Happy Blogging!