Expansion of the 1099 Reporting Requirements Repealed by Congress

by: David Marrison, OSU Extension Educator

Last May, the Ohio Ag Manager shared an article titled, The Impact of Section 9006 of the Patient Protection and Affordable Care Act on Agriculture (May, 2010) discussing the new 1099 reporting requirements in the Health Care Bill. At the time of the article, we promised to update subscribers of the Ohio Ag Manager, if a repeal happened. Thankfully for many agricultural businesses, President Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (H.R. 4) on April 14, 2011. This resolution repeals the expanded 1099 reporting provisions of the Patient Protection and Affordable Care Act (passed in March 2010) and Small Business Jobs Act (passed in September 2010).

In March 2010, the Patient Protection and Affordable Care Act sought to expand the 1099 reporting requirements (beginning in 2012) to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, including corporations (other than a payee that is a tax-exempt corporation) and to include payments made for property (was only for services not goods, previously). H.R. 4 signed by the President repeals this 1099 reporting expansion. Under the proposed rules, a 1099 would have to be issued by a farm business to any business or individual who the farm purchases tangible goods. For example, Farmer Jones purchases 25 tons of lime valued at $760 worth from XYZ Lime and Farmer Brown purchases $700 of baler twine from RU-Ready Farm Supply, both would Farmer Jones and Farmer Brown would be required to issue 1099s for these purchases. The new rules would have required the farm to issue 1099s to corporations as well. 1099s would have to been issued for purchases of goods or services from any source. This would have required millions of additional forms to be issued from the farm sector.

The Small Business Jobs Act (passed in September, 2010) enacted a requirement that individuals who receive rental income must issue Forms 1099 to service providers for payments of $600 or more. It required landlords to obtain proper taxpayer identification numbers from service providers such as plumbers, painters, roofers and accountants who were paid over $600. This provision was to apply to any payment made after December 31, 2010. H.R. 4 strikes this requirement in its entirety placing individuals who receive rental income in the same position as if the expanded information reporting requirements had never been enacted.

A reminder on what was not repealed
The expanded reporting requirements from the Patient Protection and Affordable Care Act and the Small Business Act have been repealed, but do not think that it repeals all Forms 1099-MISC. If you are in business, you still must issue a Form 1099 to anyone whom you pay $600 or more for services during the course of the year. Namely, under IRC § 6041(a), “All persons engaged in a trade or business and making payment in the course of such trade or business to another person” of $600 or more must report the amount and the name and address of the recipient to the IRS and to the recipient. The Code applies this requirement to payments of “rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income,” and the Treasury regulations add, “commissions, fees, and other forms of compensation for services rendered aggregating $600 or more” as well as interest (including original issue discount), royalties and pensions (Treas. Reg. § 1.6041-1(a)(1)(i)). This required information must be reported each calendar year for payments made during that calendar year.

H.R. 4 did not repeal the increase in the information reporting penalties that were mandated by the Small Business Jobs Act. The first-tier penalty under IRC § 6721 for failure to timely file an information return was increased from $15 to $30, and the calendar-year maximum from $75,000 to $250,000. The second-tier penalty was increased from $30 to $60, and the calendar-year maximum from $150,000 to $500,000. The third-tier penalty was increased from $50 to $100, and the calendar-year maximum from $250,000 to $1,500,000. For small business filers, the calendar-year maximum increased from $25,000 to $75,000 for the first-tier penalty; from $50,000 to $200,000 for the second-tier penalty; and from $100,000 to $500,000 for the third-tier penalty. The minimum penalty for each failure due to intentional disregard increased from $100 to $250. The increased penalties will be adjusted for inflation every five years. The increased penalty amounts were effective Jan. 1, 2011, and remain in effect after the repeal of the expanded 1099 reporting requirements.

Marrison, D.L.The Impact of Section 9006 of the Patient Protection and Affordable Care Act on Agriculture (May, 2010).

President Signs Repeal of Expanded 1099 Requirements. http://www.journalofaccountancy.com/Web/20114071.htm

Journal of Accountancy: http://www.journalofaccountancy.com/

William Perez, Expanded 1099-MISC Reporting Repealed. April 10, 2011

Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011. http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.4:

State Hearing Officer Recommends Denying CAFO Permit Application for Hi-Q

In a case of first impression for Ohio, a hearing officer for the Ohio Department of Agriculture (ODA) is recommending that the ODA Director deny a CAFO permit application because it does not contain final recommendations on infrastructure improvements from county and township officials.  The recommendation came as a result of a hearing on Hi-Q’s permit application that took place last December, after ODA’s previous Director, Robert Boggs, notified Hi-Q of his intent to deny the application for failure to include the local governments’ recommendations on infrastructure.

The ODA hearing officer reviewed the notice of intended denial and Hi-Q’s permit application and agreed that the application was not complete.  Ohio’s Livestock Environmental Permitting Program requires Hi-Q to attach to its application for a permit to install and permit to operate a facility the ”written statements from the board of county commissioners of the county and the board of township trustees of the township in which the facility will be located, certifying that, in accordance with those sections, the applicant has provided the boards with the required written notification and that final recommendations, if any, regarding improvements and costs of improvements have been made by the boards.”  OAC 901:10-1-02(A)(6).  According to the hearing officer, Hi-Q’s application did not include the county and township recommendations.

Hi-Q’s attorneys argued that the proposed poultry facility’s permit was complete and that the Union County and York Township officials had failed to abide by the permitting program requirements by refusing to give recommendations.  The apparent point of disagreement between the two sides relates to the fact that Hi-Q changed its transportation route after receiving written recommendations and requirements from the county and township on Hi-Q’s original proposed transportation route.  The county and township recommended that Hi-Q complete over $7 million in road improvements and pay $132,000 annually for maintenance of the original route.  Hi-Q then proposed a new transportation route; the county and township never made final recommendations for improvements necessary for the new route.  Both sides claim that the other side refused to discuss or agree upon recommendations for the new route.

In reaching its recommendation to deny the permit application on the basis of incompleteness, the ODA hearing officer stated that “[t]his matter garnered widespread media attention and polarized emotional support and opposition.  The facts material to this recommendation are, however, essentially undisputed.”

The hearing officer’s recommendation will be forwarded to James Zehringer, the new Director of ODA appointed by Governor Kasich.  Zehringer has the authority to make the final decision on whether to grant Hi-Q’s application.  If the Director denies Hi-Q’s permit for failure to contain the local governments’ recommendations, it will be the first time that local reaction to a proposed facility has negatively impacted a facility permit application in Ohio.  Local opponents to CAFOs have unsuccessfully fought permit applications in many instances, but had no legal basis for denial.  According to Ohio law, the ODA must approve a permit application if the applicant meets all of the requirements of the Livestock Environmental Permitting Program (LEPP); the only requirement involving the local community is the infrastructure recommendation provision that is at issue in the Hi-Q application. 

A change to LEPP’s local government provision may occur, however, if the ODA follows recommendations recently passed by the agency’s Concentrated Animal Feeding Facilities Advisory Committee.  The committee recently approved a proposal in March that recommends giving local government officials a 75-day limit to file their responses to a permit application.  The application could proceed through the approval process if the local governments don’t respond within the 75-day window.  The 75-day recommendation by the committee would require legislative action by the Ohio General Assembly.

Read the Hi Q ODA Hearing Officer Recommendation or visit the Ohio Livestock Environmental Permitting Program.

Update on Ohio Livestock Care Standards

Board nears completion of standards for farm animal care

The Ohio Livestock Care Standards Board accepted an enormous task nearly a year ago when charged with the responsibility of developing rules for the care and well-being of livestock in Ohio.  Since that time, the board has proposed numerous standards on topics ranging from euthanasia to housing.  To date, two sets of the board’s standards have completed the rulemaking process and are now effective.  Several others await either final approval by the board or review by the Ohio legislature’s Joint Committee on Agency Rule Review (JCARR).  The following summarizes the board’s progress.

1.  Livestock care standards developed by the board that became effective on January 20, 2011 include:

  • Euthanasia.  The standard outlines acceptable euthanasia methods for each species of livestock, and provides guidelines for use of each method of euthanasia.  See the final regulation in the Ohio Administrative Code, Section 901:12-1.
  • Civil penalties.  The rule establishes penalties and a notification procedure for violations of the livestock care standards.  Violations rnage from minor–punishable by a penalty of up to $500 for a first offense and $1,000 for subsequent offenses within 60 months of the first–to major–punished by a civil penalty of $1,000 to $5,000 for a first offense, and $5,000 to $10,000 for each subsequent offense within 60 months of the first.  A major violation is one that imperils the animal’s life or causes protracted “disfigurement,” “health impairment,” or “loss or impairment of the function of a limb or bodily organ.”  See the final rule at OAC Section 901:12-2.

2.  Livestock care standards submitted by the board and awaiting final review by JCARR:

  • General considerations for the care and welfare of livestock.  Establishes general management requirements for all livestock, including  feed and water, management, health and transportation.  Key provisions in this standard:
    • Housing, equipment and handling facilities must minimize bruises and injuries.
    • Restraints must be minimal. 
    • Handling devices must be humane.  Electric prods are permissible if hand held, battery powered and 50 volts or less, but may not be used on poultry, equine, alpacas, llamas, calves weighing less than 200 pounds, pigs weighing less than 35 pounds, on sensitive areas or on non-ambulatory disabled animals.    
    • Malicious or reckless throwing, dragging or dropping of an animal is prohibited, but minimal dragging  of a disabled animal may occur in certain circumstances. 
    • Picking up or carrying an animal by its ears or tail is prohibited, as is pulling an animal’s legs in positions or directions that cause distress to the animal.
    • Animals must be monitored regularly and steps must be taken when evidence of disease, injury, or parasites is present. 
    • A “Veterinary-Client-Patient-Relationship” is necessary to obtain and administer prescriptive drugs to livestock. 
    • Health and medical practices must be performed humanely. 
  • Disabled and Distressed Livestock.  The proposed rule sets forth standards of care for distressed and disabled livestock, including disabled “downer” livestock, which the rule refers to as “non-ambulatory disabled” animals.  Action must be taken to address an animal’s situation, either by caring for, monitoring, treating, transporting, slaughtering or euthanizing the animal.  The rule prohibits loading a disabled, non-ambulatory animal for transport to a non-terminal market or collection facility.  If a disabled or distressed animal is at a non-terminal market or collection facility and there is no option for immediate sale, standards of care must be provided or the animal must be released or euthanized.  The owner must keep records of treatments, medications and withdrawal times. 

3.  Standards in draft form and currently open to public comment include:

  • Standards for Individual Species.   In addition to the general consideration standards for all livestock, the board has proposed individual standards for goats, sheep, turkeys, poultry, swine, beef, dairy, veal, equine, alpacas and llamas.  The individual standards address unique needs and issues regarding feed and water, management and transportation for each specie.  Key issues addressed in the individual standards include:
    • Providing newborns with colustrum or colustrum replacement within the first 24 hours.
    • Standards for pen sizes, housing materials, lighting, air circulation, breeding and birthing pens and outdoor pens.  Of interest in these standards:
      • Restrictions on the use of gestation crates for swine after December 31, 2025.
      • For new farms not in existence on the rule’s effective date, prohibition of conventional poultry battery cages that do not provide areas for nesting, scratching, perching or bathing.
    • Management of groups of animals.
    • Standards for tethering, dehorning, castrating, shearing, induced molting, tail docking and treatment of tusks, beaks, teeth, hooves and toes.  Of particular interest in these standards:
      • Restrictions on tethering and requirements for group housing of veal calves after December 31, 2017.
      • Beginning January 1, 2018, tail docking of dairy cattle may occur only if medically necessary and performed by a licensed veterinarian.

To review the standards and the status of the work by the Ohio Livestock Care Standards Board, visit this website.

Suggestions for Current Farm Safety Net Programs While Cutting Cost

This paper presents proposals for the current farm safety net. They are intended to stimulate discussion, and can be considered individually or in any combination. Some combinations would need to address potential overlap issues. Each proposal is focused on
the management of risk and is guided by the following principles:

(1) Public assistance at some level as determined by government is provided only when a risk occurs that results in a financial loss.

(2) Public assistance should not exceed a farm‘s loss associated with occurrence of a risk.

These principles are derived from the principles for a risk management farm safety net developed in the following paper: Designing a Safety Net for 21st Century Farming (Carl Zulauf,)

Carl Zulauf, Ag. Economist, Ohio State University, OSU AED Economics


This paper addresses the question, ―Starting from a blank blackboard, what, if any farm safety net is acceptable based on economic principles and the current 21st Century status of the U.S. farm sector?‖ Incomplete farm insurance markets are identified as a rationale for discussing a 21st Century U.S. farm safety net. The incomplete insurance markets are attributed to the existence of systemic risk in U.S. farming. A farm safety net is proposed to
address the incomplete insurance markets that result from systemic risk
Click here to read the entire paper.

by Carl Zulauf, Ag. Economist, Ohio State University, OSU AED Economics

Economic Impacts of Veterinary Medicine in Ohio

This research paper defines and quantifies selected economic factors associated with the veterinary medical profession in Ohio. Food animal agriculture is already a significant force within the state‟s economy. Veterinary medical professionals help maintain the health and well-being of both food animals and companion animals.

In addition, the profession contributes expertise through various activities designed to assure a safe food supply for all citizens. The veterinary medical profession is of particular significance for all Ohio citizens because of the role veterinary medical professionals‟ play in helping assure a safe food supply and maintaining the health of food animals and companion animals.

This research highlights the direct economic contribution of veterinary medicine and analyzes the geographic distribution of practicing veterinarians within Ohio. Click here to learn more about the value of the veterinary medicine industry in Ohio.

by Dr. Tom Sporleder,Professor of Agribusiness and Farm Income Enhancement Endowed Chair, AED Economics Department, The Ohio State University College of Food, Agriculture, and Environmental Sciences, Columbus, Ohio.

Market Forces and Changes in the Plant Input Supply Industry

The plant input supply industry is composed of many diverse segments and companies that supply farmers with seed, nutrients, pesticides, machinery, capital, labor, and many other inputs. We explore the impact of the major forces driving change using examples from different segments and companies of the industry. Click here to read the entire article.

Kent Olson (kdolson@umn.edu) is Professor, Department of Applied Economics, University of Minnesota,St. Paul, Minnesota. Michael R. Rahm (mike.rahm@mosaicco.com) is Vice President, Market and Strategic Analysis, The Mosaic Company, Plymouth, Minnesota. Michael Swanson (Michael.J.Swanson@wellsfargo.com) is Vice President and Agricultural Economist, Wells Fargo, Minneapolis, Minnesota.

Forces Affecting Change in Crop Production Agriculture

Major crop production businesses face significant change today, including increasing and diverse global demand, new technologies, resource limitations and heightened societal expectations. Porter’s Five Forces analysis can be used to examine these economic conditions, opportunities, and threats. Crop production businesses are adapting to this changing competitive landscape. Click here to read the entire article.

Elizabeth A. Bechdol (beth.bechdol@icemiller.com), is Director of Agribusiness Strategies, Ice Miller LLP, Indianapolis, Indiana. Alan Gray (gray@purdue.edu) is Professor Department of Agricultural Economics and Director of the Center for Food and Agribusiness and MS-MBA program, Purdue University, West Lafayette, Indiana. Brent Gloy (bgloy@purdue.edu), Associate Professor Department of Agricultural Economics and Associate Director of Research of the Center for Food and Agricultural Business, Purdue University, West Lafayette, Indiana.
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