In response to the recent drinking water ban in Toledo, three senators from Ohio’s Lake Erie counties have introduced SB 356 to expand and accelerate fertilizer certification legislation passed earlier this year. Senators Brown, Cafaro and Turner’s proposal would add “manure” to the definition of “fertilizer” for purposes of the fertilizer certification program enacted this May in SB 150. Whether or not manure applications should fall under the
Month: August 2014
ARC-CO and PLC Payment Indicator Using August WASDE U.S. Yield and Price
By: Carl Zulauf, Professor, Ohio State University, and Gary Schnitkey, Professor, University of Illinoi at Urbana-Champaign
The 2014 farm bill gives Farm Service Agency (FSA) farm owners the option to choose their crop program for the 2014 through 2018 crop years. A factor, perhaps key factor that will influence this decision is the payment by the program choices for the 2014 crop year. This article uses the just released U.S. yield and price estimates in the August 2014 World Agricultural Supply and Demand Estimates (WASDE) to calculate an indicator of potential payments by the Agriculture Revenue Coverage – county program (ARC-CO) and the Price Loss Coverage (PLC) program. The indicator estimates are for the 2014 crop year for barley, corn, oats, long grain rice, medium (and short) grain rice, sorghum, soybeans, and wheat. These are indicator estimates because they use U.S. yield not county yield or farm payment yield, as ARC-CO and PLC use, respectively. AR-CO payments, for example, will vary across counties, with some counties having no payments due to high yields and some counties having large payments due to low yields. Thus, this article is not estimating payments that an individual FSA farm owner would receive. Nevertheless, the indicator estimates using U.S. yields should help frame questions and perspectives for FSA farm owners regarding program choices. Click here to read the article titles ARC-CO and PLC Estimated Payment – U.S.
Pastures and Pipelines
By: Clif Little, OSU Extension Agricultural and Natural Resources Educator Guernsey County
It has become a common occurrence in Eastern Ohio to see oil and gas related pipelines being installed through pastures and crop fields. While many sections of these lines are installed and reseeded to the farmer’s satisfaction, some are not. Lately, I have been asked by farmland owners and contractors alike to assess the reseeding success of individual sections of right-of-ways. Below are some ideas which I hope will curb some of the incidents I have noticed.
Above all, have the document prepared by your attorney addressing the farm needs and reseeding. Too many times landowners are attempting to negotiate a potentially lifelong contract without legal advice.
Identify the location and width of the temporary work area and pipeline. Landowners may want the pipeline company (referred to as the grantee) to provide a plat depicting all portions of the construction and installation operations permitted under the easement. It would also be helpful to the farming operation to identify the construction time period while ensuring it does not exceed the negotiated number of days to complete. Of course, landowners wanting their farm reclaimed to specific standards will also need to define the consequences for noncompliance with the contract terms. One document that provides specific guidance on farmland reclamation is the Ohio Department of Natural Resources Division of Soil & Water Conservation “Pipeline Standard and Construction Specifications”. As the landowner, you may want the final say as to the completeness of the reclamation project. This means the landowner needs a company contact name and number to consult during the process. Landowners will also need to define entry and exit points, types of gates to be utilized. In addition, establish who is responsible to maintain the gates and fence.
Farmers may need a defined area for crossing the pipeline even when under construction. It is possible, surface water such as springs, ponds and streams may be impacted and the farm owner may want to include in the agreement the remedy for such impact. Any of these items not in writing will be difficult to enforce.
Landowners may want to describe in their contract, what locations and forages are to be seeded, the seeding method to be used and seeding rates. It may also be helpful to provide a description on how the area is to be mulched and what water diversion practices will be installed. Water diversion practices such as silt fences and water bars can be quite an obstacle when mowing and/or clipping. Identify, once vegetation is established, when and whom will be responsible to remove these items and reclaim these areas. Crop yields and timber will be impacted, possibly for years. Part of the pipeline negotiation settlement should take all crop damages for multiple years into account. It is possible that the disturbed pipeline will become weed infested or experience erosion. If this occurs, what procedure is to be followed and how soon? Proper weed control is an occasion sensitive practice that is best accomplished in a timely manner. Although not recommended, some farmland owners may have lumped all “appurtenances” such as but not limited to, drips, valve, piping and metering equipment under one document. All of these structures may need fence, some kind of reseeding and long term weed plans.
The landowner may also want to retain and reserve the right to continue to enjoy use of the surface of the easement for any and all purposes, provided they do not interfere with or prevent the pipeline company use. It may be important to landowners to reserve the right to build and use the surface of the granted easement area for drainage ditches, roads, gardens, lawns, grazing, plantings and crops. It may also be important to some farm operators to reserve the right to construct a private or public road across the easement as the farm expands or in support of the current operation.
The scope of a pipeline company’s activities on the easement may impact the farm operation and therefore could be described and limited in the right-of-way grant. For example, if no hunting, fishing, loitering, lodging, camping, or similar activities by the grantee or its contractors or guests are permitted, be sure to have your attorney add this to the document. Parking of vehicles, trucks or other equipment necessary for construction may also be limited to the period of construction if likewise described in the agreement. For some farms, preserving esthetics is important and they may not want the easement area to be used as a storage area or staging area. If not, this should be agreed to in writing.
Finally, nothing lasts
forever. Some landowners may want to describe what triggers the end of this agreement. To eventually clear the farm title of this encumbrance, landowners may want to consider only granting the use of the easement for a specific term. In addition, carefully consider any language in the easement agreement that purports to give rights to the grantee in perpetuity or exclusively.
We have only begun to describe a few points on how pipelines impact pastures. For more landowner related information go to The Ohio State University (http://serc.osu.edu/extension) web site. Never sign anything without talking to your attorney and remember to put everything in writing.
Will Average Crop Revenue Program Trigger a Payment for 2013 Crop?
By: Chris Bruynis, PhD, Assistant Professor & Extension Educator, OSU Extension.
Although only about 10% of the total acres in Ohio were signed into the Average Crop Revenue Program (ACRE), farmers’ enrolled might see a payment for corn if market prices continue to remain low. Calculating the numbers using state averages and USDA estimates, the state revenue guarantee for corn is approximately $758 per acre. When dividing that revenue guarantee by the five year Olympic average state corn yield, the market year average price that corn would need to fall below to trigger a payment would be $4.59 per bushel. The current USDA estimate for the 3013-14 market year average is $4.45 per bushel. This would indicate that the state trigger would be met and farmers would need to start examining if their farm level conditions would be met to trigger a payment.
USDA estimates have the soybean market year average price at $13.00 for the 2013-14 market year. The revenue guarantee price assuming an average yield is estimated at $12.41. this means the MYA price would need to fall below $12.41 with average yields before the state trigger for an ACRE payment would be reached. Since the marketing year for the 2013 wheat crop is final, there will not be an ACRE payment in Ohio fir the 2013 what crop. Farmers interested in learning more about the probability of and ACRE payment on those farms enrolled should contact their local Farm Services Agency office for more information.
Sale of 4-H or FFA Projects Have Tax Implications
By: Larry Gearhardt, Field Specialist, Taxation
Introduction
Members of 4-H clubs or FFA chapters often raise livestock as part of the educational program of the club or chapter. The member may then sell the livestock that was raised as part of the project at the end of the fair. This transaction raises a number of income tax issues for the 4-H or FFA member.
Two Alternatives
There are two different alternatives to report the income from the sale of livestock by a 4-H or FFA member. Which alternative to choose depends upon whether or not the project is part of a trade or business carried on by the member, or whether the project is primarily for educational purposes and not for profit and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. The method of reporting includes self-employment tax ramifications as well as income tax.
The 2013 Farmer’s Tax Guide (IRS Publication 225) states on page 74 that the net income from 4-H and FFA projects should be reported on line 21, Form 1040 (i.e. other income). If necessary, a statement can be attached to the 1040 Form detailing gross income and expenses. The Farmer’s Tax Guide goes on to say that the net income is not subject to self-employment tax if the project is primarily for educational purposes and not for profit, and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. Such a project is generally not considered a trade or business.
Alternatively, a 4-H or FFA member could file a Schedule F, Profit or Loss from Farming, (Form 1040) to report the income. This alternative should be used if the project is a regular and recurring activity of the member, carried on with a profit motive. This argument is even stronger if the 4-H or FFA member has other farming activities in addition to the 4-H or FFA project.
If the project is part of a trade or business reported on Schedule F, the net income (or loss) is carried to Schedule SE, Self-Employment Tax (Form 1040).
Standard Deduction
Most 4-H and FFA members can claim only the standard deduction for dependents on their personal income tax return because they are claimed as dependents on their parents’ income tax return. For 2014, the standard deduction that can be claimed by the dependent that is claimed as a dependent by another taxpayer is the lesser of:
1. the standard deduction for a single taxpayer ($6200), OR
2. the greater of (a) $1,000, or (b) the individual’s earned income, plus $350
The definition of “earned income” is important for the purpose of computing a dependent’s standard deduction. Earned income for purposes of computing a dependent’s standard deduction most likely does not include the net income from a 4-H or FFA project that is reported on line 21 of Form 1040. However, if the 4-H or FFA member treats the project as part of a trade or business, then the net income from the project becomes earned income because it is included on line 18, Form 1040, Farm income or loss, on Schedule F.
Kiddie Tax
Another important reason to determine whether or not the net income from a 4-H or FFA project is earned income is the Kiddie Tax. The Kiddie Tax, found at Internal Revenue Code 1(g), imposes the tax rates of a child’s parents on the child’s UNEARNED income. The Kiddie Tax is reported and calculated on Form 8615.
Beginning in 2008, for children age 18, or for children age 19 through 23 who are full-time students, the definition of “earned income” is increasingly important because the Kiddie Tax does not apply to the child’s UNEARNED income if the child’s EARNED income exceeds half of his or her support. (Agricultural Tax Issues, Harris, P., Fall 2013, p. 199). However, if such is the case, the child cannot be claimed as a dependent on the parents’ tax return.
According to Internal Revenue Code section 911(d)(2)(B), which is referenced by the Kiddie Tax code section 1(g)(2)(A)(ii)(II), if a taxpayer is engaged in a trade or business in which both personal services and capital are income-producing factors, a reasonable allowance for compensation for the personal services rendered by the taxpayer, not in excess of 30% of his share of the net profits, shall be considered as earned income. As previously stated, if the project is not treated as a trade or business, it is likely not to be earned income.
Which Method Applies?
Although the amount of net income that a 4-H or FFA member receives for his or her project may seem inconsequential, there are tax implications which may require the services of a tax professional. Several factors are important in deciding how the income should be reported:
The age of the child? Special rules apply for a child 18-years-old, or a child 19 through 23 who is a full-time student.
Is the project part of a trade or business carried on by the 4-H or FFA member?
What is the level of earned income of the 4-H or FFA member in relation to his or her total level of support?
Does the child want to start an IRA? The income must be earned income to do this.
Is it important for the child to earn credits for Social Security purposes?
Raising livestock as a 4-H or FFA project can provide valuable life-lessons in responsibility. Perhaps it can also serve to teach a valuable lesson in business.
Couple challenges Ohio’s transfer of CAFO NPDES permit authority in federal court
Fourteen years after the Ohio Legislature transferred permitting authority for confined animal feeding operations (CAFOs) from the Ohio EPA to the Ohio Department of Agriculture (ODA), a Wood County couple is challenging the transfer in federal court as a violation of the federal Clean Water Act. Larry and Vickie Askins filed the lawsuit on August 4, 2014 in the U.S. District Court Northern Division against the ODA, Ohio EPA and U.S.
OSHA issues new guidance on the small farm exemption
The Occupational Safety & Health Administration (OSHA) faced harsh criticism recently when the agency inspected and issued fines to small farms engaged in grain storage activities. The farms argued that OSHA had no authority to do so because of the “small farm exemption” that limits OSHA’s authority to enforce safety regulations on small farms. This week, OSHA released a guidance memorandum that attempts to clarify how its regional administrators should interpret the small farm exemption. The agency’s new guidance focuses on whether an activity on a small farm is “not related to farm