Tax

If you and your family are grappling with the critical issue of how to transition the farm operation and farm assets to the next generation, OSU Extension is here to help.  Attend one of our “Planning for the Future of Your Farm” workshops this winter to learn about the communication and legal strategies that provide solutions for dealing with farm transition needs and decision making.  We’ve scheduled both a webinar version and several in-person options for the workshop.

This workshop challenges farm families to actively plan for the future of the farm business.  Learn how to have crucial conversations about the future of your farm and gain a better understanding of the strategies and tools that can help you transfer your farm’s ownership, management, and assets to the next generation. We encourage parents, children, and grandchildren to attend together to develop a plan for the future of the family and farm.

Teaching faculty for the workshop are David Marrison, OSU Extension Farm Management Field Specialist, and Robert Moore, Attorney with the OSU Agricultural & Resource Law Program. Topics which will be covered in the workshop include:

• Developing goals for estate and transition planning
• Planning for the transition of control
• Planning for the unexpected
• Communication and conflict management during farm transfer
• Federal estate tax challenges
• Tools for transferring assets
• Tools for avoiding probate
• The role of wills and trusts
• Using LLCs
• Strategies for on-farm and off-farm heirs
• Strategies for protecting the farmland
• Developing your team
• Getting your affairs in order
• Selecting an attorney

Webinar version.  You and your family members can attend the workshop individually from the comfort of your homes.  The four-part webinar series will be February 3, 10, 17, and 24, 2025 from 6:30 to 8:00 p.m. via Zoom. Pre-registration is required so that a packet of program materials can be mailed in advance to participating families. Electronic copies of the course materials will also be available to all participants. The registration fee is $99 per farm family.  Register by January 22, 2025 in order to receive course materials in time. Click here to register or go.osu.edu/successionregistration

In-person workshops.  Our local Extension Educators are hosting in-person workshops at five regional locations across Ohio during the upcoming winter.  Registration costs vary by. The in-person workshops will be held on

• January 23, 2025- Putnam County (9:00 to 4:00 p.m.)
• February 6, 2025- Pickaway County (10:00 to 4:00 p.m.)
• February 18, 2025- Clark County (9:00 to 4:00 p.m.)
• March 11 & 13, 2025- Wayne County (6:00 to 9:00 p.m.)
• March 13 & 18, 2025 – Licking County (6:00 to 9:00 p.m.)

Registration is required.  Find registration information for all workshops at go.osu.edu/farmsuccession

Thank you! OSU Extension would like to thank Ohio Corn and Wheat for their generous sponsorship of these programs.

We hope you’ll join us to move forward on planning for the future of your farm! 

For questions about the workshop, please contact David Marrison at marrison.2@osu.edu or 740-722-6073.

Barry Ward, Leader, Production Business Management

Writing this feels like déjà vu. It feels like we’ve lived through this before and for good reason. The article I wrote last year about significant increases in Current Ag Use Value of farmland can be repeated almost word for word.

Again, large increases in the Current Ag Use Value (CAUV) of farmland in 2024 will result in higher property taxes for farmland owners in 2025. Twenty-four of Ohio’s eighty-eight counties will see property tax increases in 2025 due to higher CAUV. Several factors have led to this increase in ag use valuation. The average current ag use value is expected to be $1,616 per acre across all soil types (proposed final value). This compares to a value of $759 per acre in 2021 which represents an increase of 113%.

The Current Agricultural Use Value (CAUV) Program is a differential real estate tax assessment program for owners of farmland. The program allows for the assessment value of farmland parcels to be taxed according to their use value in agriculture (or their value related to income from agriculture) rather than the market value (defined as the value if the land were sold by a willing seller to a non-related willing buyer). To arrive at this “use value”, a formula is used that includes several variables to capitalize the net income from agricultural products.

Landowners with farmland and woodlands in Ohio are eligible to sign-up for the CAUV program through their county auditor’s office if they meet the requirements.

There are two paths for a parcel to qualify for the Current Agricultural Use Valuation (CAUV) Program. To qualify for CAUV, land must meet one of the following requirements during the three years preceding an application.

•Ten or more acres must be devoted exclusively to commercial agricultural use; or

•If under ten acres are devoted exclusively to commercial agricultural use, the farm must produce an average yearly gross income of at least $2,500.

Each of the 3517 different soil types in Ohio is assigned a current ag use value (CAUV) each tax year. The value represents the expected net present value of an acre of land devoted solely to agricultural production for the dominant crops in Ohio. To determine this value, an average of yields and prices for corn, soybeans, and wheat is used to determine gross income. Non-land costs are then subtracted from gross income for a measure of net income. Finally, this net income is divided by a capitalization rate based upon recent values of farm interest and equity rates.

Counties are subject to an update in CAUV every 3 years so only a portion (24 of the 88) have been updated in 2024 that will impact 2025 property taxes. As counties see updated values only every three years, there is the opportunity for large changes as many farmland owners will see this year.

Several factors have led to much of this increase in ag use valuation. Higher crop market prices and increased crop yields included in the formula have been significant drivers in the higher current ag use values. Price increases have been substantial as compared to the prices used in the 2021 calculations (the last time these counties underwent CAUV updates). Corn price has increased 22.6%, soybean price increased 18.8% and wheat price increased 16.0%.

Although we have seen substantial decreases in crop market prices this year, the prices used in the formula don’t reflect this yet. The prices used in the formula are based on a 7 year “olympic average” of United States Department of Agriculture (USDA) marketing year average prices. The higher crop prices in 2020 through 2022 continue to keep this price variable high in spite of recent falling crop prices.

Yields used to determine values for each soil type increased 8.0% for corn, 5.7% for soybeans and 8.5% for wheat as compared to the yields used for the 2021 calculations.

Although Ohio farmers have seen significant increases in input costs since 2021 and the Ohio Crop Enterprise Budgets reflect this, there haven’t been enough years of these higher costs to significantly impact the cost variables used in the formula.

Low interest rates (capitalization rate) have also contributed to the increasing current ag use values as recent higher interest rates aren’t yet fully represented in the formula. The capitalization rate used in the formula in 2024 CAUV calculations was an increase at 8.2% as compared to the rate of 7.8% used in 2021, the last time these counties saw an update in CAUV. Recent higher interest rates will continue to increase the capitalization rate (denominator in the CAUV calculation) in future years which will help to moderate current ag use values.

For a detailed look at the variables and calculations that are used to determine CAUV for farmland, access the Ohio Department of Taxation online publication “2024 Current Agricultural Use Value of Land Tables Explanation of the Calculation of Values for Tax Year 2024”.

The Ohio Department of Taxation annually publishes this explanation of the CAUV valuation method complete with the measures used to calculate CAUV and examples of the calculations for certain soil units for the present year. This year’s document is titled “2024 Current Agricultural Use Value of Land Tables Explanation of the Calculation of Values for Tax Year 2024” and is available online at:

https://tax.ohio.gov/government/real-state/cauv

Woodlots

Those with woodlots will likely see decreases in CAUV for their parcels which will decrease property taxes on these parcels in 2025. This year the Ohio Department of Taxation updated the CAUV woodland clearing cost from $1,000 per acres to over $4,000 per acre based on data from the Ohio Forestry Association (OFA) and inflation data. The larger land clearing costs will result in all woodlands to be valued at the minimum CAUV of $230 per acre in 2024.

Legislative Changes

There has been quite a lot of conversation about legislative changes in determining property taxes in Ohio. There are a number of bills that have been initiated that address changes in valuation and/or taxation of property but none have made much progress. One bill that includes some language that would impact CAUV is Ohio House Bill 447.

Ohio House Bill 447 would modify and expand property tax homestead exemptions, gradually reduce school districts’ 20-mill floor for tax levies and modify the formula for determining farmland’s current agricultural use value (CAUV). The change to CAUV language in the bill would increase the tax additur (a value that reflects the statewide effective property tax rate on agricultural land) to include a 10% floor. In practice, this change would serve to lower the current agricultural use value for land devoted exclusively to agricultural use. This bill has seen little movement recently and remains in committee. Part of the reason that this bill and others haven’t progressed very far through the legislative process is the existence of the Joint Committee on Property Taxation Review and Reform.

A provision in the Senate version of the last biennial state budget was to require CAUV be determined by averaging the last three years of Current Ag Use Values. (This provision was ultimately excluded from the final biennial budget.) The current method for determining CAUV requires an update or reappraisal every 3 years. Significant changes in the variables that are used to calculate CAUV can lead to big changes in values during this this three-year interval. These large increases or decreases are often unanticipated by taxpayers. The provision that was considered would have required the Current Ag Use Value be calculated taking the current year calculated value plus the two prior years’ calculated values (for each soil type) and averaging the three. This proposed method would likely result in smaller increases and decreases in a given 3-year cycle for CAUV calculations. This provision continues to be discussed and may yet see further legislative consideration.

Joint Committee on Property Taxation Review and Reform

The Joint Committee on Property Tax Review and Reform in Ohio was created in the state's operating budget in 2023 to review the state's property tax system and make recommendations to the General Assembly. The committee is considering a wide range of legislative and administrative changes that may change the property tax system in Ohio and is required to issue a report by the end of the 2024.

Income Tax Schools at The Ohio State University is excited to announce our dates and locations for our two-day, in-person tax schools, our 4-part webinar, introduction to tax preparation course, ethics webinar, and ag tax issues webinar. 

Our two-day, in-person tax schools and 4-part webinar will cover the following topics: 

• Trusts and Estates
• Related Party Issues
• Limited Liability Company Issues 
• Business Entity Tax Issues 
• IRS Issues 
• Agricultural and Natural Resource Tax Issues
• Business Tax Issues
• Rental Activities 
• Individual Tax Issues 
• New and Expiring Legislation
• International Tax Issues 
• Rulings and Cases

Our Agricultural Tax focused webinar will focus on: 

• Business Entity Tax Issues: Split Interest Purchases, Partnership Issues
• Disaster Tax Issues: Casualty Gains, Losses, Deferral, Demolition, Land Clearing, Etc. 
• Expensing and Depreciation, with a Deep Dive on Section 179
• Retirement Issues: Self-employment Tax/Social Security Issues,Review of Self-employment Tax Connection to Social Security, and Retirement Plan Options for Farmers. 
• Lease v. Purchase, Capital Leases on the Farm
• Tax Planning for Lean Years
• Conservation Issues
• Selling and Trading Property

Make sure to mark your calendars! A list of dates and locations can be found below: 

Registration is not yet open! We hope to launch registration for the fall tax schools in early July. You can keep up to date with all the latest tax school information by visiting: go.osu.edu/taxschools. 

Registration for our summer course "An Overview of Small Businessses" is OPEN. You can find more information and register for the summer tax school by following: go.osu.edu/summertaxschool

If you have any questions, please do not hesitate to contact Barry Ward (ward.8@osu.edu) or Jeff Lewis (lewis.1459@osu.edu). We look forward to seeing you! 

With Memorial Day behind us, the unofficial start of summer is here, and we are back to bring you another edition of the Ag Law Harvest. In this Harvest we discuss OSHA’s proposed workplace heat hazard standards, DOL’s new H-2A Farmworker rule, an interesting income tax credit in Colorado, and a proposal to limit Ohio property tax increases. 

OSHA Advances Proposed Rule to Mitigate Workplace Heat Hazards.  
The U.S. Department of Labor's Occupational Safety and Health Administration (“OSHA”) announced that it is advancing a proposed rule to mitigate workplace heat hazards, following unanimous approval from an advisory committee. The rule aims to protect workers from heat-related illnesses and fatalities, particularly in agriculture. While OSHA works to finalize the proposed rule, OSHA “continues to direct significant existing outreach and enforcement resources to educate employers and workers and hold businesses accountable for violations of the Occupational Safety and Health Act’s general duty clause, 29 U.S.C. § 654(a)(1) and other applicable regulations.” Assistant Secretary for Occupational Safety and Health Doug Parker explained that as OSHA moves through the regulatory process, “OSHA will use all of its existing tools to hold employers responsible when they fail to protect workers from known hazards such as heat. . .” Since 2022, OSHA's National Emphasis Program has conducted nearly 5,000 inspections to proactively address heat-related hazards in workplaces with high heat exposure. The agency prioritizes inspections in agricultural industries employing temporary H-2A workers, who face unique vulnerabilities. Employers are reminded that they are legally required to protect workers from heat exposure by providing cool water, breaks, shade, and acclimatization periods for new or returning workers. Training for both workers and managers on heat illness prevention is also essential.

Department of Labor Finalizes and Publishes Rule Enhancing Protections for H-2A Farmworkers. 
The U.S. Department of Labor (“DOL”) announced a final rule to strengthen protections for H-2A farmworkers. The new rule titled “Improving Protections for Workers in Temporary Agricultural Employment in the United States” includes the following provisions: 

• Adding new protections for worker self-advocacy: The final rule enhances worker advocacy by expanding anti-retaliation protections and allowing self-organization and concerted activities. Workers can decline attending employer-led meetings that discourage union participation. The rule permits workers to consult legal and other key service providers and meet them in employer-furnished housing. Additionally, workers can invite guests, including labor organizations, to their employer-provided housing.
• Clarifying “for cause” termination: The final rule clarifies that a worker is not “terminated for cause” unless the worker is terminated for failure to comply with an employer’s policies or fails to adequately perform job duties in accordance with reasonable expectations based on criteria listed in the job offer. Additionally, the rule identifies five conditions that must be met in order to ensure that disciplinary and/or termination processes are justified and reasonable: These five conditions are: (1) the worker has been informed, in a language understood by the worker, of the policy, rule, or performance expectation; (2) compliance with the policy, rule, or performance expectation is within the worker’s control; (3) the policy, rule, or performance expectation is reasonable and applied consistently to H-2A workers and workers in corresponding employment; (4) the employer undertakes a fair and objective investigation into the job performance or misconduct; and (5) the employer corrects the worker’s performance or behavior using progressive discipline. 
• Seat Belts: Any employer provided transportation must have seat belts if the vehicle was manufactured with seat belts. All passengers and the driver must be wearing seat belts before the vehicle can be driven. 
• Ensuring timely wage changes for H-2A workers:  The final rule establishes that the effective date of updated adverse effect wage rates is the date of publication in the Federal Register. 
• Passport Withholding: The final rule prohibits an employer from holding or confiscating a worker’s passport, visa, or other immigration or government identification documents. An employer may, however, hold a worker’s passport for safekeeping only if: (1) the worker voluntarily requests that the employer keep the documents safe; (2) the employer returns the documents to the worker immediately upon their request; (3) the employer did not direct the worker to submit the request; and (4) the worker states, in writing, that the three conditions listed above have been met. 

The final rule is effective on June 28, 2024. However, the DOL has made it clear that H-2A applications filed before August 28, 2024, will be subject to the current applicable federal regulations. Applications submitted on or after August 29, 2024, will be subject to the new rule. For more information, visit the DOL’s “H-2A Employer’s Guide to the Final Rule ‘Improving Protections for Workers in Temporary Agricultural Employment in the United States.’”

Colorado Establishes State Income Tax Credit for Qualified Agricultural Stewardship Practices. 
Beginning in 2026 Colorado farmers and ranchers will be able to qualify for an income tax credit for actively engaging in conversation stewardship practices. The newly enacted legislation creates three different tiers of income tax credits. 

• Tier 1: A state income tax credit equal to at least $5 and no more than $75 per acre of land covered by one qualified stewardship practice, up to a maximum of $150,000 per tax year. 
• Tier 2: A state income tax credit equal to at least $10 and no more than $100 per acre of land covered by two qualified stewardship practices, up to a maximum of $200,000 per tax year.
• Tier 3: A state income tax credit equal to at least $15 and no more than $150 per acre of land covered by at least three qualified stewardship practices, up to a maximum of $300,000 per tax year. 

However, only $3 million worth of tax credits can be issued in one tax year. Any claims for the tax credit beyond the $3 million dollars are placed on a waitlist in the order submitted and a certificate will be issued for use of the agricultural stewardship credit in the next income tax year. No more than $2 million in claims shall be placed on the waitlist in any given calendar year. Additionally, only one tax credit certificate may be issued per qualified taxpayer in a calendar year, and the taxpayer can only claim the credit for up to three income tax years. 

Ohio House of Representatives Proposes Joint Resolution to Limit Property Tax Increases for Ohio Property Owners. 
The Ohio House of Representatives have proposed to enact a new section in Article I of Ohio’s Constitution. Section 23 would limit property tax increases on Ohioans. Under the proposed change, the amount of real property taxes levied on a parcel of property cannot exceed the amount of tax levied on that parcel in the preceding year plus the rate of inflation or four percent, whichever is lower. There are some exceptions that allow a one-time increase in property tax liability in excess of the four percent limit. The exceptions include: (1) when a parcel is divided; (2) the expiration of a tax exemption, abatement, or credit that applied to the parcel in the preceding year; or (3) when a building is completed or significantly improved and is added to the tax list on the parcel. We will continue to closely monitor how the proposed resolution fares in committee and beyond. If the resolution passes both chambers of the Ohio Legislature, the proposed change would be voted on in the November 5, 2024, election.