UPDATE: Governor DeWine signed H.B. 95, the Beginning Farmer bill, on April 18, 2022. The effective date for the new law is July 18, 2022. The Governor signed the Statutory Lease Termination bill, H.B. 397, on April 21, and its effective date is July 19, 2022.
Bills establishing new legal requirements for landowners who want to terminate a verbal or uncertain farm lease and income tax credits for sales of assets to beginning farmers now await Governor DeWine’s response after passing in the Ohio legislature this week. Predictions are that the Governor will sign both measures.
Statutory termination requirements for farm leases – H.B. 397
Ohio joins nine other states in the Midwest with its enactment of a statutory requirement for terminating a crop lease that doesn’t address termination. The legislation sponsored by Rep. Brian Stewart (R-Ashville) and Rep. Darrell Kick (R-Loudonville) aims to address uncertainty in farmland leases, providing protections for tenant operators from late terminations by landowners. It will change how landowners conduct their farmland leasing arrangements, and will hopefull encourage written farmland leases that clearly address how to terminate the leasing arrangement.
The bill states that in either a written or verbal farmland leasing situation where the agreement between the parties does not provide for a termination date or a method for giving notice of termination, a landlord who wants to terminate the lease must do so in writing by September 1. The termination would be effective either upon completion of harvest or December 31, whichever is earlier. Note that the bill applies only to leases that involve planting, growing, and harvesting of crops and does not apply to leases for pasture, timber, buildings, or equipment and does not apply to the tenant in a leasing agreement. A lease that addresses how and when termination of the leasing arrangement may occur would also be unaffected by the new provisions.
The beginning farmer bill – H.B. 95
A long time in the making, H.B. 95 is the result of a bi-partisan effort by Rep. Susan Manchester (R-Waynesfield) and Rep. Mary Lightbody (D-Westerville). It authorizes two types of tax credits for “certified beginning farmer” situations. The bill caps the tax credits at $10 million, and sunsets credits at the end of the sixth calendar year after they become effective.
The first tax credit is a nonrefundable income tax credit for an individual or business that sells or rents CAUV qualifying farmland, livestock, facilities, buildings or machinery to a “certified beginning farmer.” A late amendment in the Senate Ways and Means Committee reduced that credit to 3.99% of the sale price or gross rental income. The bill requires a sale credit to be claimed in the year of the sale but spreads the credit amount for rental and share-rent arrangements over the first three years of the rental agreement. It also allows a carry-forward of excess credit up to 7 years. Note that equipment dealers and businesses that sell agricultural assets for profit are not eligible for the tax credit, and that an individual or business must apply to the Ohio Department of Agriculture for tax credit approval.
The second tax credit is a nonrefundable income tax credit for a “certified beginning farmer” for the cost of attending a financial management program. The program must be certified by the Ohio Department of Agriculture, who must develop standards for program certification in consultation with Ohio State and Central State. The farmer may carry the tax credit forward for up to three succeeding tax years.
Who is a certified beginning farmer? The intent of the bill is to encourage asset transition to beginning farmers, and it establishes eligibility criteria for an individual to become “certified” as a beginning farmer by the Ohio Department of Agriculture. One point of discussion for the bill was whether the beginning farmer credit would be available for family transfers. Note that the eligibility requirements address this issue by requiring that there cannot be a business relationship between the beginning farmer and the owner of the asset.
An individual can become certified as a beginning farmer if he or she:
- Intends to farm or has been farming for less than ten years in Ohio.
- Is not a partner, member, shareholder, or trustee with the owner of the agricultural assets the individual will rent or purchase.
- Has a household net worth under $800,000 in 2021 or as adjusted for inflation in future years.
- Provides the majority of day-to-day labor and management of the farm.
- Has adequate knowledge or farming experience in the type of farming involved.
- Submits projected earnings statements and demonstrates a profit potential.
- Demonstrates that farming will be a significant source of income.
- Participates in a financial management program approved by the Department of Agriculture.
- Meets any other requirements the Ohio Department of Agriculture establishes through rulemaking.
We’ll provide further details about these new laws as they become effective. Information on the statutory termination bill, H.B. 397, is here and information about the beginning farmer bill, H.B. 95, is here. Note that provisions affecting other unrelated areas of law were added to both bills in the approval process.
Like the farm fields across Ohio lately, a little dust has been flying down at the Statehouse in Columbus. Our legislators are back to work and considering several bills that could affect agriculture. A few bills aren’t seeing much action, though. Here’s a summary of recent activity and inactivity at the Statehouse.
Newly introduced bills
H.B. 440 and S.B.241 – Agricultural Linked Deposit Program. This pair of bills introduced on September 30, 2021 by Representatives Swearingen (R-Huron) and White (R-Kettering) and Senators Cirino (R-Kirtland) and Rulli (R-Salem) is one of three bills in the “Ohio Gains Initiative” offered in partnership with Ohio Treasurer Robert Sprague. The Initiative proposes three new investment reforms affecting agriculture, health systems, and higher education. The agricultural proposal in H.B. 440 and S.B. 241 would expand the current Ag-LINK loan program that provides interest rate reductions of up to 3% on operating loans. The bill would make the loans available to cooperatives in addition to farm operators and agribusinesses and would also remove the $150,000 cap on Ag-LINK loans. It’s been referred to the House Financial Institutions Committee and the Senate Financial Institutions & Technology Committee.
Bills on the move
H.B. 175 – Deregulate certain ephemeral water features. The bill addresses “ephemeral features”—surface water that flows or pools only in direct response to precipitation but that is not a wetland. Under the proposal, ephemeral features would be exempt from water pollution control programs in Ohio, including the Clean Water Act Section 401 Water Quality Certification Program, as proposed in the federal 2020 Navigable Waters Protection Rule now on hold. The bill would also eliminate the certification review fee for ephemeral streams. H.B. 175 passed the House on September 30, 2021, amidst strong opposition. It awaits review before the Senate Agriculture and Natural Resources Committee.
H.B. 397 – Agricultural lease law. A proposal to address termination dates and notice provisions for crop leases received its second hearing before the House Agriculture and Conservation Committee on October 12. H.B. 397 would require a landowner who wants to terminate a crop lease that doesn’t address termination to do so by providing a written notice of termination to the tenant by September 1 of the year the termination would be effective. Discussion at the committee hearing could result in a broadening of the bill to include pasture leases.
S.B. 47 – Overtime pay. The Senate passed this bill on September 22, and it has since been referred to the House Commerce and Labor Committee. The bill exempts certain activities from the requirement for an employer to pay overtime wages. Under the proposal, traveling to and from a worksite would be exempt from overtime. Performing preliminary or postliminary tasks and activities outside of work hours that require insubstantial periods of time, such as checking email or voice mail, would also be exempt. The bill now moves to the House Commerce and Labor Committee.
Bills not moving
Several bills we’ve been watching have not generated continued interest at the Statehouse, including:
- H.B. 95, the Beginning Farmers bill that would provide income tax credits for beginning farmers who attend approved financial management programs and for owners who sell land and agricultural assets to certified beginning farmers. It passed the House in late June but was removed from the agenda when first scheduled for a hearing before the Senate Ways and Means Committee on September 28, 2021.
- H.B. 30, the bill adding marking and lighting requirements to animal-drawn vehicles, also passed the House in late June but has not seen action since its second hearing before the Senate Transportation Committee on September 22, 2021.
- H.B. 385, which would prohibit municipalities in the Western Basin of Lake Erie from discharging waste into those waters, fine those who do, and revoke NPDES permits for municipalities owning treatment works or sewerage systems within the Western Basin. The bill received one hearing before the House Agriculture and Conservation Committee on September 28.
- H.B. 349, which would place a moratorium on granting permits for a new construction or expansion of a regulated animal feeding facility in the Maumee watershed if the Ohio Department of Agriculture has determined that the phosphorus load in the Maumee River exceeded a specified number. The House Agriculture and Conservation Committee has not scheduled the bill for a hearing since it was referred to the committee on June 16, 2021.
Bills now effective
S.B. 52, the bill addressing large-scale wind and solar facility development in Ohio, became effective on October 11, 2021. The bill allows county commissioners to prohibit wind and solar developments and to establish restricted areas in the county that are off limit to the developments, gives county citizens an opportunity to place a restricted area designation on the ballot, increases local awareness and engagement in review of a proposed facility, and requires decommissioning plans and bonds for approved developments. Learn more about S.B. 52 with our law bulletins and videos on the new laws, available in our energy law library.
In Ohio and around the country, farmers are gearing up for a new planting season. Spring is (almost) here! Before we leave winter totally behind, we wanted to keep you up to date on some notable ag law news from the past few months.
Here’s a look at what’s going on in ag law across the country…
New law signed to ramp up ag protections at U.S. ports of entry. Last summer, a bill was introduced in the United States Senate by a bipartisan group of senators. The purpose of the bill was to give more resources to Customs and Border Control (CBP) to inspect food and other agricultural goods coming across the U.S. border. On March 3, 2020, the President signed the bill into law. The new law authorizes CBP to hire and train more agricultural specialists, technicians, and canine teams for inspections at ports of entry. The additional hires are meant to help efforts to prevent foreign animal diseases like African swine fever from entering the United States. You can read the law here.
The Renewable Fuel Standard gets a win. We reported on Renewable Fuel Standard (RFS) issues last fall, and it seems as though the battles between biofuel producers and oil refineries have spilled over into 2020. For a refresher, the RFS program “requires a certain volume of renewable fuel to replace the quantity of petroleum-based transportation fuel” and other fuels. Renewable fuels include biofuels made from crops like corn, soybeans, and sugarcane. In recent years, the demand for biofuels has dropped as the Trump administration waived required volumes for certain oil refiners. As a result, biofuels groups filed a lawsuit, asserting that EPA did not have the power to grant some of the waivers it gave to small oil refiners. On January 24, 2020, the U.S. Court of Appeals for the Tenth Circuit agreed with the biofuels groups. You can find the 99-page opinion here. If you’re not up for that bit of light reading, here’s the SparkNotes version: the court determined that EPA did not have the authority to grant three waivers to two small refineries in 2017. The court found that EPA “exceeded its statutory authority” because it extended exemptions that had never been given in the first place. To put it another way, the court asked how EPA could “extend” a waiver when the waiver had not been given in previous years. The Trump Administration is currently contemplating whether or not to appeal the decision.
Virginia General Assembly defines “milk.” To paraphrase Shakespeare, does “milk by another name taste as sweet?” Joining the company of a number of other states that have defined “milk” and “meat,” the Virginia General Assembly passed a bill on March 4, 2020 that defines milk as “the lacteal secretion, practically free of colostrum, obtained by the complete milking of a healthy hooved mammal.” The bill would make it illegal to label products as “milk” in Virginia unless they met the definition above. Essentially, products like almond milk, oat milk, soy milk, coconut milk, etc. would be misbranded if the labels represent the products as milk. Governor Ralph Northam has not yet signed or vetoed the bill. If he signs the bill, it would not become effective until six months after 11 of 14 southern states enact similar laws. The 11 states would also have to enact their laws before or on October 1, 2029 for Virginia’s law to take effect. The states are: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and West Virginia. North Carolina has already passed a similar law.
And now, for ag law in our neck of the woods.
Purple paint bill reintroduced in Ohio. You may recall that the Ohio General Assembly has been toying with the idea of a purple paint law for the past several years. On March 4, 2020, Senator Bill Coley (R-Liberty Township) once again introduced a purple paint bill. What exactly does “purple paint” mean? If passed, the bill would allow landowners to put purple paint on trees and/or fence posts. The marks would have to be vertical lines at least eight inches long, between three and five feet from the base of the tree or post, readily visible, and placed at intervals of at most 25 yards. If the bill passed, such marks would be sufficient to inform those recklessly trespassing on private property that they are not authorized to be there. People who recklessly trespass on land with purple paint marks would be guilty of a fourth degree criminal misdemeanor. You can read the bill here.
Bill giving tax credits to beginning farmers considered. Senate Bill 159, titled “Grant tax credits to assist beginning farmers” had a hearing in the Senate Ways & Means Committee on March 3, 2020. The bill, introduced last year, seeks to provide tax incentives to beginning farmers who participate in an approved financial management program, as well as to businesses that sell or rent agricultural land, livestock, facilities, or equipment to beginning farmers. A nearly identical bill is being considered in the House, HB 183. Back in February, Governor Mike DeWine indicated he would sign such a bill if it passed the General Assembly. SB 159 is available here, and HB 183 is available here.