Written by Ellen Essman and Peggy Hall
This edition of the Ag Law Harvest has a little bit of everything—Ohio and federal legislation responding to COVID issues, new USDA guidance on bioengineered foods, and a judicial review of Bayer’s Roundup settlement. Read on to learn about the legal issues currently affecting agriculture.
Ohio COVID-19 immunity bill stalls. While the Ohio House and Senate agree with the concept of immunity for COVID-19 transmissions, the two chambers don’t yet see eye-to-eye on the parameters for COVID-19 liability protection. H.B. 606, which we reported on here, has passed both the House and Senate, but the Senate added several amendments to the legislation. The House won’t be addressing those amendments soon because it’s in recess, and doesn’t plan to return for business until at least September 15. The primary point of disagreement between the two bills concerns whether there should be a rebuttable presumption for Bureau of Workers’ Compensation coverage that certain employees who contract COVID-19 contracted it while in the workplace. The Senate amendment change by the Senate concerns exemption from immunity for "intentional conduct," changed to "intentional misconduct.” Currently, there is not a plan for the House to consider the Senate’s amendments before September 15.
Lawmakers propose bill to avoid more backlogs at processing plants.
Most people are aware that the COVID-19 pandemic created a huge backlog and supply chain problem in U.S. meatpacking plants. A group of bipartisan representatives in the House recently proposed the
Requiring Assistance to Meat Processors for Upgrading Plants Act, or RAMP-UP Act. The bill would provide grants up to $100,000 to meat and poultry processing plants so the plants could make improvements in order to avoid the kind of problems caused by the pandemic in the future. The plants would have to provide their own matching funds for the improvements. You can find the bill here.
Revisiting the Paycheck Protection Program, again. In a refreshing display of non-partisanship, Congress passed legislation in late June to extend the Paycheck Protection Program (PPP). Employers who haven’t taken advantage of PPP now have until August 8, 2020 to apply for PPP funds to cover payroll and certain other expenses. Several senators also introduced the Paycheck Protection Program Small Business Forgiveness Act, a proposal to streamline an automatic approval process for forgiveness of PPP loans under $150,000, but there’s been little action on the bill to date. Meanwhile, the American Farm Bureau Federation is in discussion with the Senate on its proposal for other changes to PPP that would expand access to PPP for agriculture.
More clarification for bioengineered food disclosure. You may recall that the National Bioengineered Food Law was passed by Congress in 2016. The legislation tasked USDA with creating a national mandatory standard for disclosing bioengineered foods. The standard was implemented at the beginning of 2020, but USDA still needed to publish guidance on validating a refining process and selecting an acceptable testing method. On July 8, 2020, that guidance was published. The guidance provides steps for industry to take when validating a food refining process under the rule. A lot of food refining processes remove traces of modified genetic material. So, if a refining process is validated, there is no further need to test for bioengineered material to disclose. The guidance also contains instructions on testing methods. Basically, “any regulated entity that is using a food on the AMS List of Bioengineered Foods and does not want to include a bioengineered food disclosure because the food or ingredient is highly refined and does not include detectable modified genetic material” should follow these testing instructions. Therefore, any entity with highly refined foods that do “not include detectable modified genetic material” should follow the recently published guidance.
Bayer settlement proposal under scrutiny. Last month, Bayer, the owner of Roundup, announced that it would settle around 9,500 lawsuits related to alleged injuries caused by using the product. Not only was the proposal supposed to settle previous lawsuits, but it was also meant to address any future lawsuits stemming from purported injuries caused by Roundup. A judge from the United States District Court for the Northern District of California recently pumped the breaks on this plan, stating that any settlement that would resolve “all future claims” against Roundup must first be approved by the court. A hearing will be held on July 24, where the court will decide whether or not to “grant preliminary approval of the settlement.”
Written by Barry Ward, Director, OSU Income Tax Schools
Significant tax related changes as a result of the new legislation passed in response to COVID-19 have created some questions and perhaps consternation over the past few months. Taxpayers and tax professionals alike are wrestling with how these changes may affect tax returns this year and beyond. OSU Income Tax Schools is offering a Summer Update to address these issues and other important information for tax professionals and taxpayers.
The OSU Income Tax Schools Summer Update: Federal Income Tax & Financial Update Webinar is scheduled for August 13, 2020and will be presented as a webinar using the Zoom platform.
- New tax provisions implemented by the CARES Act and Families First Coronavirus Response Act and how to account for them such as the new net operating loss rules, the payroll tax credit, etc.
- Paycheck Protection Program Loan Issues: loan applications, forgiveness issues and the IRS ruling on loan expenditures that are forgiven under PPP are not tax deductible and how to account for them in preparing a return, etc.
- Dealing with the IRS in these difficult times. Also, what it means to the practitioner as to “dos” and don’ts” regarding the announcement that beginning this summer the IRS will allow the electronic filing of amended returns.
- The “Hot IRS Audit Issues – Pitfalls for S Corporations and Partnerships." Basis of entities as to the rules and related rulings, how to track basis in these entities, creation of basis where none had been computed in prior tax years, losses in excess of basis and when they are not allowed, definition of an excess distribution, taxation of excess distributions, distribution of appreciated property, conversion of C corporations to S corporations - do and don'ts, computation of the Built-In Gains Tax, inference and imputation of a reasonable wage for purposes of the computation of the qualified business income deduction, etc.
- Other rulings, developments, and cases.
- John Lawrence, CPA, John M. Lawrence & Associates: Instructor
- Barry Ward, Director, OSU Income Tax Schools: Co-Host & Question Wrangler
- Julie Strawser, Program Assistant, OSU Income Tax Schools: Co-Host and Webinar Manager
- August 13th, 2020: 10 am – 3:30 pm (lunch break: noon – 12:50 pm)
- Cost: $150
- Registration information and link to the registration page is at https://farmoffice.osu.edu/osu-income-tax-schools
- This workshop is designed to be interactive with questions from the audience encouraged.
Continuing education offered
- Accountancy Board of Ohio (5 hours)
- IRS Office of Professional Responsibility (5 hours)
- Continuing Legal Education, Ohio Supreme Court (4.5 hours)
There’s been a lot of action in the Ohio General Assembly over the last few weeks ahead of the body’s summer break. Specifically, the House of Representatives has considered bills involving a student debt forgiveness program for veterinarians, animal abuse, road safety in Amish country, immunity for apiary owners for bee stings, and a bill meant to support county fairs during the COVID pandemic. Finally, both the Ohio House and Senate have passed bills that would limit liability involving the transfer of COVID-19.
Animal-drawn vehicle lighting. House Bill 501, concerning slow-moving, animal drawn vehicles, was introduced in February of 2020 and was first heard in the House Transportation & Public Safety committee on June 2. The purpose of HB 501 is to “clarify the law governing slow-moving vehicles and to revise the lighting and reflective material requirements applicable to animal-drawn vehicles.” The bill would require animal-drawn vehicles, like the buggies typically driven by the Amish, to have the following: (1) at least one white lamp in the front visible from 1,000 feet or more; (2) two red lamps in the rear visible from 1000 or more; (3) one yellow flashing lamp mounted on the top most portion of the rear of the vehicle; (4) a slow moving vehicle (SMV) emblem; and (5) micro-prism reflective tape that is visible from at least 500 feet to the rear when illuminated by low beams on a vehicle. In the committee hearing, HB 501 had mostly positive feedback, and was touted as a solution to crashes involving animal-drawn vehicles in poor visibility.
When the bee stings. HB 496, which would grant apiary owners immunity for bee stings, passed the Ohio House on June 9, 2020. The bill would protect the owner of a registered apiary from liability in the case of a personal injury or property damage from a sting if they do the following: (1) implement and comply with the beekeeping industry best management practices (BMPs) as established by the department of agriculture; (2) keep correct and complete records of their implementation and compliance with BMPs and make the records available in a legal proceeding; (3) comply with local zoning ordinances pertaining to apiaries; (4) operate the apiary in compliance with the Ohio Revised Code. Notably, the bill would not protect apiarists from harming a person intentionally or through gross negligence. The bill now moves on to the Ohio Senate for consideration.
Debt forgiveness for veterinarians. The House also passed HB 67 on June 10, 2020. This bill would create the “veterinarian student debt assistance program,” which would determine which veterinarians would receive student debt assistance, and how much each person would receive. The amount awarded must be between $5,000 and $10,000. Essentially, if the new veterinarian agrees to live in Ohio for a certain amount of time, and to participate in “charitable veterinarian services” like spaying and neutering for a nonprofit organization, humane society, law enforcement agency, or state, local, or federal government, student debt could be forgiven. The details, including how many hours a veterinarian would need to work for charity, the types of charities that qualify, the amount of time a person must live in Ohio, and others would be determined by State Veterinary Medical Licenses Board.
Animal abuse. HB 33 passed the lower chamber on June 11, 2020. This bill would require veterinarians, social service professionals (people who work at the county Job and Family Services, Children’s Services), counselors, social workers, and other similar professions to report violations against “companion animals” (dogs, cats, other animals kept in a residential dwelling), to law enforcement and/or the county humane agent or animal control officer. People in these professions would have to report when they have “knowledge or reasonable cause to suspect” that violations to companion animals are happening, and they know or suspect that a child or older adult (60 years and older) lives in the residence, and they know or suspect that the violation is having an impact on the child or older adult. Violations include animal abandonment, injury, poisoning, cruelty, fighting, dog fighting, or sexual conduct with an animal.
Assistance for county fairs. If you’ve heard about any Ohio legislation recently, it was likely this bill. HB 665 was passed by the House after much debate on June 11, 2020. The 61 page bill makes a lot of changes to the statutory language. Importantly, the bill would make it a misdemeanor for patrons not to follow written warnings and directions on amusement rides. The bill also makes a number of changes to how county agricultural societies operate. First of all, members of a county agricultural society would have to be residents of the county. Members would have to pay a fee to retain membership, and the societies would have to issue a printed membership certificate to members. In counties with an ag society, the county treasurer must transfer $1600 to the society each year as long as the society holds its annual exhibition, reports to the Ohio Department of Agriculture (ODA), and the director of ODA presents the society with a certificate showing it has followed applicable laws and regulations. The bill also addresses independent agricultural societies, to which similar rules apply. The county board of commissioners would also be required to appropriate at least $100 to the ag society’s junior club. The bill would require ag societies to create a report of its proceedings during the year, file a financial report and send it to the ODA director, and publish an announcement in the county newspaper or the society’s website a statement about the filing of the financial report, and contact information for people who want to obtain a copy of the report. The bill also outlines the circumstances under which an ag society can sell fairgrounds or parts of fairgrounds. Finally, an amendment to the bill was adopted that would allow rescheduling of horse races.
So what was so controversial about this bill? A suggested amendment to the bill led to a heated argument in the House. The amendment would have banned sales and displays of confederate flags and other memorabilia at county fairs. This ban is already in place at the Ohio State Fair, but not county fairs. Ultimately, the bill passed in the house, but this amendment did not. The vote to table the amendment was largely along party lines, with every Republican except one voting against the amendment, and all Democrats voting for.
COVID-19 liability. The House passed HB 606 back in May, and we discussed it in a blog post here. As a refresher, the bill is meant to protect businesses, schools, corporations, people, etc. from liability. It would accomplish this with the declaration: “orders and recommendations from the Executive Branch, from counties and local municipalities, from boards of health and other agencies, and from any federal government agency, do not create any new legal duties for purposes of tort liability.” In other words, as long as the person, school, or business did not expose or transfer the virus recklessly, intentionally, or with willful and wanton conduct, someone could not bring a civil action for injury, death, or loss to person or property if they contract COVID from the entity. Furthermore, the bill also provides temporary civil immunity for health care providers, grants immunity to the State for care of persons in its custody or if an officer or employee becomes infected with COVID-19 in the performance or nonperformance of governmental functions and public duties, and expands the definition of “governmental functions” for purposes of political subdivision immunity to include actions taken during the COVID-19 pandemic.
The Ohio Senate passed a similar bill, SB 308. Unlike the House bill, SB 308 provides immunity only in the health care context. The bill would provide immunity from civil liability for doctors, nurses, and others working in the health care arena during “disasters” like the current pandemic. It would also provide a qualified immunity from liability to services providers for “manufacturing” and any other service “that is part of or outside of a service provider's normal course of business conducted during the period of a disaster or emergency declared due to COVID-19 and ending on April 1, 2021.”
What’s next? The Ohio Senate is scheduled to meet next week on an “as needed” basis. During these tentatively scheduled sessions, the senate could consider the bills that have cleared the House—HBs 496, 67, 33, and 665. If passed by the Senate, the bills would then move on to Governor DeWine for approval. We will keep you updated on what the Senate and Governor decide. In the case of the COVID immunity bills, each bill moved to the opposite house, where they are currently being considered in committees. We’ll have to wait and see if one or both are sent on to DeWine, or if the two houses choose to somehow combine the bills into one document.
“Will I be liable for that?” is a common question we hear in the legal world. COVID-19 has made that question even more commonplace, especially as more businesses reopen or expand services and more people reengage in public activities. About a dozen states have acted on the liability concern and passed COVID-19 liability protections, and Congress is also deliberating whether federal legislation is necessary. Here in Ohio, the House and the Senate have been reviewing separate immunity proposals. Yesterday, Ohio’s House passed its bill, which aims to limit liability in certain situations where a person claims harm from the transmission of COVID-19.
The language of House Bill 606 effectively explains the House’s intent in putting forth its proposal, stating that:
- The Ohio General Assembly is aware that lawsuits related to the COVID-19 health emergency numbering in the thousands are being filed across the country.
- Ohio business owners, small and large, as they begin to re-open their businesses are unsure about what tort liability they may face, and recommendations regarding how best to avoid infection with COVID-19 change frequently.
- Businesses and premises owners have not historically been required to keep members of the public from being exposed to airborne viruses, bacteria, and germs.
- Those individuals who decide to go out into public places are responsible to take those steps they feel are necessary to avoid exposure to COVID-19, such as social distancing and wearing masks.
The House bill declares that for the above reasons, any COVID-19 “orders and recommendations from the Executive Branch, from counties and local municipalities, from boards of health and other agencies, and from any federal government agency, do not create any new legal duties for purposes of tort liability.”
The bill’s reference to not establishing a legal duty in regards to COVID-19 is important, as it forms the basis of immunity from liability for COVID-19 infections. Under Ohio law, a person who can prove that harm resulted because another failed to meet a required duty of care can make a successful claim of negligence and receive damages for harm caused. Negating a legal duty of care for handling of COVID-19 removes the possibility of civil liability.
The House bill clearly lays out its general liability protection in Section 4 and extends the immunity from March 9 to December 31, 2020 to “any person,” which includes an individual, corporation, business trust, estate, trust, partnership, association, school, for-profit, nonprofit, governmental, or religious entity, and state institution of higher education. But it also makes an exception from immunity where a person has acted recklessly, intentionally, or with wanton misconduct:
- No civil action for damages for injury, death, or loss to person or property shall be brought against any person if the cause of action on which the civil action is based, in whole or in part, is that the injury, death, or loss to person or property is caused by the exposure to, or the transmission or contraction of [COVID-19] or any mutation thereof, unless it is established that the exposure to, or the transmission or contraction of, any of those viruses or mutations was by reckless or intentional conduct or with willful or wanton misconduct on the part of the person against whom the action is brought.
Opponents to the bill claim that it would encourage persons not to take any COVID-19 precautions, but proponents argue that the bill does so by discouraging reckless behavior. Under the legislation, to behave recklessly means that “with heedless indifference to the consequences, the person disregards a substantial and unjustifiable risk that the person's conduct is likely to cause an exposure to, or a transmission or contraction of [COVID-19] or any mutation thereof, or is likely to be of a nature that results in an exposure to, or a transmission or contraction of, any of those viruses or mutations.”
In addition to the general immunity protection explained above, the House bill also provides temporary civil immunity for health care providers, grants immunity to the State for care of persons in its custody or if an officer or employee becomes infected with COVID-19 in the performance or nonperformance of governmental functions and public duties, and expands the definition of “governmental functions” for purposes of political subdivision immunity to include actions taken during the COVID-19 pandemic.
The Ohio Senate is working on its own version of a COVID-19 immunity bill. A fourth hearing on Senate Bill 308 took place on May 27 before the Senate Judiciary Committee. Several substitute bills have replaced the original bill, and it's yet uncertain what the final version will contain.
There’s much disagreement over what we know about COVID-19, but one thing we can agree upon is that it has left an impact on the food supply chain. For some food producers, that impact is creating opportunity. Many growers see the potential of filling the gaps created by closed processing facilities, thin grocery shelves, and unwillingness to shop inside stores. If you’re one of those growers who sees an opportunity to sell food, we have a few thoughts on legal issues to consider before moving into the direct food sales arena. Doing so will reduce your risks and the potential of legal liability.
1. Follow COVID-19-related guidelines
Perhaps this goes without saying, but businesses should take COVID-19 guidelines seriously. Doing so will hopefully reduce the potential of a COVID-19 transmission in the operation while also minimizing the risk of an enforcement action and potential legal liability for failing to protect employees and customers. Follow the Ohio Department of Health Responsible RestartOhio Guidelines that are now in effect. Engaging directly with customers places a grower in the “Consumer, Retail and Services” sector guidelines, which are here. Mandatory requirements include protecting the health and safety of employees, customers and guests by establishing six-foot distances or barriers, wearing face masks, handwashing and sanitizing, checking for symptoms daily, posting signs, deep cleaning, and dealing with suspected and confirmed cases of COVID-19. The FDA has also issued “Best Practices for Retail Food Stores, Restaurants and Food Pick-Up and Delivery Services” here, and OSU’s direct marketing team has many helpful resources for implementing the practices here. Develop protocols based upon the guidelines, carefully train employees on protocols, and document your compliance.
2. Determine what food safety regulations apply to you
For food safety purposes, the Ohio Department of Agriculture and local county health department require licensing or inspection of certain types of food sale activities. The regulations are a bit messy, and it’s challenging to know when an operator is affected by these regulatory requirements. We’ve explained licensing laws pertaining to sales directly at the farm in this law bulletin, “Selling Foods at the Farm: When Do You Need a License?” There are more stringent requirements for those who sell meat, process food, or sell higher risk foods or several different types of foods. We’ve provided a few simple guidelines in the chart at the end of this post, but please refer to the above law bulletin for further details. Additionally, produce growers need to comply with Good Agricultural Practice (GAPs) and Food Safety Modernization Act (FSMA) rules. Learn more about those on our Fruit and Vegetable Safety Program website here.
3. Check your zoning
If you’re within a municipality, you may have zoning regulations that apply to your production and sales activities. Check your local zoning regulation to ensure that those activities are “permitted uses” within your designated zoning district. If not, you may need to seek a “conditional use” permit. Also be aware that some municipal zoning regulations regulate “home businesses,” and a home bakery or cottage food operation that has customers coming to the home to purchase the goods might fall into that category.
If you’re outside a municipality, Ohio’s agricultural exemption from county and township zoning applies to your production and sales activities. Local zoning can’t prohibit your activities regardless of your zoning district, with limited exceptions if you’re in a “platted subdivision” situation (on a lot under 5 acres in a platted area of at least 15 other contiguous lots). Note, however, that county and township zoning can regulate a “farm market” that receives more than 50% of its gross income from goods that weren’t raised on the owner’s farm. You might need to comply with a few zoning regulations that pertain to the size and setback lines for your structure, the parking area, and ingress and egress points for customers.
4. You may have to collect sales taxes on some items
Most takeaway food items to be consumed off-site, such as meat and produce, aren’t subject to Ohio’s sales tax. But if you sell items that are not exempt from sales tax, you’ll need to collect sales taxes on the items. If you’re planning to sell ready-to-eat items on site, beverages, flowers, or container plants, you must charge and collect sales taxes and obtain a vendor’s license in order to submit the taxes to the state. Find more details in our law bulletin on vendor’s licenses and sales taxes here.
5. Review contracting situations
You’ll likely be presented with a contract or agreement in many situations, such as a farmers’ market contract or an agreement for selling on an online sales platform. Or you may need to generate your own contract for selling whole animals or establishing a “community supported agriculture” operation. In either instance, read your contracts carefully. Be sure to include and review important terms such as price, quality delivery dates, payment processes, late fees, data use, and other provisions related to your type of sale. Don’t hesitate to involve an agricultural attorney to be sure that you’ve minimized your legal risk.
6. Talk to your insurance provider
Direct food sales might not be adequately covered by your insurance policy. You’ll need to know whether you have sufficient premises liability coverage if a customer is harmed on your farm, coverage for transporting foods or for selling at a farmers’ market (typically required by the market) and product liability coverage in case someone claims illness or other injury from consuming your food. You may need to increase coverage or purchase additional riders to the policy, depending on your risk level. Reviewing your policy with your provider and aligning coverage with your food sales activities is imperative to reducing your liability risk.
7. Do you need a separate business entity?
Consider whether your food sales activities put other assets at risk, and whether your insurance is sufficient to address that risk. If not, you should consider forming a separate business entity for your direct marketing business. Forming a Limited Liability Company for your direct food sales activities can help shield your other assets from the liability of the food sales. Talk with an agricultural attorney to assess your needs and determine what type of entity is best for your situation.
8. Keep great records
This one applies to everything above. Maintain records of what you do in regards to COVID-19 precautions, employee training, food safety compliance, and financial records of your expenditures and sales. If a liability incident arises, document it carefully. Keep the records for the required amount of time, which is typically three years for receipts for purchases and sales, ten years for insurance and employee records, and permanently for other records.
9. Don’t stop here
This list is a starting point for legal considerations for direct food sales, but it shouldn’t be the end. There may be other legal issues that affect your particularly situation. To learn more and fully consider all risks of direct marketing, talk with others who’ve directly sold food, visit with your accountant, lawyer and insurance provider, and learn the best practices for growing and marketing your food products.
Do you need a license for your direct-to-customer food sales?
Peggy Kirk Hall, OSU Agricultural & Resource Law Program
Emily Marrison, OSU Extension Coshocton County
We offer this chart as guidance and not as legal advice. Please confirm your specific situation and needs with the Ohio Department of Agriculture and your local county health department.
Selling meat for custom operator processing. You don’t need a license to sell an animal to a customer who will have it processed by a custom operator. But you can’t bring custom operator processed meat back to the farm and sell it to customers in individual portions; that type of sale requires processing by a federally approved processor.
Selling meat in individual portions. You may sell cuts of beef, pork and other livestock if the meat is processed and labeled by a processor that meets federal regulations and is deemed “fully inspected” by ODA (see a list of such facilities here).
Selling chickens processed at the farm. Growers may be surprised to learn that no license is required to process and sell up to 1,000 birds per year at the farm where the birds are raised. But if a grower sells the birds along with other food items such as produce, then the grower must register as a Farm Market and be inspected by ODA. The Farm Market registration form is here.
Selling eggs. A grower does not need a license to sell eggs produced at the farm where sold, as long as the grower has 500 or fewer birds. But if a grower wants to sell eggs through a farmer’s market or sells other low risk foods along with eggs, either a Farm Market registration and inspection from ODA (here) or a Retail Food Establishment license from the county health department is necessary.
Selling produce. Selling only fresh, unprocessed produce does not require any licensing. However, if selling other low risk foods along with produce, a grower must either register as a farm market through ODA or obtain a Retail Food Establishment license from the county health department.
Selling multiple food items. Regulation increases when a grower offers multiple types of food items for sale. If those items are “low risk,” the grower must register as a Farm Market with ODA, which involves a site inspection. If higher risk foods are involved, such as meat, eggs from offsite or from more than 500 birds, dressed poultry from offsite or from more than 1,000 birds, the grower must obtain a Retail Food Establishment license from the county health department.
Selling cottage foods and home bakery goods. Many home-prepared foods such as cookies, breads, jams, granola, snack mixes and more fall under Ohio’s cottage food law and require no licensing, but there are labeling requirements. See our law bulletin on Ohio’s Cottage Food Law here.
Written by Ellen Essman and Peggy Kirk Hall
Many people are still working from home, but that hasn’t stopped legal activity in Washington, D.C. Bills have been proposed, federal rules are being finalized, and new lawsuits are in process. Here’s our gathering of the latest ag law news.
SBA posts Paycheck Protection Program (PPP) loan forgiveness application. We’ve been waiting to hear more about how and to what extent the SBA will forgive loans made under the CARES Act’s PPP that many farm businesses have utilized. The SBA recently posted the forgiveness application and instructions for applicants here. But there are still unanswered questions for agricultural applicants as well as talk in Congress about changing some of the forgiveness provisions, suggesting that loan recipients should sit tight rather than apply now. Watch for our future blog post and a discussion on the forgiveness provisions in our next Farm Office Live webinar.
House passes another COVID-19 relief bill. All predictions are that the bill will go nowhere in the Senate, but that didn’t stop the House from passing a $3 trillion COVID-19 relief package on May 15. The “HEROES Act” includes a number of provisions for agriculture, including an additional $16.5 billion in direct payments to producers of commodities, specialty crops and livestock, as well as funds for local agriculture markets, livestock depopulation losses, meat processing plants, expanded CRP, dairy production, other supply chain disruptions, and biofuel producers (discussed below). Read the bill here.
Proposed bipartisan bill designed to open cash market for cattle. Last week, Republican Senator Chuck Grassley and Democratic Senator Jon Tester introduced a bill that “would require large-scale meatpackers to increase the proportion of negotiable transactions that are cash, or ‘spot,’ to 50 percent of their total cattle purchases.” The senators hope this change would bring up formula prices and allow livestock producers to better negotiate prices and increase their profits. In addition, the sponsors claim ithe bill would provide more certainty to a sector hard hit by coronavirus. Livestock groups aren’t all in agreement about the proposal. You can read the bill here, Senator Grassley’s press release here and Senator Tester’s news release here.
New Senate and House bills want to reform the U.S. food system. Representative Ro Khanna from California has introduced the House companion bill to the Senate's Farm System Reform Act first introduced by Senator Cory Booker in January. The proposal intends to address underlying problems in the food system. The bill places an immediate moratorium on the creation or expansion of large concentrated animal feeding operations and requires such operations to cease by January 1, 2040. The proposal also claims to strengthen the Packers and Stockyards Act and requires country of origin labeling on beef, pork, and dairy products. The bill would also create new protections for livestock growers contracted by large meat companies, provide money for farmers to transition away from operating animal feeding facilities, strengthen the term “Product of the United States” to mean “derived from 1 or more animals exclusively born, raised, and slaughtered” in the U.S., and, similar to the Grassley/Tester bill above, require an increased percentage of meatpacker purchases to be “spot” transactions.
Lawmakers ask Trump to reimburse livestock producers through FEMA. In another move that seeks to help livestock producers affected by the pandemic, a bipartisan group of U.S. Representatives sent a letter to Donald Trump imploring him to issue national guidance to allow expenses of livestock depopulation and disposal to be reimbursed under FEMA's Public Assistance Program Category B. The lawmakers reason that FEMA has "been a valued Federal partner in responding to animal losses due to natural disasters," and that the COVID-19 epidemic should be treated "no differently." You can read the letter here.
More battling over biofuels. Attorneys General from Wyoming, Utah, Louisiana, Oklahoma, Texas, Arkansas and West Virginia have sent a request to EPA Administrator Andrew Wheeler to waive the Renewable Fuel Standard (RFS) because of COVID-19 impacts on the fuel economy. The letter states that reducing the national quantity of renewable fuel required would alleviate the regulatory cost of purchasing tradable credits for refiners, who use the credits to comply with biofuel-blending targets. Meanwhile, 70 mayors from across the U.S. wrote a letter urging the opposite, and criticizing any decisions not to uphold the RFS due to the impact that decision would have on local economies, farmers, workers, and families who depend on the biofuels industry. The House is also weighing in on the issue. In its recently passed HEROES Act, the House proposes a 45 cents per gallon direct payment to biofuel producers for fuels produced between Jan 1 and May 1, 2020 and a similar payment for those forced out of production during that time.
New USDA rule for genetically engineered crops. A final rule concerning genetically engineered organisms is set to be published this week. In the rule, USDA amends biotechnology regulations under the Plant Protection Act. Importantly, the new rule would exempt plants from regulation by the Animal and Plant Health Inspection Service (APHIS) if the plants are genetically engineered but the same outcome could have occurred using conventional breeding. For instance, gene deletions and simple genetic transfers from one compatible plant relative to another would be exempted. If new varieties of plants use a plant-trait mechanism of action combination that has been analyzed by APHIS, such plants would be exempt. You can read a draft of the final rule here.
Trump’s new WOTUS rule attacked from both sides of the spectrum. A few weeks ago, we wrote about the Trump Administration’s new “waters of the United States” or WOTUS rule. Well, it didn’t take too long for those who oppose the rule to make their voices heard. The New Mexico Cattle Growers Association (NMCGA) sued the administration, claiming that the new rule is still too strict and leaves cattle ranchers questioning whether waters on their land will be regulated. In their complaint, NMCGA argues that the new definition violates the Constitution, the Clean Water Act, and Supreme Court precedent. On the other side, the Natural Resources Defense Council (NRDC), along with other conservation groups, sued the administration, but argued that the new rule does not do enough to protect water and defines “WOTUS” too narrowly. Here we go again—will WOTUS ever truly be settled?
The Farm Office is Open! Join us for analysis of these and other legal and economic issues facing farmers in the Farm Office Team’s next session of “Farm Office Live” on Thursday, May 28 at 9:00 a.m. Go to this link to register in advance or to watch past recordings.
Farmers aren’t traditionally eligible for unemployment benefits, but that won’t be the case when Ohio’s newest unemployment program opens. We've been keeping an eye out for the opening of the Pandemic Unemployment Assistance (PUA) program, which will provide unemployment benefits to persons affected by COVID-19. The program is targeted to persons who are not eligible for regular unemployment benefits, such as self-employed and 1099 filers. PUA is yet another economic assistance program generated by the Coronavirus Aid, Relief and Economic Security (CARES) Act recently passed by Congress.
PUA will provide regular unemployment benefit amounts to qualifying individuals, plus an additional $600 per week for the period of March 29 to July 25, 2020. Qualification doesn’t include a minimum income requirement, but a person must not be eligible for Ohio’s regular unemployment benefits and must not be currently receiving vacation, sick or other paid leave. The applicant must also be unable to work due to one of the following situations:
- The applicant has been diagnosed with COVID-19 or has symptoms and is seeking medical diagnosis;
- A member of the applicant’s household has been diagnosed with COVID-19;
- The applicant is providing care for a family or household member who has been diagnosed with COVID-19;
- The applicant cannot work due to caring for a child whose school or other facility has closed due to COVID-19;
- The applicant has become the primary support for a household because the head of the household has died due to COVID-19;
- The applicant has quit his or her job, was laid off, or could not begin a new job as a direct result of COVID-19;
- The applicant’s place of employment is closed because of COVID-19.
Applications should open by mid-May on the Ohio Department of Job and Family Services website. Self-employed individuals will have to submit proof of employment, such as earnings statements that reflect profit and loss, payroll deposits, or a 2019 tax return. The unemployment benefits will be retroactive to the date of eligibility and will last for no more than 39 weeks, up to December 26, 2020. PUA may also provide an additional 13 weeks of benefits for those who’ve exhausted regular unemployment benefits. To learn more or apply for PUA, visit https://unemploymenthelp.ohio.gov/expandedeligibility/.
Written by Barry Ward, Leader, Production Business Management and Director, OSU Income Tax Schools
In our recent Farm Office Live webinars, we’ve discussed the paid sick leave provisions in the Families First Coronavirus Response Act. The new law recognizes that many employees have been forced by COVID-19 to stay home rather than report to work. In such cases, the law obligates employers to provide paid sick leave but also gives federal tax credits to employers for doing so. Here’s a summary of how the law works.
Emergency paid sick leave provision
Employers with less than 500 employees are required to provide paid sick leave to employees who are unable to work (or telework) if they have become ill with COVID-19, have similar symptoms, or must provide care to someone with COVID-19 issues. Employees who have to care for children due to school or day care closure are also eligible for partial paid sick leave. Employers are required to provide 100 percent of the usual pay rate to an employee if they have COVID-19 or the related symptoms, up to $511 per day. If they’re unable to work due to the need to care for an affected individual or to care for children due to school or daycare closure, the employee must be paid 2/3rds of their usual pay rate up, up to $200 per day.
The following chart summarizes the requirements.
Employee has COVID-19 related illness
Must provide two weeks (80 hours) of 100% sick-pay, capped at $511/day
Employee is caring for individual with COVID-19 related illness
Must provide two weeks (80 hours) of 2/3rds of sick-pay, capped at $200/day
Employee is caring for children because school or childcare is closed due to COVID-19
Must provide two weeks (80 hours) of 2/3rds of sick-pay, capped at $200/day
Expanded family leave provision
A second provision, the expanded family leave provision, requires employers to provide employees with up to 12 weeks of leave for COVID-19-related needs. This leave requirement applies to employees who are unable to work due to having to care for children whose school or daycare is closed or unavailable because of COVID-19. The first ten days of the expanded family leave are unpaid (a deductible of sorts), although the employee can use the “emergency paid sick leave provision” or accrued sick leave to cover these days if necessary. After the first ten days, the employee is eligible to receive 2/3rd of regular pay for the remaining ten weeks, capped at $200 per day.
Note that employers with fewer than 50 employees are eligible for an exemption where the viability of the business would be threatened. The exemption applies to the requirements to provide leave to care for a child whose school is closed or if child care is unavailable.
Employer tax credits to fully compensate for required leave
This new law provides corresponding refundable tax credits to equal all required leave provided by an employer whether the leave was required and provided under the emergency paid sick provision or the expanded family leave provision. The credits are refundable payroll tax credits, designed to immediately and fully reimburse employers, dollar-for-dollar, for the cost of providing the required leave to their employees.
To receive the credit, employers hold on to payroll withholding as offset. Payroll withholding that can be held as this tax credit includes withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees. If this amount isn’t enough to provide the full tax credit due the employer, the employer will have to file a return with the IRS. More information on how to claim these credits is available at: https://www.irs.gov/newsroom/covid-19-related-tax-credits-how-to-claim-the-credits-faqs
Additional details are available on the U.S. Department of Labor’s “Families First Coronavirus Response Act: Employer Paid Leave Requirements” page, here: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
Economic relief measures in the CARES Act have proven difficult for farms, first due to confusion over which and how farmers qualify and also by soaring demand and depleted funding. But the recently enacted Paycheck Protection Program and Health Care Enhancement Act (HR 266) should help. The legislation injects more funds into both the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans Program (EIDL) and clarifies that farmers can qualify for EIDL loans. The bill also came with a bonus: additional guidance from the USDA and SBA for farmers seeking to access the programs. Both programs are first-come, first-served, so farm businesses who haven’t applied for the funds should decide whether to do so right away.
Here’s how the new legislation affects agricultural businesses:
- Allocates another $310 billion for the PPP to provide payroll funding for eligible employers, which includes $60 billion in funding for smaller lending institutions working with PPP loan applicants.
- Doubles the EIDL program, adding another $10 billion to the SBA disaster loan program for eligible businesses.
- Clarifies that agricultural enterprises are eligible for EIDL loans.
Using the PPP: a few quick tips
The SBA will resume accepting applications for the PPP today. Information about the program is on SBA’s website, here. Generally, PPP gives loans of up to $10 million at 1% interest to keep employees employed, with a loan maturity of two years and generous forgiveness provisions.
Farm businesses, including cooperatives, with fewer than 500 employees or who fit within the definition of a “small business concern” may apply for a PPP loan through an approved lender. Lenders include local banks as well as agricultural lenders in the Farm Credit System. Farmers should talk first to the lenders with whom they ordinarily do business to see if the lenders are participating in the PPP. If not, SBA provides a lender locating tool here.
The PPP application is here. Employers may use the loan for payroll costs or owner compensation replacement, as well as for mortgage interest, rent, and utility payments and interest payment on other debts, but 75% of the expenditures must be for payroll costs. To determine the maximum loan amount, an employer must document and calculate aggregate payroll costs from the previous 12 months, from calendar year 2019, or from February to June of 2019 if a seasonal employer. The SBA provides assistance on how to calculate payroll costs, and finally addresses the requirements for self-employed farms who report income on Schedule F. Read the guidance here, and see question 3 if you’re reporting income on Schedule F.
Upon receiving a PPP loan, a lender will set up a separate account for the funds. Borrowers should carefully document loan expenditures. This is not only for compliance purposes, but also because the PPP loan program includes a forgiveness component that forgives an amount equal to the sum of eligible costs and payments made during the eight weeks following disbursement of loan funds. At least 75% of the amount forgiven has to be for payroll costs, and the amount may be reduced by reductions in total salary or wages. Borrowers will have to apply for forgiveness, and documentation of all expenditures will prove necessary to the forgiveness process. We’re awaiting additional guidance on the forgiveness provisions, so keep an eye out for more information on this important topic.
The EIDL program
Farm businesses and agricultural cooperatives with no more than 500 employees may also now apply for EIDL, which gives loans up to $2 million for businesses that suffer economic injuries due to COVID-19. Because the program ran out of funds, there is a backlog in EIDL applications and the SBA is not reopening the loan portal until it catches up with the backlog. If SBA does reopen the program, businesses apply directly through the SBA here.
Businesses may use an EIDL loan for fixed debt, payroll, accounts payable, and other operating expenses due to the pandemic, but can’t use the funds for the same purposes as the borrower’s PPP loan. The interest rate for EIDL is higher at 3.75% (2.75% for non-profits), but the term can be up to 30 years.
Important to note: EIDL also includes an “emergency advance” component that provides an employer up to $1,000 per employee or a maximum of $10,000 as a grant. A borrower doesn’t have to repay the advance, even if the borrower doesn’t ultimately qualify for a loan. But if the borrower also has a PPP loan, the PPP forgiveness is reduced by the $10,000 EIDL advance. The emergency advance can go towards paying sick leave, payroll, increased materials costs, rental or mortgage payments, or other obligations due to revenue losses, as long as the borrower hasn’t used PPP funds for those costs.
There's still more for farms to digest from the CARES Act. The Farm Office team is ready to help! Join us for "The Farm Office is Open" tonight at 8 p.m., when we'll discuss the CARES Act programs and other economic developments for agriculture. Register for the live webinar and access past webinar recordings here.
Although many of us are quarantined at home these days, the gears of the legal world are still turning. Here’s our gathering of recent notable news and legal developments:
Our Farm Office is open Monday night! Join us for the Farm Office’s live online office hours this Monday night from 8—9:30 p.m. Our team of experts will provide updates on the Paycheck Protection Program and the dairy economy and discuss COVID-19 macro-economic and export impacts, BWC dividends, property tax concerns, potential legal issues arising from COVID-19, and other issues you want to discuss. Register at https://go.osu.edu/farmofficelive.
What’s the deal with dicamba? Our partner, the National Agricultural Law Center, is hosting a free webinar on dicamba litigation on Wednesday, April 15 at noon EST. "The Deal with Dicamba: An Overview of Dicamba Related Litigation," will feature attorney Brigit Rollins, who will review each of the dicamba lawsuits, the claims made by the plaintiffs, and what the outcome of each suit could mean for dicamba use in the United States. Go here to learn more.
Walmart sued for employee’s COVID-19 death. We’ve been wondering when we’d start seeing COVID-19 lawsuits, and the answer is now. On Monday, the estate of a Walmart employee in Illinois who died from COVID-19 sued the company for negligence and wrongful death. The complaint alleges that Walmart failed to properly clean the store or provide employees with masks, gloves, antibacterial wipes and other protective equipment, knew that employees were exhibiting COVID-19 signs and symptoms, and did not screen new employees for COVID-19. A second employee at the same store has also died of the virus. Read the complaint here.
Shell eggs go to market. The FDA issued guidance that eases up packaging and labeling requirements during the COVID-19 pandemic for shell eggs sold directly to consumers in retail food establishments. The agency explained that it made the change because plenty of shell eggs are available to meet increased consumer demands, but properly labeled retail packaging for the eggs is not. See the guidance here.
EPA’s glyphosate approval is challenged. Glyphosate, used in the weed killer Roundup, is in the news again. This time, the controversy surrounds the EPA’s decision in January 2020 to allow glyphosate to continue being used in the interim while the agency conducts its mandatory 15-year re-approval review. Although EPA has yet to make its re-approval decision, two groups of plaintiffs have petitioned the Ninth Circuit Court of Appeals for an invalidation of the EPA’s decision allowing continued use in the interim. Plaintiffs argue that the decision violates both the Federal Insecticide, Fungicide, and Rodenticide Act and the Endangered Species Act because the EPA has not gathered enough information to prove that glyphosate is safe for humans, the environment, and endangered species. You can read the petitions here and here, and EPA’s interim decision here.
No rehearing for RFS litigation. We reported previously that the Tenth Circuit Court of Appeals held the EPA in violation of the Renewable Fuel Standard (RFS) when it granted RFS blending waivers to three small refineries. While the Trump administration did not appeal the court’s decision, two of the oil refiners requested a rehearing before the full panel of Tenth Circuit judges. This week, those requests were rejected by the Tenth Circuit, starting a 90-day period during which the refiners may petition for a hearing before the U.S. Supreme Court.
ODNR suspends hunting and fishing license sales for non-residents. The Ohio Department of Natural Resources announced this week that it is “temporarily suspending the sale of non-resident hunting and fishing licenses until further notice” to further discourage travel into the state. ODNR has no set date to lift the suspension; it will be in place as long as state COVID-19 orders dictate. Read ODNR’s press release here.
BWC gives dividends and deferrals. The Ohio Bureau of Workers’ Compensation board decided yesterday to pay dividends to employers for BWC premiums to the tune of up to $1.6 billion. Checks will go out to employers later in April, and will equal approximately 100% of the BWC premiums paid in their 2018 policy years. The agency is also allowing employers to delay unpaid premium installments due for March through May until June 1, 2020 and will not lapse coverage or assess penalties for amounts not paid due to the COVID-19 pandemic. See this FAQ for details.