Income Tax
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.
Tags: OSHA, Department of Labor, H-2A, Income Tax, Colorado, Ohio, property tax
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Ohio's Beginning Farmer Tax Credit Program aims to help level the playing field for beginning farmers in Ohio. It does so by providing income tax benefits for both a beginning farmer and someone who transfers farm assets to the beginning farmer. The new program first became available for the 2023 tax year, and sunsets on January 1, 2028, or when total income tax credits granted amount to $10 million. Participating in the program requires good planning, so now is the optimal time for existing and beginning farmers to consider how best to utilize the program while program funds are still available.
Our law bulletin, Ohio's Beginning Farmer Tax Credit Program, can help guide planning efforts. The bulletin explains how the program works and outlines the process for qualifying for the program's income tax credits. That process includes:
1. Meeting eligibility requirements to become certified by the Ohio Department of Agriculture (ODA) as a "qualified beginning farmer." The first step, then, is to determine whether an individual can meet the eligibility requirements, which are:
- A resident of Ohio.
- Seeking entry to or has entered farming within the last 10 years.
- Farming or intending to farm in Ohio.
- Has a total net worth of less than $800,000 in 2021, including spouse and dependent assets, as adjusted for inflation each year.
- Provides the majority of the daily physical labor and management for the farm.
- Has adequate farming experience or knowledge in the type of farming the individual is conducting.
- Submits projected earnings statements and demonstrates profit potential.
- Demonstrates farming will be a significant source of income for the individual.
- Is not a partner, member, shareholder, or trustee of the assets the individual is seeking to purchase or rent.
- Completes an ODA-approved financial management course.
2. Completing training and applying to ODA for certification as a "qualified beginning farmer." One component of attaining the program's eligibility requirements is completing a financial management course, which an individual who meets all other program requirements must do before applying to ODA to become certified. OSU Extension offers two of the 12 ODA-approved financial management programs an individual can complete to meet the training requirement.
- After completing an eligible financial management course, the individual must submit an application to ODA's Office of Farmland Preservation to be approved as a qualified beginning farmer. The application requires submitting information and documentation showing that the individual meets the eligibility requirements.
- If ODA approves the application, the individual will receive a state income tax credit certificate for the amount paid for completing the financial management course. The qualified beginning farmer can use the tax credit on the current year's tax return and can carry it forward for three succeeding tax years.
- A list of eligible financial management courses and the application to become a qualified beginning farmer are on the ODA website at https://agri.ohio.gov/programs/farmland-preservation-office/Beginning-Farmer-Tax-Credit-Program.
3. Transfer of agricultural assets to a qualified beginning farmer. The program also creates a financial incentive for owners who sell or rent agricultural assets to an individual who has been certified as a qualified beginning farmer, as long as the beginning farmer is not a partner, member, shareholder, or trustee with the owner of the agricultural assets. The asset owner will receive an Ohio income tax credit equal to 3.99% of the asset sale price or gross rental income received during a calendar year for a cash or share rental lease, and can carry the credit forward for up to seven years.
- "Agricultural assets" include land in agricultural production (10 or more or if under 10 acres, earning $2500 in average annual gross income from agriculture), livestock, facilities and buildings, and machinery (but not if the owner of machinery is an equipment dealer).
- A sale of assets must occur in the same calendar year the owner applies for the tax credit.
- In the case of a rental of assets, the credit can be claimed over the first three years of the lease.
4. Application for a tax credit by the asset owner. To receive the 3.99% income tax credit, the asset owner must submit a Beginning Farmer Tax Credit Asset Transfer Form application to ODA. The asset owner must submit a copy of the qualified beginning farmer's certification certificate with the application, which is available on the ODA website at https://agri.ohio.gov/programs/farmland-preservation-office/Beginning-Farmer-Tax-Credit-Program. If ODA approves the application, the Ohio Department of Taxation will issue a tax credit certificate to the asset owner.
It is important for both the beginning farmer and the agricultural asset owner to understand the process for qualifying for the income tax credits the new program offers. Timing is critical, as the beginning farmer must complete the training and become certified as a qualified beginning farmer before a transfer of agicultural assets occurs. It's also important for existing asset owners to coordinate program participation with estate and transition plans. Now is the time to consult with professional advisors and begin planning for program participation for the 2024 tax year.
Learn more about the Beginning Farmer Tax Credit Program in our law bulletin, available in the tax law library on https://farmoffice.osu.edu/our-library/tax-law and by visiting the ODA's website at https://agri.ohio.gov/programs/farmland-preservation-office/Beginning-Farmer-Tax-Credit-Program.
Tags: beginning farmer, tax credit, Income Tax, HB 95
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Farmer and Farmland Owner Income Tax Webinar
Barry Ward & Jeff Lewis, OSU Income Tax Schools
Are you a farmer or farmland owner wanting to learn more about the recent tax law issues? If so, join us for this webinar on Friday, December 15th, 2023 from 10am to noon. This webinar is a part of our Farm Office Live Series and serves as our Farm Office Live! Webinar for December. To register for this webinar go to: https://go.osu.edu/register4fol
This webinar will focus on issues related to farmer and farmland owner income tax returns as well as the latest news on CAUV and property taxes in Ohio and the big changes to the Ohio Commercial Activity Tax (CAT). This two-hour program will be presented in a live webinar format via Zoom by OSU Extension Educators Barry Ward, David Marrison and Jeff Lewis along with Purdue faculty member Dr. Michael Langemeier. Individuals who operate farms, own property, or are involved with renting farmland should participate.
Topics to be discussed during this webinar include (subject to change based on tax law change):
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Economic Outlook
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Depreciation Update
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Employee vs. Independent Contractor
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Corporate Transparency Act/Beneficial Owners Information Reporting
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1099-K Changes
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Charitable Remainder Trusts
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Basis Allocation Land Acquisition – Allocating Basis to Residual Fertility for Future Deductions
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Defining Farm Income to Avoid Paying Estimated Tax
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Keeping an Eye Forward on Estate/Gift Tax Limitation
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Reminder – Keeping an Eye on Tax Cuts and Jobs Act Provisions Sunsetting After 2025 Tax Year
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Ohio Tax Update (CAUV/Property Tax Update, CAT Changes, Beginning Farmer Tax Credit, Ohio Tax Law Interpretation – Ohio Supreme Court Issues New Ruling)
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Indiana Tax Update
To register: https://go.osu.edu/register4fol
For more information, contact Barry Ward at ward.8@osu.edu or Jeff Lewis at lewis.1459@osu.edu
Despite the arrival of summer and continuing disagreements over the state budget, Ohio legislators have been working on several pieces of legislation relevant to Ohio agriculture. All of the proposals are at the committee level but may see action before the Senate and House after the budget bill process ends. Here’s a summary of the ag related proposals currently under consideration.
Senate Bill 111 – Urban Agriculture
Senator Paula Hicks-Hudson (D-Toledo) targets barriers for farmers in urban settings in SB 111, which has had three hearings before the Senate Agriculture and Natural Resources Committee. OSU Extension, the Ohio Municipal League, and several farmers have testified in support of the proposal, which contains three components:
- Establishes an Urban Farmer Youth Initiative Pilot Program to provide youth between the ages of six and eighteen living in urban areas with programming and support for farming and agriculture. The bill would appropriate $250,000 over 2024 and 2025 for the pilot, to be administered by OSU Extension and Central State Extension.
- Exempts temporary greenhouses, such as hoop houses, from the Ohio Building Code, consistent with Ohio law’s treatment of other agricultural buildings and structures.
- Codifies the Department of Taxation’s current treatment of separate smaller parcels of agricultural land under the same farming operation, which allows the acreages to be combined to meet the 10 acre eligibility requirement for Current Agricultural Use Valuation.
House Bill 64 – Eminent Domain
A proposal to make Ohio’s eminent domain laws more favorable to landowners remains on hold in the House Civil Justice Committee. HB 64 is receiving more opposition than support, with dozens of parties testifying against it in its fourth hearing on May 23. Read more about the proposal in our previous blog post.
House Bill 162 - Agriculture Appreciation Act
Rep. Roy Klopfenstein (R-Haviland) and Rep. Darrell Kick (R-Loudonville) introduced HB 162 on May 1 and the bill received quick and unanimous approval from the House Agriculture Committee on May 16. The proposal would make several designations under Ohio law already recognized by federal law:
- March 21 as "Agriculture Day."
- October 12 as "Farmer's Day."
- The week beginning on the Saturday before the last Saturday of February as "FFA Week."
- The week ending with the second Saturday of March as "4-H Week."
House Bill 166 – Temporary Agricultural Workers
A bill addressing municipal income taxes for H2-A agricultural workers has met opposition in the House Ways and Means Committee. HB 166, sponsored by Rep. Dick Stein (R-Norwalk) would subject foreign agricultural workers’ income to municipal income taxes. The current municipal tax base in Ohio is based on federal tax laws that exclude foreign agricultural worker pay from Social Security and Medicare taxes since the workers cannot use those programs, and HB 166 would remove that exclusion and add H2-A income to the municipal tax base. The bill would also require employers to withhold the taxes for the municipality of the workers’ residences. While municipal interests support the bill, Ohio Farm Bureau and other agricultural interests testified against it in its third hearing on June 13. Opponents argue that H2-A workers are not residents because they are “temporary,” that the proposal would have many potential adverse effects on how Ohio handles the H2-A program, and would hamper the ability of agricultural employers to use the H2-A program to hire employees.
House Bill 193 – Biosolid and biodigestion facilities
Biosolid lagoons and biodigestion facilities would have new legal requirements and be subject to local regulation under a proposal sponsored by Rep. Kevin Miller (R-Newark) and Rep. Brian Lampton (R-Beavercreek). HB 193 would grant county and township zoning authority over the lagoons and facilities, require a public meeting and county approval prior to seeking a facility permit from the Ohio EPA, require the Ohio EPA to develop rules requiring covers on new biosolid lagoons, and modify feedstock requirements for biodigestion facilities to qualify for Current Agricultural Use Valuation property tax assessment. HB 193 had its first hearing before the House Agriculture Committee on June 13.
House Bill 197 – Community Solar Development
A “community solar” proposal that did not make it through the last legislative session is back in a revised form. HB 197 proposes to define and encourage the development of “community solar facilities,” smaller scale solar facilities that are directly connected to an electric distribution utility’s distribution system and that create electricity only for at least three “subscribers.” The bill would establish incentives for placing such facilities on distressed sites and Appalachian region sites through a “Community Solar Pilot Program” and a “Solar Development Program.” Rep. James Hoops (R-Napoleon) and Sharon Ray (R-Wadsworth) introduced the bill on June 6, and it received its first hearing before the House Public Utilities Committee on June 21. “The goal of this legislation is to create a small-scale solar program that seeks to be a part of the solution to Ohio’s energy generation and aging infrastructure need,” stated sponsor Hoops.
House Bill 212 – Foreign ownership of property
Ohio joins a movement of states attempting to limit foreign ownership of property with the introduction of HB 212, the Ohio Property Protection Act. Sponsored by Representatives Angela King (R-Celina) and Roy Klopfenstein (R-Haviland), the proposal would prohibit foreign adversaries and certain businesses from owning real property in Ohio. The bill was introduced in the House on June 13 and has not yet been referred to a committee for review.
Tags: legislation, urban agriculture, eminent domain, employment, H2-A, tax law, Income Tax, cauv, biosolids, bioenergy, Zoning, solar, foreign ownership
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From: Barry Ward & Jeff Lewis, OSU Income Tax Schools
Are you a farmer or farmland owner wanting to learn more about the recent income tax law changes and proposals? If so, join us for this webinar on Thursday, November 17th, 2022, from 6:30 - 8:30 p.m.
Register for just $40. If you can't attend, you will be sent a link to view the recorded webinar later at your convenience. You have unlimited views of the replay, and it will be available throughout the 2022 tax filing season. Details and registration link can be found at: https://farmoffice.osu.edu/tax/farmer-and-farmland-owner-income-tax-webinar
This webinar will focus on issues related to farmer and farmland owner tax returns. This two-hour program will be presented in a live webinar format via Zoom by OSU Extension Educators Barry Ward, David Marrison and Jeff Lewis along with Purdue faculty member Dr. Michael Langemeier. Individuals who operate farms, own property, or are involved with renting farmland are encouraged to participate.
Topics to be discussed during the webinar include (subject to change based on tax law change):
- Farm Economy and Income in ‘22 and Outlook for ’23
- Deferring Taxes (deferring income, prepaying expenses), Retirement Plan Contributions, Accelerating Depreciation, Bunching Itemized Deductions, Self-employment Tax Planning, and Maximizing Permanent Tax Benefits
- Depreciation, Bonus Depreciation, Section 179, What is “Placed in Service”?
- Income Averaging
- Employee Retention Credits
- Inflation Reduction Act (IRA)
- State Tax Updates – Ohio and Indiana
To register: https://farmoffice.osu.edu/tax/farmer-and-farmland-owner-income-tax-webinar
For more information, contact Barry Ward at ward.8@osu.edu or Jeff Lewis at lewis.1459@osu.edu or call the OSU Extension Farm Office at 614-292-2433.
