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Did you know that Hippopotamuses cannot swim? It’s true. When hippos submerge themselves underwater, they don’t swim back up to the surface, instead they walk along the bottom until they reach shallow water. That is unless the hippo decides to chase you out of its territory, then it will gladly run, jump, and charge right at you.
Like the hippo, this week’s Ag Law Harvest is a little territorial. We bring you recent Ohio court decisions, a federal order allowing Colombian hippos to take the testimony of Ohio residents, and the Ohio Department of Agriculture’s directives as it ramps up its fight against Ohio’s newest pest.
Well, well, well. A recent Ohio case demonstrated the complex issues a landowner can run into when dealing with an oil and gas lease. The Plaintiff in this case owns land in Hebron, Ohio and brought suit against his neighbors and the Ohio Department of Taxation claiming that he was not the owner of a gas well located on his property or that he was responsible for paying taxes and maintaining the well under Ohio law. The Hebron, Ohio property at issue in this case passed through many hands before becoming the property of the Plaintiff. One of the prior owners was a man named William Taggart (“Taggart”). As mentioned earlier, the property also has a gas well which was subject to an oil and gas lease. The oil and gas lease passed to multiple parties and ended up with Taggart while he owned the Hebron property. After having both the property and the oil and gas lease, Taggart deeded the property to Plaintiff’s parents which eventually passed onto Plaintiff. Plaintiff argued that he is not the rightful owner of the well because the last person that was assigned the oil and gas lease was Taggart, making him the owner of the well. The Fifth District Court of Appeals disagreed. The court found that Plaintiff’s parents registered as owners of the well under Ohio Revised Code § 1509.31 which requires a person to register a well before they can operate it. Further, the court determined that when the oil and gas lease was assigned to Taggart the rights of the landowner and the lessee merged, essentially making Taggart the only individual with any property interest in the well. Relying on § 1509.31, the court found that when the entire interest of an oil and gas lease is assigned to the landowner, the landowner then becomes responsible for compliance with Chapter 1509 of the Ohio Revised Code. Therefore, when the property passed to Plaintiff’s parents, they became the owners of the well and were responsible for making sure the well was in compliance with Chapter 1509. Because this responsibility passed onto Plaintiff, the court found Plaintiff to be liable for the taxes and ensuring that the well is compliant with Ohio law. The court also denied Plaintiff’s attempt to argue that Taggart was the responsible party because the oil and gas lease was still in effect due to the fact that Plaintiff’s neighbors use the gas well for domestic purposes. The court found that the oil and gas lease had expired by its own terms, pursuant to the habendum clause contained within the lease. A habendum clause essentially defines the property interests and rights that a lessee has. The specific habendum clause in this case stated that the lease would terminate either within three years or when the well no longer produced oil and gas for commercial purposes. The lease at issue was well beyond the three-year term and, as the court found, the lease expired under Taggart because the well no longer produced oil or gas for commercial purposes. The use of the well for domestic purposes did not matter. The Fifth District ultimately held that because Plaintiff could not produce any evidence to show that another party had an interest in the well, Plaintiff is ultimately responsible for the well.
Amending a contract doesn’t always erase the past. Two companies (“Plaintiffs”) recently filed suit against a former managing member (“Defendant”) for allegedly using business funds and assets for personal use during his time as managing member. The primary issue in this case was whether or not an arbitration clause in the original operating agreement is enforceable after the operating agreement was amended to remove the arbitration clause. Defendant’s alleged misconduct occurred while the original operating agreement was in effect. The original operating agreement would require the parties to settle any disputes through the arbitration process and not through the court system. However, shortly before filing suit, the original operating agreement was amended to remove the arbitration provision. Plaintiffs filed suit against the Defendant arguing that the arbitration provision no longer applied because the operating agreement had been amended. Defendant, however, argued that his alleged misconduct occurred while the original operating agreement was in effect and that the amended operating agreement could not apply retroactively forcing him to settle the dispute in a court rather than through arbitration. The trial court, however, sided with the Plaintiffs and allowed the case to move forward. Defendant appealed the trial court’s decision and the Ninth District Court of Appeals agreed with him. The District Court found that the amended operating agreement did not expressly state any intention for the terms and conditions of the amended operating agreement to apply retroactively. Further, the court held that Ohio law favors enforcing arbitration provisions within contracts and any doubts as to whether an arbitration clause applies should be resolved in favor of enforcing the arbitration clause. The Ninth District reversed the trial court and found that the dispute of Defendant’s alleged misconduct should be resolved through arbitration.
Animal advocates claim victory in pursuit of recognizing animals as legal persons. A recent order issued by a federal district court in Ohio allows an attorney for Colombian Hippopotamuses to take the testimony of two expert witnesses residing in Ohio. According to U.S. law, a witness may be compelled to give testimony in a foreign lawsuit if an “interested person” applies to a U.S. court asking that the testimony be taken. The Animal Legal Defense Fund (“ALDF”) applied to the federal court on behalf of the plaintiffs, roughly 100 hippopotamuses, from a lawsuit currently pending in Colombia. According to the ALDF, the lawsuit seeks to prevent the Colombian government from killing the hippos. The interesting thing about this case is that hippos are not native to Colombia and were illegally imported into the country by drug kingpin Pablo Escobar. After Escobar’s death the hippos escaped his property and relocated to Colombia’s Magdalena River and have reproduced at a rate that some say is unsustainable. In Colombia, animals are able to sue to protect their rights and because the plaintiffs in the Colombian lawsuit are the hippos themselves, the ALDF argued that the hippos qualify as an “interested person” under U.S. law. After applying for the authorization, the federal court signed off on ALDF’s application and issued an order authorizing the attorney for the hippos to issue subpoenas for the testimony of the Ohio experts. After the federal court’s order, the ALDF issued a press release titled “Animals Recognized as Legal Persons for the First Time in U.S. Court.” The ALDF claims the federal court ruling is a “critical milestone in the broader animal status fight to recognize that animals have enforceable rights.” However, critics of ALDF’s assertions point out that ALDF’s claims are a bit embellished. According to critics, the order is a result of an ex parte application to the court, meaning only one side petitioned the court for the subpoenas and the other side was not present to argue against the subpoenas. Further, critics claim that all the federal court did was sign an order allowing the attorney for the hippos to take expert testimony, the court did not hold that hippos are “legal persons” under the law.
Ohio Department of Agriculture announces quarantine to combat the spread of the Spotted Lanternfly. According to the Ohio Department of Agriculture (“ODA”) the Spotted Lanternfly (“SLF”) has taken hold in Jefferson and Cuyahoga counties. The ODA announced that the SLF is now designated as a destructive plant pest under Ohio law and that the ODA was issuing quarantine procedures and restricting the movement of certain items from infested counties into non-infested areas of Ohio. The ODA warns that the SLF can travel across county lines in items like tree branches, nursery stock, firewood, logs, and other outdoor items. The ODA has created a checklist of things to look for before traveling within or out of infested counties. Nurseries, arborists, loggers, and other businesses within those infested counties should contact the ODA to see what their obligations and rights are under the ODA's new quarantine instructions. Under Ohio law, those individuals or businesses that fail to follow the ODA’s quarantine instructions could be found guilty of a misdemeanor of the third degree on their first offense and a misdemeanor of the second degree for each subsequent offense. For more information visit the ODA’s website about the SLF.
Infrastructure legislation and the Build Back Better reconciliation bill have consumed Washington lately, but the House Agriculture Committee set those issues aside long enough last week to tend to several other pieces of legislation. The committee passed five bills on to the House in its committee hearing on October 21. Here’s a summary of each:
H.R. 5609, the Cattle Contract Library Act of 2021, likely made the biggest splash in the agriculture community. Sponsored by Rep. Dusty Johnson (R-SD) and 23 co-sponsors on both sides of the aisle, the legislation would address beef supply and pricing transparency issues by requiring:
- A mandatory reporting program for packers, who must file information with USDA for:
- The type of each contract offered to producers of fed cattle, classified by the mechanism used to determine the base price for the fed cattle committed to the packer, including formula purchases, negotiated grid purchases, and forward contracts;
- A contract’s duration;
- All contract summary information;
- Contract provisions that may affect the price of cattle, including base price, schedules of premiums or discounts, and transportation;
- Total number of cattle covered by a contract that is solely committed to the packer each week within the 6 and 12-month periods following the date of the contract;
- For contracts where a specific number of cattle aren’t committed solely to the packer, an indication that the contract is an open commitment and any weekly, monthly, annual, or other limitations on the number of cattle that may be delivered to the packer under the contract;
- A description of contract terms that provide for expansion in the committed numbers of fed cattle to be delivered under the contract for the 6 and 12-month periods after its date.
- USDA must maintain the information submitted by packers in a publicly available library in a “user-friendly format,” including real-time notice, if practicable, of the types of contracts that are being offered by packers that are open to acceptance by producers.
- USDA must establish a competitive program to award Producer Education Grants for producer outreach and education on the best uses of cattle market information, including the Cattle Contract Library.
- USDA must also provide weekly or monthly reports based on the information collected from packers of:
- The total number of fed cattle committed under contracts for delivery to packers within the 6-month and 12-month periods following the date of the report, organized by reporting region and type of contract;
- The number of contracts with an open commitment along with any weekly, monthly, annual or other limitations on the number of cattle that may be delivered under such contracts; and
- The total maximum number of fed cattle that may be delivered within the 6-month and 12-month periods following the date of the report, organized by reporting region and type of contract.
H.R. 4252 proposes additional scholarship funding for students at the nation’s 1890 land grant institutions, which includes Central State University here in Ohio.
Committee Chairman David Scott (D-GA) is the sponsor of the bill, which would allocate $100 million for scholarships and make the scholarship program permanent.
H.R. 5608 proposes the Chronic Wasting Disease Research and Management Act, a bi-partisan bill sponsored by Rep. Ron Kind (D-WI) and House Agriculture Committee Ranking Member Glenn Thompson (R-PA). The act proposes a research program, support for state management efforts, and public education to tackle chronic wasting disease, a fatal neurological disease in deer, elk, and moose. Those initiatives would receive $70 million each year from 2022 to 2028.
H.R. 4489, the National Forest Restoration and Remediation Act, is also a bi-partisan bill and is sponsored by Rep. Kim Schrier, (D-WA), Matt Rosendale (R-MT), Joe Neguse (D-CO) and Dough LaMalfa (R-CA). The bill would allow the U.S. Forest Service to use interest earned on settlement funds for clean-up and restoration of damaged forest lands.
H.R. 5589, the Pyrolysis Innovation Grants Act, is dubbed as a “green technology bill” by sponsors Rep. Josh Harder (D-CA), Rep. Jimmy Panetta(D-CA) and Rep. Jim Costa (D-CA). The proposal would invest $5 million per year through 2027 for USDA pilot projects in pyrolysis, a process that reduces greenhouse gas emissions from burning nut shells by converting the shells into fuels, nutrients, and other commodities.
Farmland prices have strengthened in recent months and there are a number of key fundamentals that will likely continue to support land values in the near term. High crop prices and margins along with last year’s COVID-19 related government payments and continued low interest rates have all contributed to stronger land markets. Higher production costs and recent minor decreases in crop prices may decrease profit margins this next year and take some strength out of the market but farmland will likely continue to see increases in value through the end of this year and into the next year. Similar factors have impacted cash rental markets in Ohio and will likely continue to pressure rental rates higher in the near term.
Recent data from the United States Department of Agriculture National Ag Statistics Service (NASS) August Land Values 2021 Summary shows Ohio Farm Real Estate increasing 3.9% from 2020 to an average of $6,600 per acre in 2021. Ohio Cropland (bare cropland) showed an increase of 5.3% from 2020 to 2021. Average Cropland value is $6,800 per acre in 2021 according to this survey. Pastureland value in Ohio increased 2.1% to $3,440 per acre in 2021. Average cash rents in Ohio increased 2.6% in 2021 to $160 per acre according to this survey. The National Ag Statistics Service (NASS) also summarizes average cash rental rates by county available through Ohio NASS: www.nass.usda.gov/Statistics_by_State/Ohio/Publications/County_Estimates/2021/OH_2021_cashrent_CE.pdf
Each year, Ohio State University Extension (The Ohio State University College of Food, Agricultural, and Environmental Sciences) conducts an Ohio Cropland Values and Cash Rents Survey. The Ohio Cropland Values and Cash Rents study was conducted from January through April in 2021. The opinion-based study surveyed professionals with a knowledge of Ohio’s cropland values and rental rates. Professionals surveyed were rural appraisers, agricultural lenders, professional farm managers, ag business professionals, OSU Extension educators, farmers, landowners, and Farm Service Agency personnel.
Ohio cropland varies significantly in its production capabilities and, consequently, cropland values and cash rents vary widely throughout the state. Generally, western Ohio cropland values and cash rents differ from much of southern and eastern Ohio cropland values and cash rents. The primary factors affecting these values and rents are land productivity and potential crop return, and the variability of those crop returns. Soils, fertility, and drainage/irrigation capabilities are primary factors that most influence land productivity, crop return and variability of those crop returns.
Other factors impacting land values and cash rents may include field size and shape, field accessibility, market access, local market prices, field perimeter characteristics and potential for wildlife damage, buildings and grain storage, previous tillage system and crops, tolerant/resistant weed populations, USDA Program Yields, population density, and competition for cropland in a region. Factors specific to cash rental rates may include services provided by the operator and specific conditions of the lease.
According to the Western Ohio Cropland Values and Cash Rents Survey, cropland values in western Ohio are expected to increase in 2021 by 3.8 to 5.3 percent from 2020 to 2021 depending on the region and land class. Cash rents are expected to increase from 3.6 to 3.9 percent depending on the region and land class. For the complete survey research summary go to: https://farmoffice.osu.edu/farm-management-tools/farm-management-publications/cash-rents
This survey and the results are reflective of the thoughts of survey participants in early 2021. Recent farmland sales would lead us to believe that farmland value has likely increased more than the 3.8 to 5.3 percent that the summary indicates for 2021. Continued high crop prices along with relatively strong predicted yields throughout much of Ohio have lent more strength to farmland markets in Ohio.
Others survey results in the eastern Corn Belt may be useful in gauging the magnitude of Ohio farmland value change thus far in 2021. The Federal Reserve Bank of Chicago (7th Fed District) surveys ag lenders in their districts each quarter. (The 7th Fed District includes parts of Michigan, Indiana, Illinois, Wisconsin and all of Iowa.) Their survey in July showed the value of good farmland in their district had increased by 14 percent from July 1, 2020 to July 1, 2021. The mid-year survey conducted by the Illinois Society of Professional Farm Managers and Rural Appraisers of their members revealed an increase of 20% in farmland values from the beginning of 2021. While Ohio is not Illinois nor does Ohio sit in the 7th Fed District, these surveys may give some guidance on the level of change in farmland values in Ohio in 2021.
Fall often brings us questions about what a landowner can do when someone harms their crops, fields, and trees. We’ve heard many stories of hunters, four-wheelers, snowmobilers, timber harvesters and others tearing up hayfields, causing corn and bean losses, harming trees, or taking timber. Unfortunately, those incidents are not new to Ohio. Back in 1953, the Ohio legislature enacted a law that addressed these types of problems. In 1974, legislators revised the law to strengthen its penalty provisions, part of an effort to reform Ohio’s criminal laws. That law still offers remedies that can help a landowner today.
The reckless destruction of vegetation law. Ohio Revised Code (ORC) Section 901.51, the “reckless destruction of vegetation law,” is simple and straightforward. It states that:
“No person, without privilege to do so, shall recklessly cut down, destroy, girdle, or otherwise injure a vine, bush, shrub, sapling, tree or crop standing and growing on the land of another or upon public land.”
Note the word “recklessly,” as that’s important to the statute. Under Ohio law, a person behaves recklessly if he disregards the risk that his actions are likely to cause certain results, such as harm or injury. “Heedless indifference to the consequences” is another way to explain the term. A person who flies through a hayfield on a four-wheeler, taking no precautions to avoid harming the crop, would likely fit this definition of behaving recklessly. A timber harvester who ignores the marked property line and takes trees on the other side of it could also be behaving recklessly.
Criminal and civil options. The recklessness element of a person’s behavior is why the law incorporates criminal charges. A violation of ORC 901.51 is a fourth-degree criminal misdemeanor and could result in a fine of $250 and up to 30 days in jail. What is useful to landowners, however, is that when legislators amended the law in 1974, they added “treble damages” to allow a harmed party to collect three times the value of the property destroyed. If the value of hay lost to the four-wheeler was $500, for example, the treble damages provision allows the landowner to collect three times that amount, or $1,500. Many court cases involve tree situations, and three times the value of a tree can result in a hefty award for the harmed landowner.
Another benefit of the reckless destruction of vegetation law is that a landowner doesn’t have to rely on a criminal charge being brought by local law enforcement. While local law enforcement could bring a criminal charge against an offender and if successful, could request the treble damages for the landowner. But if law enforcement does not bring a criminal charge, Ohio courts have held that a harmed party may bring a civil action against the offender and utilize the law’s treble damages provision. Those treble damages can make it worthwhile to litigate the issue as a civil action.
The next time you’re frustrated by someone destroying your crops, trees and vegetation, the reckless destruction of vegetation law might be helpful. If you can prove that the person was reckless and indifferent to causing the harm, consider using this powerful little law to remedy the situation.
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.
Did you know that the fastest animal in the world is the Peregrine Falcon? This speedy raptor has been clocked going 242 mph when diving.
Like the Peregrine Falcon, this week’s Ag Law Harvest dives into supply chain solutions, new laws to help reduce a state’s carbon footprint, and federal and state case law demonstrating how important it is to be clear when drafting legislation and/or documents, because any ounce of ambiguity could lead to a dispute.
Reinforcing the links in the supply chain. President Joe Biden announced that ports, dockworkers, railroads, trucking companies, labor unions, and retailers are all coming together and have agreed to do their part to help reduce the supply chain disruption that has left over 70 cargo ships floating out at sea with nowhere to go. In his announcement, President Biden disclosed that the Port of Los Angeles, the largest shipping port in the United States, has committed to expanding its hours so that it can operate 24/7; labor unions have announced that its workers have agreed to work the additional hours; large companies like Walmart, UPS, FedEx, Samsung, Home Depot and Target have all agreed to expand their hours to help move product across the country. According to the White House, this expanded effort will help deliver an extra 3,500 shipping containers per week. Port and manufacturing disruptions have plagued retailers and consumers since the beginning of the COVID-19 pandemic. Farming equipment and parts to repair farming equipment are increasingly in short supply. The White House hopes that through these agreements, retailers and consumers can finally start to see some relief.
California breaking up with gas powered lawn equipment. California Governor Gavin Newsom recently signed a new bill into law that would phase out the use of gas-powered lawn equipment in California. Assembly Bill 1346 requires that new small off-road engines (“SOREs”), used primarily in lawn and garden equipment, be zero-emission by 2024. The California legislation seeks to regulate the emissions from SOREs which have not been as regulated as the emissions from other engines. According to the legislation, “one hour of operation of a commercial leaf blower can emit as much [reactive organic gases] plus [oxides of nitrogen] as driving 1,100 miles in a new passenger vehicle.” The new law requires the State Air Resources Board to adopt cost-effective and technologically feasible regulations to prohibit engine exhaust and emissions from new SOREs. Assembly Bill 1346 is a piece of the puzzle to help California achieve zero-emissions from off-road equipment by 2035, as ordered by Governor Newsome in Executive Order N-79-20.
U.S. Supreme Court asked to review E15 Vacatur. A biofuel advocacy group, Growth Energy, filed a petition asking the U.S. Supreme Court to review a federal court’s decision to abolish the U.S. Environmental Protection Agency’s (“EPA”) rule allowing for the year-round sale of fuel blends containing gasoline and 15% ethanol (“E15”). Growth Energy argues that the ethanol waiver under the Clean Air Act for the sale of ethanol blend gasoline applies to E15, the same as it does for gas that contains 10% ethanol (“E10”). Growth Energy also claims that limiting the ethanol waiver to E10 gasolines contradicts Congress’s intent for enacting the ethanol waiver because E15 better achieves the economic and environmental goals that Congress had in mind when it drafted the ethanol waiver. Growth Energy asks the Supreme Court to overturn the lower court’s decision and instead interpret the ethanol waiver as setting a floor, not a maximum, for fuel blends containing ethanol that can qualify for the ethanol waiver. Growth Energy now awaits the Supreme Court’s decision on whether or not it will take up the case. Visit our recent blog post for more background information on E15 and the waivers at issue.
When in doubt, trust the trust. A farm family in Preble County may finally be able to find some closure after the 12th District Court of Appeals affirmed the Preble County Court of Common Pleas’ decision to prevent a co-trustee from selling farm property. Dorothy Wisehart (“Dorothy”), the matriarch of the Wisehart family established the Dorothy R. Wisehart Trust (the “Trust”) in which she conveyed a one-half interest in two separate farm properties, both located within Preble County to the Trust. Dorothy retained her one-half interest in the two farms which passed to her son, Arthur, upon her death. Furthermore, upon Dorothy’s death, the Trust became an irrevocable trust with Arthur as the sole trustee. The Trust had five income beneficiaries – Arthur’s wife and four kids. The Trust specifically allowed for removal and replacement of the trustee upon the written request of 75% of the income beneficiaries. In 2010, four of the five income beneficiaries executed a document removing Arthur as the sole trustee and instead placed Arthur and Dodson, Arthur’s son and one of the income beneficiaries, as co-trustees. Arthur, however, argued that only Dorothy had the power to remove and appoint a new trustee and once Dorothy passed, no new trustee could be appointed. In 2015, Dodson filed suit against his father after Arthur allegedly tried to sell the two farms and further alleged that Arthur breached his fiduciary duty by withholding funds from the Trust. Dodson also asked the court to determine the issue of whether Dodson was validly appointed as co-trustee. The common pleas court sided with Dodson and found that (1) the Trust held an undivided one-half interest in the farms, (2) Dodson was validly appointed as co-trustee, and (3) Arthur wrongfully withheld funds from the Trust, breaching his fiduciary duty as a trustee. Arthur appealed, arguing that the case was not “justiciable” because the harms alleged by Dodson were hypothetical and no real harm occurred. However, the 12th District Court of Appeals disagreed with Arthur. The court found that the Trust expressly provided for the removal and appointment of trustees by 75% of the income beneficiaries. Further, the court ruled that this case was justiciable because Dodson’s allegations needed to be resolved by the courts or else real harm would have occurred to the income beneficiaries of the Trust. This case highlights perfectly the importance of having well drafted estate planning documents to help clear up any disputes that may arise once you’re gone.
No need to cut the “GRAS” today. Consumer advocates, Center for Food Safety (“CFS”) and Environmental Defense Fund (“EDF”), brought suit against the Food and Drug Administration (“FDA”) asking the court to overturn the FDA’s rule regarding “Substances Generally Recognized as Safe (the “GRAS Rule”). According to the plaintiffs, the GRAS Rule subdelegated the FDA’s duty to ensure food safety in violation of the United States Constitution, the Administrative Procedure Act (“APA”), and the Federal Food, Drug, and Cosmetic Act (“FDCA”). In 1958, Congress enacted the Food Additives Amendment to the FDCA which mandates that any food additive must be approved by the FDA. However, the definition of “food additive” does not include those substances that are generally recognized as safe. Things like vinegar, vegetable oil, baking powder and many other spices and flavors are generally recognized as safe to use in food and not considered to be a food additive. Under the GRAS Rule, anyone may voluntarily, but is not required to, notify the FDA of their view that a substance is a GRAS substance. There are specific guidelines and information that must be presented to back up a manufacturer’s claim that a substance is GRAS. In any case, the FDA retains the authority to issue warnings to manufacturers and to stop distribution when the FDA believes that a substance is not a GRAS substance. Plaintiffs claim that under the GRAS Rule, the FDA is subdelegating its duty by allowing manufacturers to voluntarily notify the FDA of a GRAS substance rather than requiring it. However, the Federal District Court for the Southern District of New York found that the FDA did not subdelegate its duties because the FDCA does not require the FDA provide prior authorization that a substance is GRAS. Further, the court held that the FDA has done nothing more than implement a process by which manufacturers can notify the FDA of GRAS determinations and the FDA can choose to agree or disagree. The court reasoned that even if a mandatory GRAS notification procedure or prior approval process were in place, manufacturers could simply lie about what’s in their products and the FDA would be none the wiser. The court also noted that mandatory submissions would consume the FDA’s resources which would be better spent evaluating higher priority substances. The court ultimately concluded that the FDA’s GRAS Rule does not highlight a constitutional issue, nor does it violate the FDCA or APA.
Large-scale wind and solar energy development has generated both opportunity and conflict across Ohio in recent years. For several months, we monitored the progress of Senate Bill 52, a proposal intended to address community and landowner concerns about wind and solar facilities. This past Monday marked the effective date for Senate Bill 52, passed by the Ohio Legislature in June, and we've been busy developing new resources to help explain the laws that are now effective.
The legislation expands local involvement in the siting and approval of large-scale wind and solar facilities in several ways:
- County commissioners may designate “restricted areas” where such facilities may not locate.
- County citizens may petition for a referendum to approve or reject restricted area designations.
- Developers must hold a public meeting overviewing a proposed facility in the county where it would locate.
- County commissioners may prohibit or limit a proposed wind or solar facility after learning of it at the public meeting.
- County and township representatives must sit on the Ohio Power Siting Board committee that reviews facility applications.
The new laws also require wind and solar developers to submit decommissioning plans and performance bonds to address removal of a facility at the end of its lifetime.
Our two law bulletins and video series on Senate Bill 52 are now available. The resources work through each part of Senate Bill 52 and explain which types of facilities will be subject to the laws. You'll find the new resources in our energy law library on the Farm Office website at https://farmoffice.osu.edu/our-library/energy-law.
If you've ever claimed a sales tax exemption on a purchase of farm goods, you may have experienced some confusion over whether you or the good is eligible for the exemption. That's because Ohio's sales tax law is a bit tedious and complicated. The law has several agricultural exemptions, but it can be challenging to understand who can claim them and what types of goods and services are exempt. Those are the reasons for our newest law bulletin, Ohio's Agricultural Sales Tax Exemption Laws. We walk through the different sales tax exemptions that apply to agriculture, offer examples of goods that do and do not qualify for the exemptions, explain who can claim an exemption and how to claim it, and explain what happens when sales taxes are overpaid or not correctly paid. We also offer steps a farmer can take to obtain the full benefits of Ohio's agricultural sales tax exemptions. The bulletin is available in our law library and through this link.
Barry Ward & Julie Strawser, OSU Income Tax Schools
Dealing with the tax provisions of the COVID-related legislation for both individuals and businesses are among the topics to be discussed during the upcoming Tax School workshop series offered throughout Ohio in November and December.
The annual series is designed to help tax preparers learn about federal tax law changes and updates for this year as well as learn more about issues they may encounter when filing individual and small business 2021 tax returns.
OSU Income Tax Schools are intermediate-level courses that focus on interpreting tax regulations and changes in tax law to help tax preparers, accountants, financial planners and attorneys advise their clients. The schools offer continuing education credit for certified public accountants, enrolled agents, attorneys, annual filing season preparers and certified financial planners.
Attendees also receive a class workbook that alone is an extremely valuable reference as it offers over 600 pages of material including helpful tables and examples that will be valuable to practitioners. Summaries of the chapters in this year’s workbook can be viewed at this site:
A sample chapter from a past workbook can be found at:
This year, OSU Income Tax Schools will offer both in-person schools and an online virtual school presented over the course of four afternoons.
November 1-2, Presidential Banquet Center, Kettering/Dayton
November 3-4, Ole Zim’s Wagon Shed, Gibsonburg/Fremont
November 17-18, Ashland University John C. Meyer Convocation Center, Ashland
November 22-23, Christopher Conference Center, Chillicothe
November 29-30, Zane State/Ohio University Zanesville Campus, Zanesville
December 2-3, Nationwide & Ohio Farm Bureau 4-H Center, OSU Campus, Columbus
December 6-7, Hartville Kitchen, Hartville
Virtual On-Line School presented via Zoom:
November 8, 12, 15 & 19, 12:30 – 4:45 p.m.
Register two weeks prior to the school date and receive the two-day tax school early-bird registration fee of $400. This includes all materials, lunches and refreshments. The deadline to enroll is 10 business days prior to the date of each school. After the school deadline, the fee increases to $450.
Additionally, the 2022 RIA Federal Tax Handbook is available to purchase by participants for a discounted fee of $50 each. Registration information and the online registration portal can be found online at:
In addition to the tax schools, the program offers a separate, two-hour ethics webinar that will broadcast Wednesday, Dec. 15 at 1 p.m. The webinar is $25 for school attendees and $50 for non-attendees and is approved by the IRS and the Ohio Accountancy Board for continuing education credit.
A webinar on Ag Tax Issues will be held Monday, Dec. 13 from 8:45 a.m. to 3:20 p.m.
If you are a tax practitioner that represents farmers or rural landowners or are a farmer or farmland owner that prepares your own taxes, this five-hour webinar is for you. It will focus on key topics and new legislation related specifically to those income tax returns.
Registration, which includes the Ag Tax Issues workbook, is $150 if registered at least two weeks prior to the webinar. After November 29, registration is $200. Register by mail or on-line at https://go.osu.edu/agissues2021.