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American Burying Beetle
By: Peggy Kirk Hall, Thursday, March 31st, 2022

When the U.S. EPA approved the seven-year renewal registration for Corteva’s Enlist One and Enlist Duo on January 12, 2022, it also prohibited use of the herbicide in 217 counties across the country.  Twelve Ohio counties were on that list, preventing farmers in Athens, Butler, Fairfield, Guernsey, Hamilton, Hocking, Morgan, Muskingum, Noble, Perry, Vinton, and Washington counties from using the herbicides.  Welcome news for those farmers came on Tuesday, when the EPA announced that it is removing the restricted use for all Ohio counties.

The prohibition against using Enlist Duo’s use was because Corteva did not submit its use in all U.S. counties in the reregistration, many of which had endangered species and critical habitat that could be impacted by the herbicides.  The twelve Ohio counties that were not submitted for use by Corteva are home to the American Burying Beetle, which is on the Endangered Species list.  But in February, Corteva submitted a label amendment that proposed use of Enlist One and Enlist Duo in 128 of the previously restricted counties, including Ohio’s twelve counties. 

Upon receiving Corteva’s amendment, federal law requires EPA to complete an “effects determination” to assess potential effects on the endangered species in the previously restricted counties.  The assessment included reviewing updated range maps for the endangered species and their habitats that were provided by the U.S. Fish and Wildlife Service.  Range maps help identify the overlap between the American Burying Beetle’s location and growing areas for corn, soybeans, and cotton where Enlist might be applied.  Based on the maps, the agency determined that the beetle was not present in 10 of the previously restricted counties and had less than a 1% overlap with crop areas in another 118 counties.

EPA also examined whether there would be direct or indirect effects on other listed endangered species or habitat in those counties.  The black-footed ferret was the only specifies identified in field areas in the 128 counties, and fifteen other listed specifies and three critical habitats were determined to exist off of the field areas.  But the EPA found that the Enlist label restrictions would address any concerns with these additional species and habitats.

After completing its effects determination and review of the amendment, the EPA concluded that “the use of these products—with the existing label requirements in place to mitigate spray drift and pesticide runoff—will not likely jeopardize the American Burying Beetle or other listed species and their critical habitats in these counties.”  Similarly, EPA determined that six Minnesota counties that are home to the endangered Eastern Massasauga rattlesnake were also removed from the prohibited list and approved for Enlist use.

EPA noted the importance of following the label restrictions for the herbicides, particularly in areas where endangered species reside.  The new label approved by the EPA in January contains changes to the previous label.  According to OSU weed scientist Mark Loux, those changes include a revised application cutoff for soybeans, “through R1” that replaces “up to R2” on previous labels, and the addition of a slew of spray nozzles to the approved nozzle list.  Enlist users should take care to review these new provisions.  As required by EPA, Corteva provides educational tools on using Enlist, available at https://www.enlist.com/en/enlist-360-training.html.

If you’re interested in reading more about the EPA’s registration review on Enlist One and Enlist Duo, the agency’s docket on the registration is available at  https://www.regulations.gov/docket/EPA-HQ-OPP-2021-0957/document.  The amendment letter for the recent removal of prohibitions on certain counties is at https://www.regulations.gov/document/EPA-HQ-OPP-2021-0957-0020.

Photo of farmer in the field with a clipboard

By Robert Moore, Research Specialist and Attorney, Agricultural & Resource Law Program

Prior to LLCs becoming available for common use, Limited Partnerships (LP) were used extensively to hold farmland.  LPs provide liability protection for the limited partners and usually allow the land to be distributed out to the partners without tax liability.  Additionally, the land in the LP can receive a stepped-up tax basis upon the death of a partner.  LPs were a good choice to hold farmland.

The primary disadvantage of an LP is the liability exposure of the general partner.  Because the general partner is tasked with management responsibilities for the LP, they receive no liability protection.  Therefore, any liability created by the activities of the LP will transfer to the general partner and put all of the general partner’s assets at risk.

LLCs were developed in the 1990’s and started to become popular in the early 2000’s.  LLCs can be taxed as partnerships and thus provide all the tax benefits of an LP.  Also, LLCs provide liability protection for all owners regardless of their management roles.  Therefore, LLCs provide all the benefits of an LP plus provide liability protection for the manager.  Due to the superior lability protection of LLCs, LPs have been made obsolete in Ohio.

If you have an LP, you should consider converting it to an LLC.  The conversion will extend liability protection to all the owners while maintaining the partnership taxation structure.  Converting from an LP to an LLC is relatively easy.

The conversion is performed by completing Form 700 provided by the Ohio Secretary of State.  The form can be filed through the mail or by submitting online.  A $99 fee is required to be paid when the conversion is submitted.  The form asks for the identification and structure of the current entity and the name and structure of the future, converted entity.

Any asset held by the LP is automatically owned by the LLC after conversion.  For real estate, an affidavit is recorded with the county recorder stating the LP has been converted to an LLC.  Because both the LP and LLC will have a partnership taxation structure, the same tax identification number can be used after the conversion.  An operating agreement should be drafted for the new, converted LLC as the old LP agreement will no longer be in effect.

Consider the following example.  XYZ Farms Ltd. is an LP and holds farmland.  The owners of the LP wish to convert to an LLC to provide liability protection for the manager partner.  Form 700 is filed with the Ohio Secretary of State along with the $99 fee.  The conversion form states that XYZ Farms Ltd. is converting to an LLC and will have the new name of XYZ Farms LLC[1].  After the conversion, the LLC files an affidavit with the county recorder stating that XYZ Farms was converted from an LP to an LLC and the farmland is now owned by the LLC.  The owners of XYZ Farms LLC draft a new operating agreement with terms and provisions applicable to an LLC.

LLCs have replaced LPs as the entity of choice to hold farmland.  LPs that were established prior to the availability of LLCs can be converted to LLCs relatively easily.  Owners of an LP should consider converting to an LLC to provide liability protection for the managing partner.

 

[1] Form 590, “Consent for Use of Similar Name”, and Form 610, “Articles of Organization”, must also be filed with the conversion form.

Long term care written out in a blue bubble with associated activities in surrounding/connecting bubbles.

By Robert Moore, Attorney and Research Specialist, OSU Agricultural and Resource Law Program 

The costs for assisted living and nursing home care have steadily been increasing.  Many people find themselves in the situation where their income will not cover the costs of long-term care.  Long-term care costs have become a significant risk to Ohio farms and the ability to continue a viable farming operation for future generations.

The following are the most recent long-term care costs from a Genworth survey:

Type of Care                                                     Annual Cost

Ohio Semi - Private Room                                  $85,776

Ohio - Private Room                                          $98,556

National – Semi-Private Room                           $93,075

National – Private Room                                    $105,850

Ohio - Assisted Living                                        $52,500

National - Assisted Living                                   $54,000

Ohio costs are less than national costs but are still significant.  Care facilities in small towns and rural areas tend to cost less than facilities in larger cities like Cleveland, Columbus and Cincinnati.  Costs are expected to continue to increase.  By 2030, Genworth predicts that national average cost for a private room in a nursing home will be around $142,000/year.

Farmers that do not have adequate income to pay for long-term care costs will be required to dip into savings to make up the deficit.  If savings are extinguished, farm assets may need to be sold to pay for the care.  The sale of these farm assets is what can jeopardize the future viability of the farming operation.

There are no easy solutions regarding long-term care costs.  Options include gifting assets away, buying long-term care insurance or self-insuring.  Medicaid can also play a role in long-term care costs.  In future posts we will discuss strategies to minimize the risk of long-term care costs to farming operations.

Row of Case IH Combines.

By Robert Moore, Research Specialist, OSU Agricultural & Resource Law Program

A common business strategy for farming operations is to place their machinery in a separate, stand-alone LLC.  The idea behind this strategy is that by putting the high-liability machinery in its own LLC the other farm assets are protected.  Unfortunately, the liability protection of a machinery LLC is sometimes overstated and may not provide as much protection as intended.

The compromised liability protection of a machinery LLC is not due to a defect in LLCs, but rather it is a result of who is operating the machinery.  Typically, the persons operating the machinery are the owners or employees of the farming operation.  Many liability incidents involving farm machinery are the result of operator error which pulls the liability back to the farming operation.

Consider the following example.  XYZ Farms is a grain operation.  To mitigate the liability of having large machinery traveling on roadways, XYZ Farms establishes Machinery LLC and transfers all machinery to the LLC.  An employee of XYZ Farms causes an accident while driving machinery on a roadway.  Because employers are liable for the actions of employees, XYZ Farms is liable for the accident even though the machinery was held in Machinery LLC.

A machinery LLC does provide some liability protection.  If the liability incident is caused solely by an issue with the machine and not the operator, the LLC may prevent liability from transferring to other assets. Again, most accidents are caused by operator error so relying on this liability protection is planning against the odds.

As seen in the example, machinery LLCs do not completely insulate owners and other assets from liability.  In fact, no entity used in a farming operation is guaranteed to prevent liability exposure for the owner.  Therefore, liability insurance should always be the primary liability management plan for farm operations.  Business entities should be used as the backup plan if liability insurance fails to cover liability exposure.

Machinery LLCs do have other beneficial uses.  One of the more common uses is to consolidate various machinery ownership among family members.  Having one entity own, buy, and sell all machinery is often a simpler plan than multi-ownership.  For example:

Mom and Dad, Son, and Daughter each own some machinery. Each time they need to buy a new piece of equipment, it is a challenge to determine how the trade-in is handled and who should be the new owner.  Instead, they establish a machinery LLC and put all their machinery in the LLC.  They each receive ownership in the LLC in proportion to the ownership in the machinery.  For all future purchases, the LLC provides the trade-in and buys the new machine.  

The liability protection provided by machinery LLCs may not be as thorough as sometimes expected but they can still be a valuable component of a business structure plan.  They do provide some liability protection and are useful in other ways such as consolidating ownership.  Before establishing a machinery LLC, be sure to have a thorough discussion with legal counsel to fully understand it’s benefits and limitations.

 

Young goat standing on a pile of hay in a snowy field with Farm Office Live agenda overlay.
By: Jeffrey K. Lewis, Esq., Monday, March 14th, 2022

It's that time again, Farm Office Live comes back this week! We have all the recent legal, tax, and farm management information to help you spring into the new season.    

Our program this month will feature agricultural economist, Seungki Lee, PhD, Associate Professor AEDE, who will be providing a grain marketing outlook.  The Farm Office Team of Dianne Shoemaker, David Marrison, Peggy Kirk Hall, Barry Ward, and Robert Moore will follow with discussion and updates on: 

  • Farm Service Agency Programs  
  • Federal Tax Law 
  • Medicaid Planning
  • Finanical Efficiency for Grain Farms
  • Fertilizer
  • Crop Budgets Look-Ahead

We are offering Farm Office Live this Wednesday, March 16 from 7 - 8:30 pm, and again on Friday, March 18 from 10 - 11:30 am.  Register or catch the recorded version at https://farmoffice.osu.edu/farmofficelive

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Picture of Ohio farmland at sunset
By: Peggy Kirk Hall, Thursday, March 10th, 2022

In farm estate and transition planning, we caution against leaving farmland to multiple heirs as co-owners on the deed to the property.  That’s because Ohio law allows any co-owner of property to seek “partition,”  a legal action asking the court to either sell the property and divide sale proceeds among the co-owners or, in some cases, to physically divide the property between co-owners.  If the goal of a farm family is to keep property in the family, co-ownership and partition rights put that goal at risk.  A recent case from the Ohio Court of Appeals illustrates how partition can force the unwilling sale of property from a co-owner of the property.

The recent court case didn’t involve farmland, but concerned a home and four acres of land owned jointly by an unmarried couple, each on the deed to the property as co-owners with rights of survivorship.  The couple separated and one remained in the home, but the two could not agree upon how to resolve their interests in the property.  That led to a court case in which one co-owner asked the court to declare that the other had no remaining interest in the property. The other co-owner disagreed and filed a partition claim asking the court to sell the property and divide sale proceeds according to each person’s property interest.  The trial court determined that each co-owner did have ownership interests in the property and ordered the property to be sold according to the partition law.

The trial court granted each party the right to purchase the property within 14 days before it would be sold, but neither exercised that right.  After an appraisal, the court ordered the property sold and also ordered payment of the outstanding mortgage.   That left the court with the challenge of determining how to divide the remaining sale proceeds according to each party’s interests in the property.  A complicated analysis of payments, credit card debts, a home equity loan, rental value, and improvements to the property resulted in a final determination that granted one co-owner more of the proceeds than the other.

Both parties appealed the division of proceeds to the Twelfth District Court of Appeals, unfortunately adding more cost and consternation to resolving the co-ownership problem.  The court of appeals noted that Ohio law grants a court the duty and discretion to apply broad “equitable” principles of fairness when determining how to divide property interests among co-owners in a partition proceeding. A review of the trial court’s division of the proceeds led the appeals court to affirm the lower court’s holding as “equitable,” ending the three-and-a-half-year legal battle. 

Ohio’s partition statute itself provides a warning of the risk of property co-ownership.  It states in R.C. 5307.01 that co-owners of land “may be compelled to make or suffer partition…”  While the purpose of partition is to allow a co-owner to obtain the value of their property interests, it can certainly force others to “suffer.”  If a co-owner can’t buy out another co-owner, the power of partition can force the loss of farm property.  As a result, family land can leave the family and a farming heir can lose land that was part of the farming operation.  That’s most likely not the outcome parents or grandparents expected when they left their farmland to heirs as co-owners.

Fortunately, legal strategies can avoid the risk of partition.  For example, placing the land in an LLC removes partition rights completely, as the land is no longer in a co-ownership situation—the LLC is the single owner of the land.  The heirs could have ownership interests in the LLC instead of in the land, so heirs could still receive benefits from the land.  The LLC Operating Agreement could contain rules about if and how land could be sold out of the LLC, and could ensure terms that would allow other LLC members to buy out another member’s ownership interests.  An agricultural attorney can devise this and other legal strategies to ensure that partition isn’t a risk to farmland or farm heirs.

Read the case of Redding v. Cantrell, 2022-Ohio-567.