Recent Blog Posts

By: Robert Moore, Friday, June 02nd, 2023

Legal Groundwork

The National Agricultural Law Center (NALC) is holding its 10th Annual Mid-South Agricultural and Environmental Law Conference on Thursday (June 9th) in Memphis, Tennessee.  The conference primarily addresses agricultural legal issues in the Mississippi Delta region.  Robert Moore will be providing a presentation on Long-Term Care and its impact on farming operations.  Other topics will include real estate title issues, the 2023 Farm Bill and conservation easements.  More information can be found here and an online attendance option is available.

The NALC, funded through the National Law Library, is a long-time partner with OSU’s Agricultural and Resource Law Program.  The NALC maintains resources that are understandable and available to the general public.  The Center’s website serves as a hub for research and information within the agricultural, food and environmental law field.  You can view their extensive catalogue of information at


By: Robert Moore, Wednesday, May 31st, 2023

Legal Groundwork

You may have seen the recent story of an attorney in New York who filed a pleading in a case in a federal district court.   The filing included citations to six court cases that do not actually exist.  Come to find out, the attorney who filed the pleading did not write it but instead used ChatGPT, the Artificial Intelligence (AI) tool.  The attorney now faces a June 8 sanctions hearing before the judge.  This incident is a good example of the myriad of implications, both good and bad, of using AI in the legal world and beyond.

What is AI?

Artificial Intelligence refers to the development of computer systems capable of performing tasks that typically require human intelligence. It includes a broad range of technologies, including machine learning, natural language processing, computer vision, and robotics. AI systems have the ability to process and analyze vast amounts of data, identify patterns, and make autonomous decisions or recommendations.

How Does Artificial Intelligence Work?

AI operates through various techniques and methodologies that allow machines to simulate human intelligence. Here are some key aspects of AI functionality:

Machine Learning. Machine learning is a branch of AI that focuses on developing algorithms capable of learning and improving from data. Through a process called training, AI models are exposed to large datasets, enabling them to recognize patterns, make predictions, and perform tasks without explicit programming.

Natural Language Processing. Natural language processing enables machines to understand and interpret human language. AI systems analyze text, speech, and context to extract meaning, respond to inquiries, and engage in conversation. Virtual assistants like Siri and Alexa are examples of AI applications that utilize natural language processing.

What is ChatGPT?

ChatGPT is an AI chatbot developed by OpenAI, a non-profit corporation.  Released in November 2022, ChatGPT is groundbreaking in that it allows a simple, easy-to-use interface with a powerful AI computer framework.  Anyone who is capable of a simple Google search can use ChatGPT.

The chat or chatbot component of ChatGPT allows the user to chat with ChatGPT.  The user does not need to be a computer programmer or have a sophisticated understanding of computers.  The user asks or commands ChatGPT to produce an answer or output and then can further refine the output by chatting with ChatGPT.  For example, let’s enter the following into ChatGPT: “Write a one paragraph email to my neighbor asking them to fix their fence so their cattle quit getting into my field”.  ChatGPT produces the following:

"I hope this email finds you well. I wanted to bring to your attention a recurring issue that has been affecting my property recently. It seems that the fence separating our fields is in need of repair, as I have noticed your cattle frequently entering my field. While I understand that maintenance tasks can sometimes slip our minds, I kindly request your assistance in fixing the fence to prevent further incursions. I believe that addressing this matter promptly will help maintain a positive relationship between us and ensure the well-being of both our properties. If you require any assistance or have any questions, please do not hesitate to reach out. Thank you for your attention to this matter."

As you can see, ChatGPT did a good job of writing the email.  Instead of you spending 15 minutes trying to find the right words, it drafted your email in seconds.  But let’s say you’ve already told your neighbor about their fence and want the email to be firmer and more direct.  All you have to say to ChatGPT is: “Make the email firmer and more direct”.  ChatGPT produces the following:

"I hope this email finds you well, although I must express my growing concern over a pressing matter. It has come to my attention on multiple occasions that your cattle have been breaching the fence separating our fields. This trespassing has caused considerable damage to my property and poses a risk to both your animals and mine. I must insist that you take immediate action to rectify this issue by repairing the fence without any further delay. It is imperative that we maintain clear boundaries and protect the integrity of our respective properties. I trust you understand the urgency of this situation and will promptly address it. Should you require any assistance or have questions regarding this matter, please reach out to me as soon as possible."

By chatting with ChatGPT, it was able to learn what changes you wanted and to accommodate the request.  ChatGPT was able to successfully change the email to a firmer tone by understanding simple, common input terms.  This is the breakthrough of ChatGPT and other AI tools, AI is no longer the domain of the Elon Musk’s of the world, we all now have access to it.  You can set up a free account with ChatGPT and start using it today.

You may be thinking the email is a neat trick but what can it do to help me in the real world?  The possibilities are endless.  The following are just a few examples:

  • Provide creative names for a new business
  • Explain a complex concept
  • Research an issue
  • Draft invoices and receipts
  • Create marketing ideas and marketing materials
  • Generate a mission statement for your organization

Limitations of AI

AI is not close to perfect, at least not yet.  As the New York lawyer found out, ChatGPT and other AI tools can, and do, sometimes produce incorrect responses.  Therefore, AI should be used as a tool to provide ideas and assist with tasks but should not be relied upon as an infallible expert on all matters.  AI is not currently a capable substitute for important, technical issues such as medical diagnosis, legal services or tax advice.

The Agricultural and Resource Law Program has begun a project to monitor and measure the effectiveness of ChatGPT and other AI tools in providing legal assistance.  Over the next few months, we will provide updates and summaries of our findings.  We feel it is important to understand both the utility and limitations of AI in the legal and agricultural world.


AI technology presents numerous benefits, including improved efficiency, enhanced decision-making capabilities, and automation of tasks. AI can and will likely transform many industries including legal and agriculture. However, it is crucial to consider the current limitations of AI and the need for human oversight. Striking a balance between harnessing AI's potential benefits and addressing its limitations is vital for responsible and effective integration.


Author’s Note: Excluding the examples, ChatGPT wrote about 25% of this article, can you tell which part?


Get your free ChatGPT account here.





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A chicken looking directly at the camera.
By: Jeffrey K. Lewis, Esq., Friday, May 26th, 2023

We’re back! We are excited to bring back our regular Ag Law Harvest posts, where we bring you interesting, timely, and important agricultural and environmental legal issues from across Ohio and the country. This month’s post provides you with a look into Ohio’s ongoing legal battle of some provisions in the recently enacted “Chicken Bill”, a brief dive into the U.S. Department of Labor’s new H-2A wage rules, a warning about conservation easement fraud, and an explanation of a court’s recent decision to release an insurance company from its duty to defend its insured in a lawsuit. 

Battle of “Chicken Bill.”
Ohio House Bill 507 (“HB 507”), sometimes referred to as “the Chicken Bill” went into effect last month and was widely known for reducing the number of poultry chicks that can be sold in lots (from six to three). However, HB 507 contained other non-poultry related provisions that have caused quite a stir. Environmental groups have sued the State, seeking a temporary restraining order, a preliminary and permanent injunction to prevent HB 507 from going into effect, and a declaratory judgement that HB 507 violates Ohio’s Constitution. Two provisions within HB 507 have specifically caught the attention of the Plaintiffs in this case: (1) a revision to Ohio Revised Code § 155.33 that requires state agencies to lease public lands for oil and gas development (the “Mandatory Leasing Provision”); and (2) a revision to Ohio Revised Code § 4928.01 that defines “green energy” to include energy generated by using natural gas, so long as the energy generated meets certain emissions and sustainability requirements (the “Green Energy Provision”). 

Plaintiffs argue that the Mandatory Leasing Provision will cause irreparable harm to their members’ “environmental, aesthetic, social, and recreational interests” in Ohio’s public lands. Additionally, Plaintiffs assert that the Mandatory Leasing Provision and Green Energy Provision violate Ohio’s Constitution by not following the “One-Subject Rule” and the “Three-Consideration Rule” both of which require transparency when creating and passing legislation in Ohio. The Franklin County Court of Common Pleas recently denied Plaintiffs’ request for a temporary restraining order, reasoning that no new leases would likely be granted until the Oil and Gas Land Management Commission adopts its rules (as required by Ohio law) and that there is “no likelihood of any immediate and irreparable injury, loss, or damage to the plaintiffs.” Since the hearing on Plaintiffs’ request for a temporary restraining order, the State of Ohio has filed its answer denying Plaintiffs’ claims and currently all parties are in the process of briefing the court on the merits of Plaintiffs’ request for a preliminary injunction. 

New H-2A Wage Rules: Harvesting Prosperity or Sowing Seeds of Despair? 
On February 28, 2023, the U.S. Department of Labor (the “DOL”) published a final rule establishing a new methodology for determining hourly Adverse Effect Wage Rates (“AEWR”) for non-range farm occupations (i.e. all farm occupations other than herding and production of livestock on the range) for H-2A workers. The new methodology has been in effect since March 30th. Late last month Rep. Ralph Norman and the Chairman of the House Committee on Agriculture, Rep. Glenn “GT” Thompson, introduced a resolution of disapproval under the Congressional Review Act, seeking to invalidate the DOL’s final rule. Similarly, the National Council of Agricultural Employers (“NCAE”) released a statement declaring that it has filed a Motion for Preliminary Injunction against the DOL’s new methodology. 

Opponents of the new rule argue that the increased wages that farmers and ranchers will be required to pay will put family operations out of business. On the other hand, the DOL believes “this methodology strikes a reasonable balance between the [law’s] competing goals of providing employers with adequate supply of legal agricultural labor and protecting the wages and working conditions of workers in the United States similarly employed.” Producers can visit the DOL’s frequently asked questions publication to learn more about the new H-2A wage rule. As it stands, the new H-2A regulations remain in effect and producers should be taking all possible steps to follow the new rules. Make sure to speak with your attorney if you have any questions about compliance with H-2A regulations. 

Conservation Easement Fraud – Protecting Land or Preying on Profits? 
For a while now, conservation easements have been utilized by farmers and landowners to preserve their land while also obtaining a substantial tax benefit. But not all actors in the conservation easement sphere are good ones. Earlier this month, a land appraiser in North Carolina pled guilty to conspiring to defraud the United States as part of a syndicated conservation easement tax shelter scheme. According to a press release by the U.S. Department of Justice (“DOJ”), Walter “Terry” Douglas Roberts II of Shelby, North Carolina conspired with others to defraud the United States by inflating the value of conservation easements which led to $1.3 billion in fraudulent tax deductions. Roberts is guilty of inflating the value at least 18 conservation easements by failing to follow normal appraisal methods, making false statements, and manipulating or relying on knowingly manipulated data to achieve a desired tax deduction amount. Roberts faces a maximum penalty of five years in prison and could be forced to pay back a specified amount to the U.S. Government. 

Conservation easement fraud is not new, however. The Internal Revenue Service (“IRS”) has been monitoring the abuse of the conservation easement tax deductions for some time. The IRS has included these fraudulent transactions on its annual “Dirty Dozen” list of tax avoidance scams. The IRS has seen taxpayers, often encouraged by promoters armed with questionable appraisals, take inappropriately large deductions for these types of easements. These promoters twist the law to develop abusive tax shelters that do nothing more than “game the tax system with grossly inflated tax deductions and generate high fees for promoters.” The IRS urges taxpayers to avoid becoming entangled by these dishonest promoters and that “[i]f something sounds too good to be true, then it probably is.” If you have questions about the tax benefits of a conservation easement, make sure to speak with your attorney and/or tax professional.  

Alleged Intentional Acts Not Covered by Insurance. 
An animal feed manufacturer is in hot water, literally. A city in Mississippi has accused Gold Coast Commodities, Inc. (“Gold Coast”), an animal feed manufacturer, of intentionally dumping hot, greasy wastewater into the City’s sewer system. Prior to the City’s investigation into Gold Coast’s alleged toxic dumping, Gold Coast purchased a pollution liability insurance policy from Crum & Forster Specialty Insurance Company (“Crum & Forster”). After an investigation conducted by the City and the Mississippi Department of Environmental Quality, the City filed a lawsuit against the feed manufacturer alleging that it intentionally dumped toxic waste into the City’s sewer system. Gold Coast then notified its insurance company of the potential claim. However, Crum & Forster denied coverage for Gold Coast’s alleged toxic dumping. According to the insurance policy, coverage exists for an “occurrence” defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Crum & Forster refused to provide a defense or coverage for Gold Coast in the City’s toxic dumping lawsuit because the City alleges multiple times that Gold Coast acted intentionally, and therefore, Gold Coast’s actions were not an accident and not covered by the policy. 

In response, Gold Coast filed a lawsuit against Crum & Forster asking a federal district court in Mississippi to declare that Crum & Forster is required to defend and provide coverage for Gold Coast under the terms of the insurance policy. On a motion to dismiss, the federal district court in Mississippi dismissed Gold Coast’s lawsuit against the insurance company. The district court reasoned that in the underlying toxic dumping lawsuit, the City is not alleging an accident, rather the City asserts that Gold Coast intentionally dumped the toxic waste. Thus, Crum & Forster is not obligated to provide a defense or coverage for Gold Coast, under the terms of the policy. Gold Coast appealed to the Fifth Circuit Court of Appeals (which has jurisdiction over federal cases arising in Texas, Louisiana, and Mississippi). 

The Fifth Circuit affirmed the decision of the federal district court, rejecting Gold Coast’s claim that Crum & Forster is obligated to provide a defense and coverage for Gold Coast in the City’s toxic dumping lawsuit. Gold Coast argued that the City seeks to recover under the legal theory of negligence in the toxic dumping case, therefore Gold Coast’s actions are accidental in nature. The Fifth Circuit was unconvinced. The Fifth Circuit explained that when reading a complaint, the court must look at the factual allegations, not the legal conclusions. The Fifth Circuit found that the factual allegations in the City’s lawsuit all referred to Gold Coast’s intentional or knowing misconduct and any recovery sought under the theory of negligence is not a factual allegation, instead it is a legal conclusion. The Fifth Circuit concluded that using terms like “negligence” do not “transform the character of the factual allegations of intentional conduct against [Gold Coast] into allegations of accidental conduct constituting an ‘occurrence.’” Thus, the Fifth Circuit affirmed the federal district court’s decision to dismiss Gold Coast’s lawsuit against its insurer. Unless the Supreme Court of the United States decides to take up the case, it looks like Gold Coast is all on its own in its fight against the City. The lesson here is that although insurance is important to have, its equally as important to speak with your insurance agent to understand what types of incidents are covered under your insurance policy. 

By: Barry Ward, Thursday, May 25th, 2023

Barry Ward, Leader, Production Business Management

Lower crop prices and a mix of higher and lower input costs have been the theme for the last several months. High production costs in 2022 gave way to a mix of higher and lower input  costs for the 2023 production year. Factors affecting both supply and demand have continued to drive commodity crop prices lower. The result of these changes is an outlook for limited positive margins for the 2023 corn, soybean and wheat crops.

Production costs for Ohio field crops are forecast to be slightly lower than last year with lower fertilizer and fuel prices leading the way. Higher rents, seed costs, machinery/equipment costs and interest rates mostly offset any benefit related to lower cost areas.

Variable costs for corn in Ohio for 2023 are projected to range from $514 to $628 per acre depending on land productivity. The trend line corn yield (181.8 bpa) scenario included in the corn enterprise budget shows a decrease in variable costs of 10% but a decrease in total costs of only 5% due to higher rents and machinery/equipment costs.

Variable costs for 2023 Ohio soybeans are projected to range from $280 to $320 per acre. Variable costs for trend-line soybeans (56.5 bpa) are expected to decrease 10% in 2023 compared to 2022 while total costs are expected to decrease only 2% in 2023.

Wheat variable expenses for 2023 are projected to range from $246 to $309 per acre. The trend line wheat yield (75.4 bpa) scenario included in the wheat enterprise budget shows a decrease in variable costs of 3% with an increase in total costs of 4%.

Returns will be mixed depending on crop price change throughout the rest of the year. Grain prices used as assumptions in the 2023 crop enterprise budgets are $5.00/bushel for corn, $12.00/bushel for soybeans and $8.00/bushel for wheat (wheat price set in October using the September ’23 Futures price at that time).

Projected returns above variable costs (contribution margin) range from $333 to $463 per acre for corn and $378 to $494 per acre for soybeans. Projected returns above variable costs for wheat range from $326 to $415 per acre although significant crop price decreases since last fall (when the price was set for this enterprise budget) will likely cause wheat to be less profitable than these return projections indicate.

Return to Land is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to Land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from $23 to $254 per acre in 2023 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $130 to $348 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $129 per acre to $295 per acre assuming a planting-time price of $8/bushel. If a current forward harvest price for wheat of $6.80/bushel is used, the Return to Land is in a lower range of $60 to $192 per acre depending on land production capabilities.

Total costs projected for trend line corn production in Ohio are estimated to be $1,003 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $88 per acre include depreciation, interest, insurance and housing. A land charge of $228 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $88 per acre. Details of budget assumptions and numbers can be found in footnotes included in each budget.

Total costs projected for trend line soybean production in Ohio are estimated to be $667 per acre. (Fixed machinery costs: $69 per acre, land charge: $228 per acre, labor and management costs combined: $55 per acre.)

Total costs projected for trend line wheat production in Ohio are estimated to be $619 per acre. (Fixed machinery costs: $43 per acre, land charge: $228 per acre, labor and management costs combined: $56 per acre.)

Data used to compile these enterprise budgets includes research, surveys, market data, economic modeling, calculations and experience of authors.

Current budget analyses indicate less favorable returns for all three primary commodity crops in Ohio for 2023 but crop price change and harvest yields may change this outcome. These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2023 have been completed and posted to the Farm Office website:

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Sunset over Western Lake Erie
By: Peggy Kirk Hall, Thursday, May 18th, 2023

What is the key to resolving disagreements over water quality issues in Lake Erie?  Cooperation, according to the federal court judge overseeing a legal battle over Lake Erie. The judge, U.S. District Judge James G. Carr, recently approved a plan that is the result of cooperation between the U.S. EPA, State of Ohio, Lucas County Commissioners, and the Environmental Law & Policy Center.  For almost six years, the parties have been in a legal battle over how to deal with water quality in Western Lake Erie.  But at the encouragement of the court, the parties developed and agreed to a Consent Decree to settle the case.  Judge Carr approved the Consent Decree on May 4, 2023.  Time will soon tell if the cooperation approach will satisfy the parties holding interests in Lake Erie’s water quality.

What led to the Consent Decree?

In the midst of growing concerns about harmful algal blooms and water quality in Western Lake Erie, the Environmental Law & Policy Center and Lucas County Commissioners filed a lawsuit against the U.S. EPA, claiming that the federal agency had failed its obligations to oversee Ohio’s duties to meet water quality standards under the Clean Water Act (CWA).  The CWA requires states to identify waters that do not meet water quality standards and designate them as “impaired waters.”  Once it lists a water as impaired, the state must also rank which waters have the highest need for determining Total Maximum Daily Loads (TMDLs) that set maximum amounts of pollutants that may enter the water.  TMDLs provide a framework for future decisions that affect water quality in the impaired water.

Following a separate lawsuit that challenged Ohio EPA’s designation of some but not all waters in Western Lake Erie as impaired, Ohio EPA assigned impaired water status to all Western Lake Erie waters by 2018.  But Ohio identified the waters as a “low” TMDL priority and stated that it would address water quality the western basin through “alternative measures” rather than preparation of a TMDL. The U.S. EPA, charged with reviewing state actions for compliance with the CWA, approved Ohio’s designation.  The Environmental Law & Policy Center and the Lucas County Board of Commissioners each filed lawsuits against the U.S. EPA for approving Ohio’s approach, and the two lawsuits were consolidated into the current case.  The State of Ohio, not an original party to the litigation, received the court’s permission to intervene as a defendant in the lawsuit.

Several years and many motions and hearings later, Judge Carr admonished both sides of the lawsuit for dragging the matter out in court and leaving Lake Erie’s water quality problem “largely unattended.”  In 2021, before considering separate summary judgment motions the parties had made, the Judge pointed out that no matter his decision, the other party would appeal it and continue the litigation and that “nothing is going to get done.”  Resolving the problems in Lake Erie would only happen if the U.S. EPA, the plaintiffs, and the State of Ohio would “work cooperatively towards accomplishing a meaningful outcome and resolution,” Judge Carr stated.  His resolution on the summary judgment motions would only “kick the can down the road for another two years, at least...” A better solution, said Judge Carr, would be for the parties to resolve the matter through settlement.

With the court’s oversight, the parties engaged in settlement negotiations for nearly two years.  They reached an agreement in 2022.  As required by law, the U.S. EPA filed the proposed agreement, or Consent Decree, in the Federal Register last November and sought public comments to the proposal.  The parties then filed a joint motion to the court, asking Judge Carr to approve the proposed Consent Decree. 

The Consent Decree

The Consent Decree outlines a timeline Ohio EPA must follow to create a TMDL designed to address nutrient and algae impairments for drinking water, aquatic life, and recreational uses by establishing pollutant limits for all Western Lake Erie waters. The agreement requires the plaintiffs to allow additional time for the U.S. EPA to step in and prepare a TMDL if Ohio fails in its efforts to do so.  The Consent Decree also sets up a status report schedule and a dispute resolution process and awards attorney fees and costs to the Plaintiffs.  The agreement does not address the legal sufficiency of the TMDL, and the plaintiffs still hold the right to challenge the legal sufficiency or adequacy of the TMDL. The Consent Decree will end upon performance of all obligations by all parties.

The following summarizes the steps of the agreed upon TMDL schedule.

Approval of the Consent Decree

Judge Carr’s role in reviewing the proposed agreement was to determine if it is “fair, adequate, and reasonable, as well as consistent with the public interest.”  The parties’ submitted a joint motion in support of the Consent Decree that laid out their arguments as follows:

  1. The proposed agreement is fair because it was negotiated at length, in good faith, and in recognition of the strengths and weaknesses of each side.
  2. Because the proposed agreement addresses Defendant’s alleged violations by providing a schedule for developing a TMDL for Western Lake Erie, it is adequate and reasonable.
  3. The Consent Decree is in the public interest and furthers the goals of the Clean Water Act by providing for the timely development of a TMDL that will help “restore and maintain the chemical, physical, and biological integrity of the Nation’s waters” as intended by the Act. It also allows continued citizen rights to participate in the TMDL, does not alter existing regulations for TMDLs, and avoids significant time and expenses associated with ongoing litigation.

Judge Carr agreed with the parties’ arguments and approved the Consent Decree.  In doing so, he praised the work of U.S. District Judge Polster, who oversaw the settlement negotiations, the lawyers for each party, and the State of Ohio.  “Though the work that today’s agreement brings is but a first step, it is a step that has to be taken.  How many more steps lie ahead, and how long they will take, is beyond even guessing,” he stated.  “But there’s reason to hope that, in time, the Maumee River will no longer display, as it has for countless summers, a loathsome foul and slimy green surface as it flows through Toledo on its constant and irresistible course on to Lake Erie’s Western Basin.”

What’s next?

Implementation of the Consent Decree schedule is already underway.  The Ohio EPA issued a draft TMDL or “Nutrient Water Quality Improvement Plan for the Maumee River Watershed” on December 30, 2022, and is currently reviewing comments made during the public comment period that ended on March 8, 2023.  The agency appears to be on schedule for meeting the June 30 deadline for submitting the TMDL to the U.S. EPA for its review. Information on the Draft TMDL is available at

But is continued cooperation on the TMDL for Western Lake Erie possible?  Both the plaintiffs in this case submitted comments on the draft TMDL, and both raised concerns about its “shortcomings.”  

“The TMDL just proposes to keep doing the same things that have already failed, focused on voluntary measures and incentive payments to producers,” stated the Environmental Law & Policy Center in its comments, available at

“It is critical that the draft TMDL not lack the necessary steps to reduce agriculture phosphorous runoff into Lake Erie and place limits on dissolved reactive phosphorous,” said Lucas County Commissioner Wozniak in comments summarized at  “We shouldn’t be fooled into settling for half measures and voluntary practices any longer. We are talking about the health of our most valuable resource, and we must have a meaningful TMDL to protect it.”

While the spirit of cooperation encouraged by Judge James G. Carr is at play in the development of a TMDL for Western Lake Erie, whether that spirit will thrive in the debate over the content and future implementation of the TMDL is a critical question. In the words of Judge Carr, how many more steps lie ahead, and how long they will take, is beyond even guessing.  Let’s hope that more litigation isn’t one of those steps.


The Consent Decree is available through this link.

Judge Carr's Order on the Consent Decree is at this link.

By: Peggy Kirk Hall, Wednesday, May 17th, 2023

Do you want to learn more about Ohio solar energy development?  If so, consider dropping in on our upcoming webinar series, where my colleague Eric Romich and I will discuss trends, procedures, and legal issues in Ohio solar development. The five-part webinar series covers solar development from start to finish and will take place May 23, 24, 25, 30, and 31 from 9 to 10:30 a.m. The series includes the following sessions:

May 23:  Solar Development Overview and Trends

  • Ohio solar development, industry and technology trends, dual use of land for solar energy and agriculture, community and regulatory issues.

May 24: Leasing Land for Solar Development

  • Pre-leasing considerations, solar lease phases, common legal terms, and best management practices for leasing.

May 25: Connecting to the Electric Grid

  • Overview of the electric utility system, regulatory jurisdiction, and interconnection procedures and timelines.

May 30:  Solar Project Approval in Ohio

  • Solar project application procedures, state oversight, and new laws allowing county and township oversight of solar development.

May 31:  Construction and Post-Construction

  • The construction process, common issues, regulatory oversight, and decommissioning a project in the future

Registration and additional information about the free Zoom webinar series is available at   Those unable to attend can view webinar recordings on the Farm Office energy law library at

By: Robert Moore, Friday, May 12th, 2023

Legal Groundwork

The recent failures of three banks may have some farmers concerned about the security of their cash reserves.   Many farms hold large reserves of cash, the loss of which would be financially devastating.  The federal government does provide protection through the FDIC but not all financial institutions participate in FDIC, not all account types are covered and there are limits to the protection.  However, with a little bit of planning, even large amounts of cash can be fully protected from bank failures.



The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits and examines and supervises financial institutions for safety, soundness, and consumer protection.  FDIC deposit insurance coverage depends on two things: (1) whether your bank is FDIC-insured and (2) whether your chosen financial product is a deposit product.  If a bank fails, the FDIC will immediately ensure that holders of eligible accounts will receive their funds subject to coverage limits.  To determine if a specific financial institution participates in FDIC, the name of the bank can be searched in the following database:


Eligible Accounts

The following accounts are eligible for FDIC coverage:

  • Checking accounts
  • Savings accounts
  • Money Market Deposit Accounts (MMDAs)
  • Time deposits such as certificates of deposit (CDs)
  • Cashier's checks, money orders, and other official items issued by a bank

Accounts that are not eligible for FDIC coverage are as follows:

  • Stock investments
  • Bond investments
  • Mutual funds
  • Crypto Assets
  • Life insurance policies
  • Annuities
  • Municipal securities
  • Safe deposit boxes or their contents
  • U.S. Treasury bills, bonds or notes1


Coverage Limits

FDIC coverage is not unlimited.  Generally, coverage is capped at $250,000 but can be more depending on the type of account and number of owners/beneficiaries.  The coverage limit for each type of account is as follows:

Single Accounts (Owned by One Person)                  $250,000

Joint Accounts (Owned by Two or More Persons)      $250,000 per co-owner

Corporation, Partnership Accounts                             $250,000

Revocable Trust Accounts                                          $250,000 per owner per unique beneficiary

Irrevocable Trust Accounts                                         $250,000 for each unique beneficiary

Government Accounts                                                $250,000


Strategies to Insure Large Reserves of Cash

The account restrictions and coverage limits can be problematic for many farms.  It is not uncommon for farms to hold more than $250,000 in a single account to buy inputs, buy the next farm or as a reserve for lean times.  Consider the following example:

Farmer has $1,000,000 in his individual savings account at Bank Co.  If Bank Co. were to fail, FDIC would only protect $250,000 of his $1,000,000, leaving $750,000 unprotected and at risk.

The following are a few strategies that can be used to insure large cash reserves:

Bank Networks.  Some banks are part of a network that allow eligible accounts to be set up at other, cooperating banks.  The primary bank establishes eligible accounts at other banks and then transfers up to $250,000 into each account.  Continuing the above example, Bank Co. establishes a savings account at three other banks – 1st Bank Co., 2nd Bank Co. and 3rd Bank Co.  Bank Co. then transfers $250,000 to each bank.  Farmer now has fully protected accounts at four different banks and his entire $1,000,000 is shielded with FDIC protection.  Bank Co. took care of setting up the three additional accounts and transferring the funds.

Open Different Types of Eligible Accounts.  FDIC will cover different types of eligible accounts at the same bank.  So, multiple type accounts at the same bank can insure more than $250,000.  In this scenario, Farmer can change his individual account to a joint account by adding his spouse ($500,000 coverage), transfer $250,000 to an account held by his farm corporation and transfer $250,000 to an account owned by his trust.  By adding owners and establishing different types of eligible accounts, Farmer’s entire $1,000,000 can be covered by FDIC and remain at Bank Co.

Open Accounts at Multiple Banks.  This strategy is similar to using a Bank Network except that the account holder establishes the accounts.  The account holder may prefer to personally open accounts at multiple banks rather than allowing his bank to do so.  With this strategy,  Farmer opens savings accounts at 1st Bank Co, 2nd Bank Co. and 3rd Bank Co. and transfers $250,000 to each new account.  Now, Farmer’s entire $1,000,000 is covered by FDIC but at four different banks. 



Producers holding funds in accounts not eligible for FDIC coverage or holding funds in excess of FDIC limits should consider implementing strategies to cover any unprotected money.  As the above examples illustrate, it is relatively easy to cause large cash reserves to be entirely insured by FDIC.  The producer’s banker or financial advisor should be consulted to determine the strategy that will work best to protect the maximum amount of funds. 


1 These investments are backed by the full faith and credit of the U.S. government.



Posted In: Business and Financial
Tags: FDIC
Comments: 0
By: Robert Moore, Friday, May 05th, 2023

Legal Groundwork

A common dilemma for many second-marriage couples is how to provide for a surviving spouse while ensuring that assets ultimately go to the deceased spouse’s children.  If the deceased spouse’s assets go to the surviving spouse, there is no guarantee that those assets will transfer to the deceased spouse’s children upon the death of the surviving spouse.  Trusts often provide a good solution to this problem.

Trusts can be used to provide income to the surviving spouse while ensuring that the assets are ultimately inherited by the deceased spouse’s children.  Because the surviving spouse will never own the assets, the surviving spouse cannot redirect to whom those assets will go.  The trust can hold the deceased spouse’s assets in trust for the surviving spouse’s life, thus providing income.  Then, at the surviving spouse’s death, the assets are distributed to the deceased spouse’s children.  Consider the following example:

Mark establishes a trust with the following provision: “Upon my death, my assets shall be held in trust for the life of my wife, Mindy.  While held in trust for Mindy, my Trustee shall distribute all income to Mindy.  Upon the death of Mindy, my Trustee shall distribute the assets to my children.” 

This trust will provide income to Mindy but ultimately distribute the assets to Mark’s children.  Mark can be sure that Mindy receives income from the trust but can also be sure that his assets ultimately are inherited by his children and not Mindy or her children.  Mindy has no control over the distribution of assets at her death.

In some situations we may want some assets to go directly to the deceased spouse’s children at death and some held in trust.  This is very common for farm plans.  When children will be taking over the farming operation, we may not want to tie up the operating assets in trust but instead have those go directly to the farming children.  To implement this plan, a trust may have a provision similar to the following:

“Upon my death, my Trustee shall distribute all my farm machinery, grain, crops and other farm operating assets to my children.  The remainder of my assets, including my farmland, shall be held in trust for Mindy.  While held in trust for Mindy, my Trustee shall distribute all income to Mindy.  My Trustee shall offer to lease the farmland to my children for 80% of the county cash rent average.  Upon the death of Mindy, my Trustee shall distribute all remaining trust assets to my children.”

In this example, the farm operating assets go directly to Mark’s children so that they can continue the farming operation.  The only farm asset held is trust is the land, but Mark’s children have the option to lease the land at a favorable lease rent.  This strategy avoids interfering with the farming operation while holding non-operating assets for Mindy’s benefit.  Mark has met his goal of immediately transferring farm operating assets to his children while providing for Mindy and ensuring his assets will eventually be inherited by his children.

A third scenario involving trusts and second marriages may have some assets go directly to the surviving spouse, some assets go directly to the children, and some held in trust for the surviving spouse.  It may be appropriate for some assets to go directly to the surviving spouse so that they have full control over those assets.  A trust could include the following provision:

“Upon my death, my Trustee shall distribute all my farm machinery, grain, crops and other farm operating assets to my children.  All cash, investments and life insurance shall be distributed to Mindy.  The remainder of my assets, including my farmland, shall be held in trust for Mindy.  While held in trust for Mindy, my Trustee shall distribute all income to Mindy.  My Trustee shall offer to lease the farmland to my children for 80% of the county cash rent average.  Upon the death of Mindy, my Trustee shall distribute all remaining trust assets to my children.”

In this example, Mark wanted Mindy to receive some assets directly and not held in trust.    The farm operating assets are still distributed to the children immediately and the land is held in trust for Mindy’s benefit then distributed to Mark’s children at Mindy’s death.  Mark achieved his goal of having some non-farm assets go directly to Mindy, the farm operating assets go directly to his children with the remaining assets being held for Mindy’s benefit and ultimately distributed to Mark’s children.

As these examples illustrate, trusts can be very effective at establishing plans for second marriages.  The surviving spouse can be provided with adequate income while protecting the assets for the deceased spouse’s children.  A simple will-based plan or no estate plan at all can result in some or all the deceased spouse’s assets either be consumed by the surviving spouse or being inherited by the surviving spouse’s children.  A trust can be designed with a great deal of flexibility and creativity to provide a suitable farm transition plan for second-marriage situations.


Posted In: Estate and Transition Planning
Comments: 0
The word taxes laying in grain.
By: Jeffrey K. Lewis, Esq., Tuesday, May 02nd, 2023

What are “Taxable Gross Receipts” Under Ohio’s Commercial Activity Tax?
By: Jeffrey K. Lewis, Esq., Attorney and Program Coordinator, OSU Income Tax Schools and Barry Ward, Leader, Production Business Management; Director, OSU Income Tax Schools

The privilege of doing business in Ohio comes at a cost. Since July 1, 2005, Ohio has imposed an annual Commercial Activity Tax (“CAT”) on taxpayers doing business in Ohio. The CAT is measured by a taxpayer’s “taxable gross receipts” during the tax period, which for most taxpayers will be the calendar year. 

As a general rule, any individual or business entity that is required to register or pay tax under Ohio law is subject to paying Ohio’s Commercial Activity Tax. There are certain “excluded taxpayers” including any taxpayer with $150,000 or less of “taxable gross receipts”, non-profit organizations, governmental entities, and others.

The focus of this article will be on what is and is not a “taxable gross receipt” under the CAT. To determine what is a “taxable gross receipt” a taxpayer must undergo a three-step analysis that starts with determining what is a “gross receipt” under Ohio law. Then a taxpayer must situs (or source) those gross receipts to Ohio in order to calculate their total “taxable gross receipts.” A taxpayer’s total taxable gross receipts will then determine their remaining obligations under the CAT. 

Step 1. Determine total “gross receipts.”

“Gross receipts” are broadly defined in Section 5751.01(F) of the Ohio Revised Code as “the total amount realized by a person, without deduction for the cost of goods sold or expenses incurred, that contributes to the production of gross income of the person, including the fair market value of any property and any services received, and any debt transferred or forgiven as consideration.” In other words, a gross receipt is anything that contributes to a taxpayer’s gross income which includes proceeds from the sale of goods or services and income generated from rentals and leases. 

However, Ohio law excludes numerous items from the definition of gross receipt and therefore those items are excluded from being subject to the CAT. A full list of items excluded from the definition of gross receipts can be found in Ohio Revised Code Section 5751.01(F)(2). Below, Chart 1 provides a list of those exclusions, and the bolded exclusions will be discussed in further detail below. 

It is important to remember a taxpayer’s viewpoint when reading the list of exclusions. A taxpayer must ask themselves: “Did I receive proceeds from the sale or transfer of property, goods, or services, and if so, do those proceeds fall into one of the following categories?” If the receipt of any proceeds falls into one of the categories below, the taxpayer does not have to count those proceeds as gross receipts. 

Chart 1: Proceeds Excluded from “Gross Receipts” 

  • Interest income.
  • Dividends and distributions; distributive or proportionate shares.
  • Receipts from the sale or transfer of capital assets (I.R.C. § 1221) or assets used in the trade or business (I.R.C. § 1231). 
  • Proceeds from the repayment, maturity, or redemption of an intangible.
  • Receipts from a repurchase agreement or loan.
  • Contributions received by a trust, plan, or other arrangement.
  • Compensation.
  • Stock issuance.
  • Life insurance proceeds. 
  • Gifts or charitable contributions.
  • Money awarded from litigation.
  • Agent’s commission, fee, or other remuneration.
  • Returns and allowances.
  • Receipts from worthless or uncollectible debts (“bad debts”).
  • The sale of an account receivable.
  • Qualified uranium receipts.
  • Certain gross casino revenue.
  • Receipts realized from the sale of agricultural commodities by an agricultural commodity handler.
  • Qualifying integrated supply chain receipts.
  • Certain dyed diesel fuel purchases by railroad companies.
  • Certain receipts related to the sale of tangible personal property and capital equipment in megaprojects.
  • Certain sports gaming receipts.
  • Any receipts for which the tax imposed by the CAT is prohibited by law.   
  • Tax refunds. 
  • Pension reversion.
  • Contributions to capital.
  • Sales or use tax collected. 
  • Receipts of an employer from payroll deductions relating to the reimbursement of the employer for advancing money to an unrelated third party on an employee’s behalf. 
  • Cash discounts allowed and taken.
  • Excise taxes collected.
  • Sale or transfer of a motor vehicle as customer preference (car dealers only).
  • Receipts from a financial institution for services provided to the financial institution in connection with the issuance, processing, servicing, or managing loans or credit accounts.
  • Funds received or used by mortgage brokers.
  • Property, money, and other amounts received by Professional Employer Organizations (“PEOs”) from client employers. 
  • Amounts retained as a commission by persons holding permits to conduct horse-racing meetings.
  • Qualifying distribution center receipts.
  • Receipts realized by an out-of-state disaster business from disaster work conducted in Ohio during a disaster response.
  • Receipts from the sale or transfer of a mortgage-backed security or a mortgage loan by a mortgage lender.
  • Amounts of excess surplus of the state insurance fund received by the taxpayer from the Ohio Bureau of Workers’ Compensation.


A Closer Look . . . 
As can be seen from Chart 1, there are numerous exclusions from the definition of “gross receipts.” Below we discuss a few of those exclusions in further detail. 

  1. Interest Income.  Interest income, except for the interest earned from a credit sale, is excluded from gross receipts. For example, if a taxpayer earns interest on a savings account, that interest is excluded from the taxpayer’s gross receipts. However, a taxpayer must include any monthly interest earned on an installment contract in their gross receipts. 

Example: A farmer agrees to sell land to a neighbor under a land installment contract. Under the land installment contract, the farmer agrees to convey title to the land to the neighbor and the neighbor agrees to pay the purchase price of the land, plus interest, in monthly payments (the installment payments). The farmer retains title to the land until the neighbor’s installment payment obligations have been fulfilled. In this scenario, the farmer must include the monthly interest earned in their gross receipts. However, the amount earned by the farmer that is applied to the purchase price of the land is not included in the farmer’s gross receipts. 

  1. Dividends and distributions; distributive or proportionate shares.  If a taxpayer is a shareholder or member of a corporation, S corporation, or other similar entity, the dividends or distributions paid to the taxpayer from the corporation are expressly excluded from the definition of gross receipts and thus not subject to the CAT. This is also true for the value of any distributive shares or proportionate shares received by the taxpayer by virtue of being a member or partner of a pass-through entity or partnership. 

Example: The “patronage dividends” earned by a farmer or farming business that are members of a cooperative are not included in gross receipts. Cooperatives are formed under Ohio’s corporation statute, and these “patronage dividends” are treated the same as a traditional dividend given to a shareholder of any other corporation.  

  1. Sale or transfer of capital assets and assets used in the trade or business of the taxpayer.  Ohio law excludes the receipts from the sale or transfer of an asset, described in either Section 1221 or 1231 of the Internal Revenue Code, from the definition of gross receipt, regardless of the length of time the asset is held, and regardless of any gain or loss realized on the transfer of the asset. 

When it comes to the Commercial Activity Tax, Ohio is only concerned about the types of assets described within Sections 1221 and 1231. Section 1221 describes those assets held for personal or investment purposes (i.e. capital assets) and Section 1231 describes assets used in the trade or business of the taxpayer. 

Interaction between Section 1221 assets and Section 1231 assets. For Ohio CAT purposes, if an asset meets the description in Section 1221’s definition of capital assets or in Section 1231’s description of business assets then the proceeds from the sale of that asset do not need to be included in a taxpayer’s gross receipts. Below is a more detailed explanation of the assets described in Sections 1221 and 1231 of the Internal Revenue Code. 

Section 1221 Property: Assets held for personal use and investment.  Generally, these assets include property held by a taxpayer, whether or not connected with their trade or business, and used for personal or investment purposes. The proceeds earned by a taxpayer from the sale or transfer of these capital assets are not subject to the CAT. 

Section 1231 Property: Assets used in the trade or business of the taxpayer. If an asset is included in the definition of these business assets in Section 1231, then the proceeds from the sale or transfer of the business asset do not need to be included in the taxpayer’s gross receipts. According to Section 1231, property used in the trade or business includes: 

      1. Depreciable property including, farm machinery, equipment, etc.(so long as it is not considered “inventory”). The entire gross receipt from the sale or transfer of the depreciable asset is exempt from the CAT, regardless of whether a taxpayer recognizes a gain or loss from the sale, including IRC Section 1245 or 1250 recapture income. 
      2. Real property used in the taxpayer’s trade or business (so long as it is not considered “inventory”); 
      3. Timber, coal, and iron ore that are still in the ground (once the mineral is removed from the ground, however, it is no longer an asset used in the trade or business and instead becomes inventory and thus subject to the CAT); 
      4. Livestock held by the taxpayer for draft, breeding, dairy, or sporting purposes. (Livestock is uniquely defined in the Code of Federal Regulations to include cattle, hogs, horses, mules, donkeys, sheep, goats, fur-bearing animals, and other mammals. Livestock does not include poultry, chickens, turkeys, pigeons, geese, other birds, fish, frogs, reptiles, etc.); and
      5. Unharvested crop on land, which is sold simultaneously to the same person is considered “property used in the trade or business.”

Therefore, if an asset that is sold/transferred is included in the above definition, then the proceeds from that sale/transfer do not need to be included in a taxpayer’s gross receipts.

Examples: The Ohio Department of Taxation has provided some of the following examples to help demonstrate “property used in the trade or business” of a taxpayer and whether the receipts from the sale or transfer of those assets should be included in gross receipts: 

  1. A farmer trades in a tractor with a FMV of $50,000 and an adjusted tax basis of $0. The farmer would have $50,000 in recapture income recognized. However, under the CAT, this recaptured income is not included in the farmer’s gross receipts.
  2. A farmer selling land, including the crops grown on the land, can exclude receipts from the sale if both the crops and land are simultaneously sold to the same person. Once the purchaser harvests the crop, it becomes part of the purchaser’s inventory, and the purchaser must report the receipt from the sale of that crop in their gross receipts. 
  3. A farmer who harvests corn for sale must include the proceeds from the sale of the corn in their gross receipts. 
  4. Proceeds from the sale of livestock that are used for draft, breeding, dairy, or sporting purposes are excluded from gross receipts. 
  5. Cattle raised for slaughter are not considered Section 1231 property, instead they are viewed as inventory. Therefore, a farmer or other taxpayer who finishes steers in a feed lot for slaughter must include those proceeds earned in gross receipts. 
  6. A taxpayer who sells acreage including standing timber can exclude the receipts from this sale from CAT. 
  7. A taxpayer who cuts timber for the purpose of selling it in the taxpayer’s trade or business cannot exclude receipts from this transaction from their gross receipts. The opposite is true for a landowner who is not in the business of cutting and selling timber. A landowner that sells timber on their property is selling Section 1221 property. Generally, the landowner is selling title of the timber to another party. The purchaser of the timber will have to include the receipts from the sale of the timber in their gross receipts, but the landowner does not.  
  8. There are some special considerations for the sale of a business. For a business that is selling its stock and assets to another entity/taxpayer, the receipts from this sale are excluded from CAT as Section 1221 property. However, those receipts from any outstanding accounts receivable or inventory held by the business at the time of the sale must be included in the business’s gross receipts and thus subject to CAT. 


Chart 2 below, provided by the Ohio Department of Taxation, contains a list of different types of assets and whether the receipts from the sale or transfer of these assets are subject to CAT: 

      Chart 2: Examples of Assets Subject to the CAT

Sale or transfer of . . . 

Subject to CAT? 

Personal residence


Office building sold by investor


Personal car (used for pleasure)


Delivery truck not part of inventory


Stocks and bonds (personal investment)


Accounts receivable


Supplies used in taxpayer’s business


Fishing pole sold at yard sale


Fishing pole sold by a retailer


Jewelry not sold by retailer/wholesaler


Hedging transactions


Personal sailboat (used for pleasure)


Copy machine used for business purposes




Golf clubs sold at yard sale


Golf clubs sold by a professional player


Unextracted oil sold with land


Extracted mineral


Cattle (livestock) – non-inventory




Farmland with growing crops


Harvested crops




Stock certificates


Accounts receivable


Business equipment



Step 2. Determine “taxable gross receipts.”

After a taxpayer has calculated their gross receipts, the taxpayer must then determine their “taxable gross receipts.” A “taxable gross receipt” is a gross receipt that is sitused (or sourced) to the state of Ohio. Generally, gross receipts are sourced based on the benefit to the purchaser. Section 5751.033 of the Ohio Revised Code sets forth the rules for determining how to source gross receipts to Ohio. Gross receipts are sitused to Ohio as follows:  

Chart 3: Sourcing Gross Receipts to Ohio

Real Property:

  • Gross rents and royalties
  • Sale or transfer
  • If the property is located in Ohio, those receipts are sourced to Ohio. Receipts from real property not located in Ohio are not taxable gross receipts. 

Tangible Personal Property: 

  • Gross rents and royalties 
  • Sale or transfer 
  • For gross rents and royalties, if the tangible personal property is located or used in Ohio, it is a taxable gross receipt. 
  • For the sale or transfer of tangible personal property, the property is sourced based on where the property is ultimately received after all transportation has been completed. Therefore, only tangible personal property that is ultimately received in Ohio is a taxable gross receipt.

Other Services

  • The general rule is that the service is sourced based on the benefit to the purchaser. Receipts stemming from services performed in Ohio are taxable gross receipts. Receipts from services performed outside the state of Ohio are not taxable gross receipts. 


Step 3. Only include those taxable gross receipts for the current tax year. 

Ohio law provides that a “taxpayer’s method of accounting for gross receipts for a tax period shall be the same as the taxpayer’s method of accounting for federal income tax purposes . . .” The taxpayer’s method of accounting will be either the cash method or accrual method of accounting. Under the cash method, a taxpayer reports income in the tax year the income is received. Under the accrual method, a taxpayer reports income in the tax year it is earned, regardless of when payment is received. Therefore, for a taxpayer that uses the cash method of accounting, gross receipts are only included in the tax year that the receipt is received. Take, for example, a grain farmer that enters into a deferred payment contract with the local grain elevator. If the farmer uses the cash method of accounting, the receipt from the sale of the farmer’s grain is included in the year when payment is received. If the farmer uses the accrual method of accounting, the receipt from the sale of the farmer’s grain must be included in the year the farmer entered into the deferred payment contract because that would be the year when the farmer earned the income. 



In summary, a taxpayer’s obligation under Ohio’s Commercial Activity Tax is largely determined by the amount of “taxable gross receipts” the taxpayer has for the current tax period. A taxpayer must engage in the daunting process of determining what is and is not a “gross receipt” and then must situs (or source) those gross receipts to Ohio in order to calculate their “taxable gross receipts.” However, determining a taxpayer’s obligations under the CAT does not stop there. There are additional requirements such as registration, minimum tax imposed, and filing frequency. For more information about a taxpayer’s obligations under the CAT, please visit the Ohio Department of Taxation’s Commercial Activity Tax (CAT) – General Information website


26 U.S. Code § 1221 – Capital Asset Defined

26 U.S. Code § 1231 – Property Used in the Trade of Business and Involuntary Conversions

26 C.F.R. §1.1231-2 – Livestock held for draft, breeding, dairy, or sporting purposes

Ohio Administrative Code Chapter 5703-29: Commercial Activity Tax

Ohio Department of Taxation – Commercial Activity Tax (CAT) - FAQs

Ohio Department of Taxation – Commercial Activity Tax (CAT) – General Information

Ohio Department of Taxation – CAT 2005-08: Commercial Activity Tax; I.R.C. Section 1221 and 1231 Assets Excluded from “Gross Receipts”

Ohio Department of Taxation – CAT 2005-17:“Taxable gross receipt,” defined

Ohio Department of Taxation – CAT 2006-04: Commercial Activity Tax: Cash Discounts, Defined

Ohio Revised Code Chapter 5751: Commercial Activity Tax


By: Robert Moore, Thursday, April 27th, 2023

Legal Groundwork

Under Ohio law, a spouse cannot be disinherited by a will. Through a concept known as elective share, the surviving spouse may elect to receive what is provided for in the deceased spouse’s will or receive what is provided by law.  How much the surviving spouse receives from the elective share depends on the family status of the deceased spouse.  The following is the elective share for spouses as provided by the Ohio Revised Code:

  • If the decedent (deceased spouse) died with a spouse but no descendants, the surviving spouse inherits the entire probate estate.
  • If the decedent died with a spouse, and their only descendants were also descendants of the surviving spouse, the surviving spouse inherits the entire probate estate.
  • If the decedent died with a spouse and one child who is not the child of the surviving spouse, the surviving spouse inherits the first $20,000 of the probate estate, plus half of the remaining estate. The child takes the rest.
  • If the decedent died with a spouse and multiple children who were not children of the surviving spouse, and at least one child together with the surviving spouse, the surviving spouse inherits the first $60,000 of the estate and one-third of the balance, with the descendants who were unrelated to the surviving spouse taking the rest.
  • If the decedent died with a spouse and multiple children who were not children of the surviving spouse, and no children together with the surviving spouse, the surviving spouse inherits the first $20,000 of the probate estate and one-third of the balance, with the descendants who were unrelated to the surviving spouse taking the rest.

Consider the following example as to how the elective share is applied:

Mark and Mindy each have two children from previous marriages.  Mark has farmed his entire life and built a large farming operation prior to marrying Mindy.  Mindy is not involved in the farming operation.  Mark’s two children plan to take over the farming operation.  Mark executes a Will that leaves all his assets to his children.  Mark believes the Will causes all his assets to go to his children at death.  After Mark’s death, Mindy decides to take her elective share.  Because there are multiple children from a previous marriage, Mindy will receive $20,000 plus one-third of Mark’s assets.

As the above example illustrates, Mark could not disinherit Mindy using his will.  Under Ohio law, Mindy had the right to receive assets from Mark’s estate even though he had left nothing in his will for Mindy.  The same would apply if Mark had no will at all which is called intestacy.  In intestate estates, the elective share also applies.

It should be noted that the elective share only applies to probate assets.  Assets that are disposed of through a trust[1] or a transfer/payable on death beneficiary are not subject to the elective share.  If Mark had all his assets in a trust and left nothing for Mindy, Mindy could not elect against the trust assets because they were not subject to probate jurisdiction.  Also, if Mark had his children as payable on death beneficiaries of all his financial accounts, Mindy could not make an elective share against those financial accounts either.

Due to the ability to avoid the elective share, trusts can be valuable tools in farm succession planning involving second marriages.  In the next installment, we will continue our discussion of planning with second marriages by explaining how trusts can be used to provide for the surviving spouse while ensuring the assets end up with the deceased spouse’s children.

[1] To avoid probate, assets must be titled to the trust or be titled payable/transfer on death to the trust.  Assets that must go through a “pour over” will before being transferred to the trust are subject to probate.