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The Ohio General Assembly is back in Columbus after the March 19th primary election, and committee schedules are already filling up. Given the increased activity in recent weeks, we thought it was a good time to examine what has happened legislatively this year up until this point.
H.B. 64—Eminent Domain. This bill was first introduced by Representatives Kick (R-Loudonville) and Creech (R-West Alexandria) in February of 2023. The bill’s purpose is to make it more difficult for governmental agencies or private entities to take private property through eminent domain. On February 6, 2024, the bill was updated with a Substitute House Bill 64 in the House Civil Justice Committee.
The previous version of the bill excluded recreational trails from the definition of “public use,” meaning that property could not be taken by a government agency for recreational trails. The current version of the bill narrows this language, allowing for a taking for the purpose of creating recreational trails, but not in cases where the property is not adjacent to a public road and where the property’s primary use will be for a recreational trail.
Another substantial change between the versions involves compensation offers from the government entity to the landowner. In the original version of the bill, a government entity would not have been allowed to reduce an offer made to purchase property before proceedings commenced if the reduction was based on hard-to-discover issues with the property. The current version would exclude this provision, restoring an agency’s authority to reduce offers.
Substitute House Bill 64 would also make changes to compensation and awards landowners could receive if the issue goes to court.
H.B. 197—Solar Development. Sponsored by Representatives Hoops (R-Napoleon) and Ray (R-Wadsworth), H.B. 197 would establish a the community solar pilot program and the solar development program. Under the language of the bill, a “community solar facility” is defined as a single facility with at least three subscribers and a nameplate capacity of 10 megawatts or less, or 20 megawatts or less if on a distressed site. Furthermore, the bill would require The Public Utilities Commission of Ohio (PUCO) to establish a Community Solar Pilot Program of 250 megawatts on sites in the Appalachian region of the state. The bill would also amend the state competitive retail electric service policy to encourage community solar facilities in the state and allow subscribers to community solar facilities to receive monthly electric bill offsets.
H.B. 324—Motor Fuel. Introduced by Representatives McClain (R-Upper Sandusky) and Klopfenstein (R-Haviland) in November of 2023, H.B. 324 passed the House on February 7, 2024 and was referred to the Senate Ways and Means Committee on February 27.
If passed, the bill would authorize a temporary, nonrefundable income or CAT tax credit of 5 cents per gallon for retail dealers who sell high-ethanol blend motor fuel containing between 15-85% ethanol. The tax credit would be limited to five years or to a total of $10 million, whichever occurs first.
H.B. 327—Employee Verification. H.B. 327, introduced by Representatives Wiggam (R-Wayne County), and Swearingen (R-Huron), had its first committee hearing in House Commerce & Labor on February 13, 2024. The bill would require political subdivisions, private employers employing 75 individuals within the state of Ohio, and nonresidential construction contractors to verify each new employee’s work eligibility through the federal E-verify program. E-Verify is an online program that helps employers verify employees’ eligibility for employment. If the bill were to pass, the employer would be required to keep a record of the verification for the duration of the employee’s employment, or three years, whichever is longer. During testimony on the bill, Representatives Wiggam and Swearingen indicated an interest in possibly lowering the employee threshold, citing Florida’s 25 employee threshold.
H.B. 347—Farming Equipment Taxes. This bill was introduced by Representative Don Jones (R-Freeport) and referred to the House Ways and Means Committee in early December of 2023. Since then, the bill has been heard in committee twice, once in January, and once in February, both times without testimony. The bill would change the way farmers claim a tax exemption on certain purchases.
Currently, when an Ohioan engaged in farming, agriculture, horticulture, or floriculture is buying a product for “agricultural use,” they must provide the seller with an exemption certificate. This certificate comes from the Ohio Department of Taxation and relieves the seller of the obligation to collect the sales tax on behalf of the state. However, the Department of Taxation can later determine that the purchase does not qualify for exemption, and then the farmer would be expected to pay the tax.
H.B. 347 would slightly alter this current way of doing things when it comes to the purchase of certain vehicles and trailers. Under the bill, the purchaser could receive an agricultural use exemption for taxes on these vehicles if the purchaser shows the seller copies of the purchaser’s Schedule F—the federal income tax profit of loss from farming form—for three most recent preceding years. Alternatively, a farmer could obtain a certificate from the Department of Taxation verifying that they have filed a Schedule F for three years in lieu of providing the forms directly to the seller. Notably, the bill states that “no other documentation or explanation shall be required by the vendor or the tax commissioner” to prove that the purchase qualifies for the agricultural use exemption.
The following vehicles and trailers would be included under the bill:
- Trailers, excluding watercraft trailers;
- Utility vehicles, (vehicles with a bed, principally for the purpose of transporting material or cargo in connection with construction, agricultural, forestry, grounds maintenance, land and garden, materials handling, or similar activities);
- All-purpose vehicles, (vehicles designed primarily for cross-country travel on land and water, or on multiple types of terrain, but excluding golf carts);
- Compact tractors (garden tractors, small utility tractors, and riding mowers).
H.B. 364—Seed Labeling; Noxious Weeds. Sponsored by Representatives Dobos (R-Columbus), and Klopfenstein (R-Haviland), H.B. 364 had its first hearing in the House Agriculture Committee on February 6, 2024. Specifically, the bill would allow the Ohio Prairie Association and other noncommercial entities sharing seeds to distribute milkweed seeds non-commercially to i members, with the intent of promoting habitats for pollinators like monarch butterflies.
The bill would legally define “non-commercial seed sharing” as the distribution or transfer of ownership of seeds with no compensation or remuneration. Also included in the definition are a list of situations that are not considered “non-commercial seed sharing,” including when:
- The seeds are given as compensation of work or services rendered;
- The seeds are collected outside of Ohio;
- The seeds are patented, treated, or contain noxious weed species or invasive plants.
H.B. 364 also includes a definition of “seed library,” which it defines as a non-profit, governmental, or cooperative organization or association to which both of the following apply:
- It is established for the purpose of facilitating the donation, exchange, preservation, and dissemination of seeds among the seed library’s members or the general public.
- The use, exchange, transfer, or possession of seeds acquired by or from the non-profit governmental, or cooperative organization or association are obtained free of charge.
The bill would further exempt non-commercial seed sharers and seed libraries from labeling, advertising, handling, and sales restrictions under Ohio law.
To further the goal of promoting pollinators and habitats, H.B. 364 would make changes to the requirements for maintaining toll roads, railroads, or electric railways. Current law requires managers of such thoroughfares to destroy a number of noxious weeds along the roadway or in right of ways. The bill would no longer require the destruction of Russian thistle, Canadian thistle, common thistle, wild lettuce, wild mustard, wild parsnip, ragweed, milkweed, or ironweed.
H.B. 447—Property Tax. Introduced on March 12, 2024 by Representative Loychik (R-Cortland), H.B. 447 was referred to the House Ways & Means Committee on April 2, 2024. The bill would modify and expand property tax homestead exemptions, gradually reduce school districts’ 20-mill floor for tax levies and modify the formula for determining farmland’s current agricultural use value (CAUV). The change to CAUV would involve the calculation of the overall capitalization rate for agricultural land. Current law does not establish a minimum rate, but the bill would do so by stating that overall capitalization rate plus additur shall not be less than 10 percent. Since a higher capitalization rate results in a lower CAUV value and because the current capitalization rate is around 8%, the change would likely lower CAUV values.
S.B. 156—Scenic Rivers. This bill, sponsored by Senators Reineke (R-Tiffin) and Hackett (R-London) passed the Ohio Senate on January 24, 2024, and was referred in the House to the Energy and Natural Resources Committee on February 6, 2024. The bill would transfer the Wild, Scenic, and Recreational Rivers Program from the Division of Parks and Watercraft to the Division of Natural Areas and Preserves (DNAP) in ODNR. The bill would narrow the scope DNAP’s authority to watercourses designated as wild, scenic, and recreational rivers. Currently, the law is written so that the regulatory agency has authority over areas. “Areas” encompass not just the water, but also the land surrounding rivers. On the other hand, “watercourses” are defined as “substantially natural channel[s] that [are] at least five miles in length with recognized banks and a bottom in which the flow or water occurs.” Thus, agency oversight would be diminished from the river and its surrounding area to just confines of the river itself.
The bill also clarifies that a watercourse designation does not affect private property rights adjacent to a designated river.
Finally, the bill would require DNAP to adopt rules for the use, visitation, and protection of scenic river lands and provide for the establishment of facilities and improvements that are necessary for their visitation, use, restoration, and protection, but do not impair their natural character.
S.B. 226—Agricultural Land. S.B. 226 was introduced by Senator Terry Johnson (R-McDermott) in late February and referred to the Veterans & Public Safety Committee on February 27, 2024. The bill would create the Ohio Property Protection Act, which would include protection of:
- Agricultural land, defined as “land suitable for use in agriculture,” including the water on the land, airspace above the land, and natural products and products from the land;
- Any land located within a twenty-five-mile radius of any installation under the jurisdiction of the United States Armed Forces;
- Any land located within a twenty-five radius of a critical infrastructure facility.
To protect property in the above categories, the bill would make it illegal for the following people and entities to acquire or purchase such property:
- Those persons and foreign adversaries listed on a registry compiled by the Ohio Secretary of State;
- A government of a foreign adversary;
- An individual who is a citizen of a foreign adversary;
- A business that is headquartered in a foreign adversary;
- A business that is directly or indirectly owned or controlled by one or more of the above persons and entities; and
- An agent, fiduciary, or trustee of the above persons and entities.
Tags: Ohio legislation, Ohio legislature, eminent domain, ethanol, solar, sales tax, foreign land ownership, cauv, property tax, scenic rivers
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At some point, we have all had to find a notary to get a document notarized. Ohio law requires certain documents like deeds, long-term leases and vehicle titles to be notarized. But, have you ever thought, why do we need to have documents notarized and what are notaries? In this article, we will discuss notaries and the important role they plan in our society.
What Does an Ohio Notary Do?
An Ohio notary is an official empowered by the state to perform various acts that add an extra layer of security and credibility to legal proceedings. Their primary duties include:
- Verifying Signatory Identity: A notary ensures that the person signing a document is who they claim to be. This involves either personally knowing the person or requesting valid government-issued photo identification and verifying its details.
- Witnessing Signature: The notary observes the signing of the document and attests to their presence during this act. Their signature and official seal serve as evidence of this witnessing.
- Administering Oaths and Affirmations: Notaries can administer oaths, which are formal declarations made under penalty of perjury, and affirmations, which are non-religious oaths. This ensures the seriousness and truthfulness of statements made during legal proceedings.
- Taking Acknowledgments: An acknowledgment is a formal statement confirming that a signer understands the content of a document and willingly signed it. The notary verifies the signer's identity, witnesses their signature, and completes a separate acknowledgment certificate.
Why Do We Need Documents Notarized?
Notarization serves several critical purposes:
- Combating Fraud: By verifying identity and witnessing signatures, notaries help deter fraud by ensuring documents haven't been forged or signed under duress. This adds a layer of security to important transactions, protecting individuals and organizations from potential scams and financial losses.
- Promoting Trust: A notary's seal signifies an independent and impartial witness to the signing process. This official recognition instills confidence in the document's authenticity, especially when dealing with parties unfamiliar with each other.
- Facilitating Legal Processes: Certain legal documents, such as deeds, powers of attorney, and sworn statements, require notarization to be considered valid in court proceedings. The notary's presence strengthens the document's legitimacy and streamlines the legal process.
Who Can Be an Ohio Notary?
To be a notary, a person must meet the following requirements:
- Be at least 18 years old and a legal resident of Ohio, or
- Be an attorney admitted to practice law in the state with a primary practice in Ohio.
- Have no criminal convictions.
All new notaries are required to complete a 3-hour notary class and obtain a background check. Non-attorneys must also pass an exam.
Conclusion
Notaries play a vital role in safeguarding the integrity of legal documents and transactions within the state of Ohio. By verifying identities, witnessing signatures, and administering oaths, they contribute to a more secure and efficient legal system. If you're interested in a rewarding role that upholds trust and protects individuals, becoming an Ohio notary public might be a perfect fit for you.
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I'm often asked how an attorney becomes an "agricultural attorney." The answer is simple: through knowledge. The best agricultural attorneys I know have two kinds of knowledge: they know agriculture, and they know the laws that affect agriculture. There are several upcoming events that can help attorneys and law students gain the legal knowledge required to be an agricultural attorney.
The National Agricultural Law Center is currently offering two opportunities for attorneys and law students:
- Research Fellowships for Law Students. NALC employs law students in their second and third years as Research Fellows who help conduct legal research and writing projects. It's an outstanding opportunity to gain research experience and access to the world of agricultural law. As a partner of the NALC, our OSU Agricultural & Resource Law Program usually has one or two NALC Research Fellows working with us. For the upcoming term, specific research topics for NALC Research Fellows might include but are not limited to food safety and food labeling; environmental regulation of agriculture; agricultural finance and credit; other relevant issues such as agricultural data and technology, land use, farm programs, local and regional food systems and agricultural labor; and legal issues of importance to underserved populations, including BIPOC, such as heirs property, access to credit, environmental law/justice and food system equity. Interested law students must act quickly, as the fellowship applications are due April 5, 2024. Application information is available on the National Agricultural Law Center website.
- Agricultural & Environmental Law Conferences. NALC is hosting two legal conferences this June: the Mid-South Agricultural & Environmental Conference in Memphis, Tennessee on June 6-7 and the Western Agricultural & Environmental Law Conference on June 13-14. We've attended the NALC conferences, and they're excellent learning experiences that cover the breadth of topics we face in agricultural law. The conferences also allow attendees to interact with speakers and other attorneys from around the country, and law students are welcomed. Registration is now open for both conferences and is available on the National Agricultural Law Center website.
Two additional opportunities for agricultural attorneys and law students are on the horizon, and include:
- The Cultivating Connections Conference. Our program here at OSU, in partnership with Iowa State University's Center for Agricultural Law and Taxation and the National Agricultural Law Center, is planning to host the second annual Cultivating Connections Conference for attorneys, accountants, appraisers, financial planners, and other professionals interested in farm transition planning. We welcome law students and other young professionals to join us. The conference will be in Cincinnati, Ohio on August 4 and 5, and registration will soon be available on our Farm Office website.
- The AALA Annual Educational Symposium. The American Agricultural Law Association (AALA) will host its annual conference on November 7- 9 in Memphis, Tennessee. The AALA also includes law students in its conference, and offers several activities for the students. The AALA is currently accepting presentation proposals for the conference and registration will open later this Spring on the AALA website.
If you are or want to be in agricultural law, don't miss out on these opportunities to gain the critical knowledge necessary to be an agricultural attorney. Agriculture needs you!
Tags: Agricultural Law, agricultural attorneys, legal education
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Spring has officially sprung, and so have a few interesting legal updates. In this edition of the Ag Law Harvest we cover aggravated vehicular assault in a farm utility vehicle, "Made in the USA" labels, the Corporate Transparency Act's legal woes, USDA's Dairy Margin Program, and the U.S House Committee on Agriculture's Agricultural Labor Working Group's final report.
Driver of Farm Utility Vehicle Cannot be Found Guilty of Aggravated Vehicular Assault.
The Supreme Court of Ohio ruled that a driver of a farm utility vehicle involved in a crash cannot be convicted of a felony for injuring passengers because the vehicle does not meet the definition of a “motor vehicle” under Ohio’s criminal code. Joshua Fork of Sandusky County crashed his Polaris utility vehicle while driving under the influence at a party in 2020. Two of Fork’s passengers sustained serious injuries as a result of the accident. Fork was convicted of operating a vehicle under the influence (OVI), and two counts of aggravated vehicular assault. Fork did not contest his OVI conviction but did appeal his aggravated vehicular assault conviction to the Sixth District Court of Appeals. The case eventually made its way to the Supreme Court of Ohio.
In its decision, the Court found that Ohio law has two definitions of “motor vehicle.” One definition applies strictly to traffic laws and the other applies more broadly to Ohio’s “penal laws.” The Court held that the definition of “motor vehicle” that applies to penal laws, such as aggravated vehicular assault, exempts utility vehicles. The Court concluded that because of the utility vehicle exemption and the fact that the utility vehicle’s principal purpose is for farm activities, Fork cannot be found guilty of vehicular aggravated assault. To read more on the Supreme Court’s decision, visit: https://www.courtnewsohio.gov/cases/2024/SCO/0321/230356.asp
USDA Announces Final Rule on “Made in the USA” Labels.
The U.S. Department of Agriculture (“USDA”) announced the finalization of a rule to align the voluntary “Product of USA” label claim with consumer understanding of what the claim means. The USDA's final "Product of USA" rule permits the voluntary use of the "Product of USA" or "Made in the USA" label claim on meat, poultry, and egg products. However, these labels can only be used if the products are derived from animals that were born, raised, slaughtered, and processed in the United States. The rule aims to prevent misleading U.S. origin labeling, ensuring that consumers receive truthful information about the origins of their food.
Under the final rule, the "Product of USA" or "Made in the USA" label claim will remain voluntary for meat, poultry, and egg products. It will also be eligible for generic label approval, meaning it won't require pre-approval by the USDA's Food Safety and Inspection Service (“FSIS”) before use, but establishments must maintain documentation supporting the claim. Additionally, the rule permits other voluntary U.S. origin claims on these products, provided they include a description on the package of the preparation and processing steps that occurred in the United States upon which the claim is made.
Corporate Transparency Act Loses First Federal Court Battle.
As we have previously reported (here), the Corporate Transparency Act (“CTA”) requires certain business entities to file Beneficial Ownership Information (“BOI”) with the Financial Crimes Enforcement Network (“FinCEN”) or face civil and criminal penalties. However, an interesting twist in the CTA saga has occurred. A federal court in Alabama issued an opinion ruling the CTA unconstitutional, concluding that the CTA exceeds the U.S. Constitution’s limits on Congress’s power, and issued an injunction against the U.S. Government from enforcing the CTA against the named plaintiffs in the case. Therefore, the named plaintiff, Isaac Winkles, and companies for which he is a beneficial owner or applicant, the National Small Business Association, and the approximately 65,000 members of the National Small Business Association are currently not required to report beneficial ownership information to FinCEN. Everyone else must still comply with the CTA and the BOI reporting requirements.
FinCEN released a statement acknowledging the court’s ruling but emphasized that only the named plaintiffs are excused from reporting beneficial ownership information to FinCEN at this time. On March 11, 2024, the U.S. Government filed a notice of appeal of the lower court’s ruling, hoping to reverse the injunction and the court’s decision. We will continue to monitor the situation and keep you informed of any updates to the CTA and BOI reporting requirements.
USDA Announces 2024 Dairy Margin Coverage Program.
The U.S. Department of Agriculture (“USDA”) announced that starting February 28, 2024, dairy producers in the United States can enroll in the 2024 Dairy Margin Coverage (“DMC”) program. Enrollment for the 2024 DMC coverage ends on April 29, 2024.
The USDA's Farm Service Agency (FSA) has made revisions to the DMC regulations to allow eligible dairy operations to make a one-time adjustment to their established production history. This adjustment involves combining previously established supplemental production history with DMC production history for dairy operations that participated in Supplemental Dairy Margin Coverage in previous coverage years. DMC has also been authorized through the calendar year 2024 as per the 2018 Farm Bill extension passed by Congress.
FSA Administrator Zach Ducheneaux encourages producers to enroll in the 2024 DMC program, citing its importance as a risk management tool. The program has proven effective, with over $1.2 billion in Dairy Margin Coverage payments issued to producers in 2023. Ducheneaux highlights the program's affordability, noting that it offers a sense of security and peace of mind to producers.
DMC is a voluntary risk management program that provides protection to dairy producers when the margin between the all-milk price and the average feed price falls below a certain dollar amount selected by the producer. In 2023, DMC payments were triggered in 11 months, including two months where the margin fell below the catastrophic level of $4.00 per hundredweight, marking a significant development for the program.
House Committee Releases Final Report Recommending Changes to H-2A Program.
On March 7, 2024, the U.S. House Committee on Agriculture’s Agricultural Labor Working Group (“ALWG”) released its final report containing policy recommendations for U.S. agricultural labor. The report includes significant reforms to the H-2A program, many of which, as announced by the ALWG, received unanimous support from the bipartisan working group. The recommended policies encompass creating a single H-2A applicant portal, implementing H-2A wage reforms, establishing a federal heat standard for H-2A workers, and granting year-round industries such as livestock, poultry, dairy, peanuts, sugar beets, sugarcane, and forestry access to the H-2A program.
Tags: Utility Vehicles, USDA, Dairy Margin Program, H-2A, Ag Labor, Food Labeling, corporate transparency act
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It's time for our annual Small Farm Conference, a day-long educational program for those who live on and operate smaller-scale farms. This year, the conference will be on April 6 on the eastern side of Ohio at the Mid-East Career Technical Center in Senecaville. Our Agricultural & Resource Law Program will teach a "Solar and Wind Leasing" session in the Business Management track. Other track topics include Horticulture and Produce Production, Livestock, Natural Resources, and The Farm Kitchen.
Here's the session and speaker line-up for each track:
Track 1: Horticulture and Produce Production
- Organic Pest Management - Logan Minter, OSU Extension Specialty Crops Field Specialist
- Planning for Planting - High Tunnels, Low Tunnels and Gardens - Kacey Gantzer, West Virginia Dept. of Agriculture
- Common Produce Disease and Management - Frank Becker, OSU Extension Educator
- Growing Produce with Hydroponics - Tim McDermott, OSU Extension Educator
- Introduction to Bramble Production - Ryan Slaughter, OSU Extension Educator
Track 2: Business Management
- Ohio Landowner/Hunter Access Partnership Program - John Morton, ODNR Wildlife Management Consultant
- Small Farm Equipment - Frank Becker, OSU Extension Educator
- Solar and Wind Leasing - Peggy Hall, Attorney, OSU Agricultural & Resource Law Program
- Budgeting to Make Large Purchases - Jennie Schultice, Farm Credit
- What Do I Need to Start and Set Up a Business? - David Marrison, OSU Extension Farm Management Field Specialis
Track 3: Livestock
- Raising Meat Rabbit - Kim Ray, The Ray Family Farm
- Pasture Poultry - Tyler and Jessica Radcliff, B&R Farms
- Outdoors Hands-on Demonstration! Livestock Handling form Large to Small Animals - OSU Field Specialists and The Mid–East Career Technical Center
- How to Make Goat Milk Soap - Radisson Norman, Bubble Goat Soap Co.
Track 4: Natural Resources
- Invasive Plant Species - Carrie Brown, OSUExtension
- Timber Harvesting and Marketing - Jake Peer, Peer Family Forestry
- Coyote-Livestock Interactions and Research Efforts - OHcoyote Research Group
- Basics of Growing Paw Paws - Valerie Libbey, Libbey Farm
- Products From the Hive - Joan Leary, Products of the Hive
Track 5: The Farm Kitchen
- Seed Starting - Carri Jagger, OSU Extension Educator
- Herb Vinegars: Come to Where the Flavor Is - Kate Shumaker, OSU Extension Educator
- Cooking With a Slow Cooker or Instant Pot - Misty Harmon, OSU Extension Educator
- Freeze Drying vs. Dehydrating - Candace Heer and Shari Gallup, OSUExtension Educators
- Food Preservation Basics - Emily Marrison, OSU Extension Educator
Registration for the conference is $100 and includes lunch, session materials, and a trade show. Registrations are due March 28, so register now! To register, visit https://go.osu.edu/2024osusmallfarmconference.
Think about your key farm advisors. You likely have regular conversations with your agronomist, veterinarian, equipment dealer, and grain buyer throughout the year. But when was the last time you spoke with your insurance agent? For many farmers, insurance agents fall outside their regular circle of communication. This can be a risky oversight. Here's why regular contact with your insurance agent is crucial:
- Proactive Protection: Unlike other advisors you might consult reactively for problems, your insurance agent plays a preventative role. They ensure your farm has the right coverage to bounce back from unexpected events.
- Customized Coverage: Farms are unique operations. A good insurance agent will understand your specific risks and tailor your policy accordingly. This could involve covering unique assets, activities, or environmental concerns.
- Maximizing Coverage: Insurance policies can be complex. Regularly reviewing your policy with your agent helps ensure you understand your coverage details, including property value limits, replacement options, and liability protection levels.
Take Action Today: Schedule an Insurance Review
Here are some talking points to get the conversation started with your agent:
- Policy Review: Go over your current coverage thoroughly. Are all your farm properties and assets listed accurately? Are the listed values up-to-date to reflect true replacement costs?
- Coverage Gaps: Discuss any unique farm activities or assets that might require additional coverage beyond your current policy.
- Liability Needs: Evaluate your current liability coverage. Is it sufficient for your operation?
An Investment in Peace of Mind
An hour or two spent with your insurance agent can make a world of difference in the event of a loss. They can be your partner in safeguarding your farm's financial future. Don't wait until a problem arises; take charge today and schedule a comprehensive insurance review.
For more information on farm insurance options, consult the Farm Insurance: Covering Your Assets bulletin available at farmoffice.osu.edu.
Co-authored with Wayne Dellinger, Extension Educator in Union County and member of the OSU Ag Safety Team.
The upcoming solar eclipse on April 8 is a rare event that could bring a half-million people into the 124-mile eclipse path across Ohio, according to the Ohio Emergency Management Agency. For months, we’ve been hearing about eclipse issues ranging from eye safety to best viewing locations. But for farmers and farmland owners within the eclipse viewing area, the solar eclipse raises unique issues and concerns. Should we take steps to secure the farm? Will it delay our farming activities? What if we have trespassers or want to invite people to the farm to view the eclipse?
With the eclipse quickly approaching, now is the time to address the safety and legal questions it creates for the agricultural community. To provide guidance on these questions, our Agricultural & Resource Law Program partnered with the OSU Ag Safety Team. We offer these five steps farmers and farmland owners can take now to prepare for the solar eclipse:
- Secure the farm property.
- Understand trespass laws.
- Know responsibilities for invited guests.
- Plan ahead for farming activities.
- Be prepared to react to an incident.
For each step, we provide explanations of the concerns and issues that might arise, any laws that apply, and actions farmers and farmland owners can take to reduce their safety and legal concerns. Read the entire article at https://farmoffice.osu.edu/solar-eclipse-2024.
Tags: eclipse, solar eclipse, Property, liability, trespassers, premises liability, safety
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Estate taxes are receiving a lot of attention due to the impending reduction in the federal estate tax exemption in 2026. If Congress does not extend or make permanent the current estate tax exemption, the exemption in 2026 will be $5.5 million per person plus inflation. The inflation-adjusted estate tax exemption for 2026 is expected to be between $7 million and $7.5 million. The current federal estate tax exemption for 2024 is $13.61 per person.
The lower federal estate tax exemption will still be high enough for most people to avoid federal estate taxes. However, some farmers will see themselves move into the federal estate tax bracket in 2026. People who will find themselves subject to estate taxes due to the 2026 sunset provisions are exploring strategies to help reduce estate tax liability.
One such strategy that may be considered is gifting. In some situations, gifting can help reduced estate taxes. In other situations, it may have little effect and have detrimental effects on income tax strategy. This article will discuss how gifting may or may not help with estate tax liability and the implications of gifting.
Annual Gifts
One gifting strategy to help reduce estate taxes is using the annual gift exclusion. As stated above, multiple gifts of up to $18,000 can be made without tax to either party. The gifts can be money, shares in a business entity, real estate or almost any other kind of asset. The annual exclusion gift can be an effective strategy for those people who have many potential recipients for the gift and/or may be close to or just over the federal estate tax exemption. Consider the following example:
Grandma has 10 grandchildren. She calculates that she will be about $200,000 over the estate tax exemption in 2026. She gifts each grandchild $18,000 in both 2024 and 2025. The gifts allow Grandma to gift a total of $360,000.
This gift allowed Grandma to move back under the estate tax exemption and avoid estate taxes. Neither Grandma nor grandchildren will pay gift taxes on the gift. As the example shows, using the annual gift exclusion can be an excellent way to reduce or eliminate estate taxes.
The primary limitation to the annual exclusion gift strategy is that it may have limited effect for people who are significantly over the federal estate tax limit. While $18,000 is not a small amount of money to gift, it may be too small to make much of an impact on estate taxes of higher wealth people. Let’s continue the previous example with a change of facts:
Grandma’s net worth will be $2,000,000 million over the exemption in 2026.
Even though Grandma can gift $180,000 each year to her grandchildren, it will take 12 years for Grandma to gift away $2,000,000. Additionally, her net worth will likely increase each year. In fact, the increase in net worth may outpace what she is able to gift each year. While annual gifting will always help reduce potential estate taxes, this strategy may only be moderately helpful for higher wealth people.
Lifetime Credit Gift
Another strategy is to make large gifts more than the $18,000 annual exclusion gift. As discussed above, large gifts can be made without paying gift tax. However, the estate tax exemption is reduced by the amount of the gift. So, making lifetime credit gifts are offset dollar-for-dollar by a reduction in the estate tax exemption. However, this strategy can still be effective when gifting assets that are expected to appreciate in value. Gifting these assets keeps the appreciation out of the Giftor’s estate. Consider the following example:
Grandma owns the Smith Farm that sits next to town. It is currently valued at $1,000,000. She expects commercial development pressure to cause the value of the Smith Farm to increase to $3,000,000 in the next few years. Grandma decides to gift the Smith Farm to their grandchildren.
Grandma can gift the Smith Farm without paying gift taxes. Her federal estate tax exemption will be reduced by $1,000,000. So, the gift itself does not help her estate tax situation. However, when the Smith Farm increases in value by $2,000,000, that appreciation in value will be assumed by the grandchildren. Grandma has essentially been able to gift $3,000,000 out of her estate while only using up $1,000,000 of her estate tax exemption.
This strategy may not be the best strategy for assets that will have no or little appreciation. For a non-appreciating asset, the gift just comes off the estate tax exemption and does not help the estate tax situation. Again, large gifts work best with appreciating assets.
Capturing the Higher Lifetime Credit
As stated previously, the current lifetime credit gifting allowance is $13.62 million which will decrease by about one-half in 2026. So, there is an opportunity to make a very large gift now and capture the large gift allowance before it is reduced. Consider the following example:
Grandma has a net worth of $20,000,000. She is concerned she will be over the estate tax exemption limit by $13,000,000 in 2026 resulting in around $5,000,000 of estate taxes. To avoid these taxes, Grandma gifts $13,620,000 of land to her grandchildren in 2024.
In this scenario, Grandma is able to gift her entire lifetime credit which reduces her estate tax exemption is to $0. But, when the estate tax exemption is reduced to $7,000,000 in 2026, there will be no claw back of her gift. That is, her estate tax exemption will remain at $0 and the IRS will not seek to recoup any of the 2024 gift exceeding $7,000,000. So, Grandma is able to gift $13,620,000 in 2024 and there is no claw back of the extra $6,620,000 in 2026 when the exemption is reduced. Grandma’s net worth is reduced to $6,380,000, which will be less than the 2026 exemption amount, and therefore Grandma has avoided all estate taxes without paying any gift taxes.
Obviously, this strategy only works for very high wealth individuals. The person must have enough assets to gift more than the full exemption amount and still have adequate assets remaining to support themselves. Most people do not have enough wealth to make this strategy work, but for those that do, it can be very effective.
Gifting Has Negative Tax Consequences
Gifting eliminates the opportunity of stepped-up basis at death. This important concept of stepped-up tax basis at death is a tremendous financial benefit to the beneficiary receiving the asset from the estate. Careful consideration should be given to this loss of stepped-up basis before a gifting strategy is implemented. For more information on gifting and stepped-up basis, see the Gifting Assets Prior to Death publication available at farmoffice.osu.edu.
Seek Legal and Tax Advice
Making gifts, particularly large gifts, have significant legal and tax consequences. Before implementing a gifting plan, be sure to consult with legal and tax advisors to explore all options and to understand the implications of different strategies. While gifting may seem like a simple solution to estate taxes, gifting is often complicated and has complex legal and tax consequences that should be carefully considered.
Tags: Gifting, estate taxes
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March is already upon us and we're busy preparing for the March edition of Farm Office Live. Grab a cup of coffee and join us next Friday morning at 10:00 a.m. for our March webinar. We're excited to have a few industry professionals on this month for a panel discussion on the latest WASDE report and strategies for 2024 grain marketing. The full Farm Office Live agenda includes:
- Second Marriages and Transition Planning -- Robert Moore, Attorney, OSU Agricultural & Resource Law Program
- The New Rule for Independent Contractors -- Jeff Lewis, Attorney, OSU Income Tax Program
- Legislative Update -- Peggy Hall, Attorney, OSU Agricultural & Resource Law Program
- 2024 Crop Input Outlook -- Barry Ward, Leader, Production Business Management
- Industry Panel -- WASDE and Strategies for Grain Marketing, moderated by Bruce Clevenger, OSU Field Specialist in Farm Management
- Hot Topics and Upcoming Programs -- David Marrison, Interim Director, Farm Financial Management & Policy Institute
Register for Farm Office Live at no cost through this link. Can't attend? We record every Farm Office Live webinar and post the recordings at https://farmoffice.osu.edu/farmofficelive.
In the last post, we looked at strategies to deal with second marriages using trusts. In this post, we look at the risks of divorce on the farm transition plan and strategies to minimize the risk.
Marital Versus Separate Assets
To address the issue of divorce, it is first helpful to know what assets are subject to a divorce. According to Ohio law, marital assets are to be divided “equitably” in the event of a divorce. Equitable does not necessarily mean equal although an equal division of marital assets between the spouses is often the result. Divorces can be especially threatening to farmland because of the “land rich, cash poor” dilemma for farmers. In a farm divorce, it is usually not equitable for one spouse to receive all the farm assets if there are not sufficient non-farm assets for the other spouse. Thus, both spouses may receive farmland in the divorce settlement. Once the farmland is divided, either spouse can sell or transfer the land out of the family.
It is important to note that Ohio law only requires “marital” assets to be divided. Non-marital assets, referred to as “separate” assets, are retained by the spouse who brought the assets to the marriage. Understanding the difference between a separate asset and a marital asset is critical when attempting to mitigate the risks of divorce.
Separate assets include the following:
- Property acquired by a spouse prior to the date of the marriage.
- Passive income and appreciation from separate property received by a spouse during the marriage.
- An inheritance received by a spouse during the marriage.
- A gift received by a spouse during the marriage.
The above list would seem to make it an easy exercise to determine which assets are marital and which are separate in a divorce situation. However, like many legal issues, the application of the concept is more complicated than it may appear. This is because Ohio law also provides that income or appreciation on separate property can become a marital asset.
Ohio law includes as marital property:
“… all income and appreciation on separate property, due to the labor, monetary, or in-kind contribution of either or both of the spouses that occurred during the marriage. ”
So, it is possible for an asset to be partially separate (the initial property) and partially marital (the income and appreciation on the property).
Consider the following example:
Andy and Beth are farmers in the process of divorcing. Shortly after they were married, Beth inherited a 100-acre farm from her grandmother. When she inherited the farm, it was valued at $600,000. A few years after inheriting the farm, Andy and Beth’s farming operation paid for and installed $80,000 of drainage tile on the farm. The current value of the farm is $1 million.
In this example, the farm was Beth’s separate asset upon inheritance. However, the tile that improved the quality and value of the farm was a result of Andy and Beth’s joint farming operation. Andy likely has a valid claim that at least part of the $400,000 increase in value is a marital asset due to the tile installation.
Perhaps Andy further argues that most of the increase in value was due to fertilizer, tillage and other soil improvements made while Andy and Beth farmed the land. It is in Andy’s interest to make the $400,000 increase in value a marital asset. Conversely, Beth could argue that the increase was not a result of the marital farming operation but was merely a passive value increase due to market pressure. It is in Beth’s interest to argue the $400,000 increase as her separate asset.
As this example illustrates, an asset that is initially a separate asset can become, at least in part, a marital asset. Both Andy and Beth have valid arguments. It is not hard to imagine how much time and legal fees could be spent resolving or litigating the issue in a contentious divorce.
Co-mingling assets can also cause a separate asset to become a marital asset. If the spouse owning the asset voluntarily allows the other spouse to become an owner of the asset, it is likely to become a marital asset. Using the example above, after Beth receives the farm, she adds Andy’s name to the deed as co-tenant. Because she voluntarily added Andy to the deed and gave him half ownership, Beth has likely changed the property from a separate to a marital asset.
Another example might be as follows:
Beth receives a $100,000 inheritance from her grandmother. Beth deposits the money in a bank account owned by both her and Andy.
By co-mingling the inherited money with other money owned jointly with Andy, Beth has probably made the $100,000 inheritance a marital asset. If Beth would have deposited the money in an account owned only by her, the inheritance would have remained a separate asset. While co-mingling does not automatically make an asset become marital property, the spouse owning the asset should avoid co-mingling if wanting to keep the asset separate.
Assets acquired during a marriage will almost always be considered marital property. This is true even if one spouse provided little or no contribution towards the acquisition of the asset. Ohio law considers marriage to be a partnership regardless of the contribution of the spouses. For example, farmland purchased during the marriage will be a marital asset even if only one spouse operates the farm and the other spouse is not involved with the farmland or farming operation.
Prenuptial and Postnuptial Agreements
A prenuptial agreement can help alleviate the issues with marital assets. This type of agreement entered into prior to marriage designates what assets each person is bringing to the marriage, what assets will be separate, and what assets will be marital. Especially for people who have accumulated some wealth prior to marriage, a prenuptial agreement is a good option to avoid future disputes regarding the nature of assets in a marriage and potential risks to farmland.
To be valid and enforceable, a prenuptial agreement should:
- Be in writing and signed by the parties;
- Be prepared, reviewed and executed long before the marriage;
- Provide each spouse’s assets, including values;
- Be reviewed by separate attorneys representing each spouse.
Prenuptial agreements can become outdated, especially when marriages last many years. A married couple who enters into a prenuptial agreement when they are 25 may have very different assets and goals when they are 65. Until recently, married couples in Ohio were stuck with their prenuptial agreement regardless of how unfair or obsolete the agreement had become. Recently, legislation was adopted to allow for postnuptial agreements.
A postnuptial agreement is similar to a prenuptial agreement in that it identifies which assets are to remain outside of the marriage and what assets are considered joint, marital assets. A postnuptial agreement is signed sometime after marriage begins. There are no term requirements for a postnuptial agreement – it can be entered into shortly after marriage or many years after marriage.
For a prenuptial agreement to be terminated or amended or for a postnuptial agreement to valid, the law requires the following:
- The agreement be in writing and signed by both spouses,
- The agreement is entered into freely without fraud, duress, coercion or overreaching,
- There was full disclosure, or full knowledge, and understanding of the nature, value and extent of the property of both spouses,
- The terms do not promote or encourage divorce or profiteering from divorce.
For people who are considering getting remarried or for those that are already remarried, a prenuptial or postnuptial agreement should be considered. These agreements can establish how assets are to be divided in the event of a divorce and perhaps relieve some worries regarding farm transition planning. Prenuptial and postnuptial agreements should be drafted in consultation with an attorney.
For more information on farm transition strategies to address second marriage issues, see the new bulletin FARM TRANSITION PLANNING STRATEGIES FOR SECOND MARRIAGES available at farmoffice.osu.edu.