Recent Blog Posts

Baker with flour on hands
By: Peggy Kirk Hall, Friday, January 27th, 2023

The world loves a good baker.  If you’re one of those good bakers and you want to sell your baked goods, do you need a license?  Maybe. Our newly revised law bulletin, “The Home Bakery Registration Law in Ohio,” explains when a license or “registration” is necessary for selling home baked goods in Ohio.

Whether you need to register for a Home Bakery license depends on the type of baked good you’ll produce. Certain foods are at lower risk of a food safety concern when produced at home, which we refer to as “non-potentially hazardous” foods.  Those foods might fall under the Ohio Cottage Food Law, which does not require a license or registration for those who want to produce and sell foods that are on the cottage foods list. When a home baked good does pose higher food safety risks, however, the home bakery law applies to that food and additional practices are necessary to reduce food safety.  The producer who wants to sell that type of home baked good must register as a “Home Bakery" with the Ohio Department of Agriculture to help ensure that food safety practices are in place.

Which home-baked foods fall into which category?  This chart illustrates the differences between non-potentially hazardous “cottage" foods and potentially hazardous “home bakery” foods. If a food falls into the “potentially hazardous” category, the producer needs to apply for a Home Bakery license. 


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What’s required for the Home Bakery registration?  Our law bulletin explains the registration and inspection process and labeling requirements.  Read more about those parts of the Home Bakery Registration Law in our bulletin, available on the Farm Office Food Law Library at

By: Robert Moore, Tuesday, January 24th, 2023

Legal Groundwork

Recently, there has been renewed interest in a tax strategy involving excess fertilizer in farmland.  The idea behind this strategy is to allocate a value to any residual fertilizer in farmland that was recently purchased or inherited.  The value of the fertilizer is then deducted to offset income.  While this strategy does have merit, it is considered by some tax professionals to be an aggressive tax strategy and caution should be used when implementing.

This strategy is centered on excess fertilizer being in the soil when farmland is acquired.  Excess fertilizer is that amount of fertilizer over and above the base nutrient levels.  The excess fertilizer is treated as a separate asset that can be distinguished from the soil.  A value is attributed to the excess fertilizer and that value is amortized based on the depletion rate of the fertilizer.  In essence, the new owner of the farmland is claiming they can put a verifiable value on the excess fertilizer and then amortize the value of the fertilizer.  

In a 1992 Technical Advice Memorandum (TAM), the IRS stated that to amortize the cost of fertilizer acquired with land, the landowner must establish the extent of the fertilizer, the value of the fertilizer and the depletion rate of the soil nutrients.  The burden is on the taxpayer seeking the deduction to prove the extent, value and depletion rate of the soil nutrients. It is important to note that a TAM is not legal authority and cannot be cited as authority, but it does potentially give insight as to the position the IRS would take in a similar matter.  

To help explain this concept, consider the following example:

Arthur applied $15,000 of fertilizer to his farm in November 2022 in anticipation of growing a crop in 2023.  In January 2023, Arthur dies unexpectedly, and his son Alex inherits the farm.  Alex is a farmer and intends to grow a corn crop on the farm in 2023.   Alex hires an agronomist who determines that all the fertilizer applied by Arthur is in excess of base nutrient levels and will be depleted over a three-year period.  Alex deducts the $15,000 of excess fertilizer in 2023, 2024 and 2025. 

If an attempt is made to deduct excess fertilizer, something like the above example is an ideal scenario.  The fertilizer applied is easily documented, no crop has yet been planted, and the agronomist can establish the depletion rate.  All aspects of the strategy should be carefully documented, including a report from the agronomist.  Peril awaits those who implement this strategy after they have applied additional fertilizer, grown a crop or can otherwise not properly document the excess fertilizer and/or depletion rate.

While the above example uses an inherited farm, the same strategy can be used with purchased farms.  Farms purchased at public auction may sell for a premium if excess fertilizer is present.  The premium, if properly documented, can potentially be deducted as excess fertilizer.  For farms purchased at private sale, the buyer and seller should address excess fertilizer in the purchase contract and declare a mutually agreeable amount and value.  If the buyer allocates a portion of the purchase price to excess fertilizer but the seller does not, the inconsistency in reporting could cause the IRS to deny the strategy.  

While identifying excess fertilizer can be a benefit to the buyer, it may be detrimental to the seller.  The seller should treat the excess fertilizer as a sale of fertilizer which is subject to ordinary income and thus possibly a higher tax rate.  Thus, the seller may be reluctant to participate in allocating a portion of the purchase price to excess fertilizer.  Also, if the buyer were to sell the land in the future, they will need to recapture the excess fertility as ordinary income.

As stated above, allocating a value to excess fertilizer in newly acquired farmland does have merit.  However, this strategy has never been formally approved by the IRS and, until it is, comes with the risk that the IRS could reject the deduction of excess fertilizer.  Additionally, states are not obligated to follow the IRS’ lead and one state, Minnesota, has a history of closely scrutinizing the strategy.  For anyone considering implementing this strategy, they should seek advice from their tax advisor to minimize risks of an adverse IRS ruling and employ an experienced agronomist or soil scientist to provide technical guidance on fertilizer levels and depletion rate.  In addition to seeking good, qualified advice, the landowner should be sure that every aspect of the strategy is well documented.

Note: this strategy can apply to any addition to the soil such as lime or micronutrients.

Posted In: Tax
Tags: Excess Fertilizer
Comments: 0
Grain bin on country road with sign opposing solar development
By: Peggy Kirk Hall, Friday, January 20th, 2023

The solar energy “boom” in Ohio continues to encounter opposition from local communities that would be home to large-scale solar developments.  Yesterday, the Ohio Power Siting Board (OPSB) denied a solar project application in Defiance County due to “general opposition by local citizens and governmental bodies.”  Just before the holidays, a project in Greene County met the same fate.  The cases now bring the number of solar project rejections in Ohio to three. Each one highlights the role community opposition can play in project denial, particularly when local governments are part of that opposition.  

How does OPSB review a proposed solar project?

The OPSB is responsible for reviewing applications for solar energy projects that are over 50 MW in capacity.  Currently, the members of the OPSB include the chair of the Public Utilities Commission of Ohio, directors of the EPA and departments of Agriculture, Development, Health, and Natural Resources, and a public member, along with four non-voting legislators.  In the future, a county commissioner and township trustee will also join in the OPSB review process.

Ohio law requires the OPSB to analyze eight criteria when reviewing an application and deciding whether to grant a certificate to construct a major utility facility.  The law states in Ohio Revised Code 4906.10(A) that OPSB shall not grant a certificate unless it finds and determines all of the following:

(1) The basis of the need for the facility if the facility is an electric transmission line or gas pipeline;

(2) The nature of the probable environmental impact;

(3) That the facility represents the minimum adverse environmental impact, considering the state of available technology and the nature and economics of the various alternatives, and other pertinent considerations;

(4) In the case of an electric transmission line or generating facility, that the facility is consistent with regional plans for expansion of the electric power grid of the electric systems serving this state and interconnected utility systems and that the facility will serve the interests of electric system economy and reliability;

(5) That the facility will comply with Chapters 3704., 3734., and 6111. of the Revised Code and all rules and standards adopted under those chapters and under section 4561.32 of the Revised Code. In determining whether the facility will comply with all rules and standards adopted under section 4561.32 of the Revised Code, the board shall consult with the office of aviation of the division of multi-modal planning and programs of the department of transportation under section 4561.341 of the Revised Code.

(6) That the facility will serve the public interest, convenience, and necessity;

(7) In addition to the provisions contained in divisions (A)(1) to (6) of this section and rules adopted under those divisions, what its impact will be on the viability as agricultural land of any land in an existing agricultural district established under Chapter 929 of the Revised Code that is located within the site and alternative site of the proposed major utility facility. Rules adopted to evaluate impact under division (A)(7) of this section shall not require the compilation, creation, submission, or production of any information, document, or other data pertaining to land not located within the site and alternative site.

(8) That the facility incorporates maximum feasible water conservation practices as determined by the board, considering available technology and the nature and economics of the various alternatives.

Once all required elements of an application for a certificate are submitted and the application is complete, which can take many months, the OPSB staff and board begins its evaluation of the application to decide whether to grant the certificate.  The review process, which might include intervening parties and multiple hearings, can last for many months or even a year or more.  During that time, the OPSB must examine the application to determine if it meets the criteria in ORC 4906.10(A), relying on the expertise and recommendations of OPSB technical staff. 

Recently approved solar projects

In December, the OPSB approved the application of Springwater Solar, a 155 MW solar project proposed to be built on 1,085 acres in Madison and Franklin counties, holding that the project met all of the criteria in ORC 4906.10(A).  The decision brings the total of approved solar projects in Ohio to 34, representing 6,175 MW to be built on 63,554 acres, as illustrated on the map below.  The map also displays additional pending applications totaling 3,139 MW and 29,076 acres.


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Source:  Ohio Power Siting Board, available at

Recently denied solar projects

Two solar project applications recently reviewed by OPSB did not receive a green light from the board.  In December, the OPSB denied an application by Kingwood Solar that proposed to construct a 175 MW solar facility on 1,200 acres in Greene County.   And on January 18, the OPSB denied a Cepheus Energy proposal to construct a 68 MW solar project on 649 acres in Defiance County.  Before those two rejections, the OPSB had only previously denied one solar project application—the Birch Solar application rejected last October.  In all three instances, the OPSB based its denial on ORC 4906.10(A)(6), stating that the projects would fail to serve the “public interest, convenience, and necessity” due to general opposition.

In the Cepheus application, the board focused on local public interaction and participation, reviewing public testimony and 600 pages of public comments on the project.  The board also noted that seven local governments had expressed concern or opposition to the project, including the Defiance Soil and Water Conservation District, Delaware and Sherwood Township trustees, Defiance County Economic Development Office, Defiance County Board of Commissioners, Delaware Township Fire Department, and Sherwood Area Economic Development Corporation.

The interests of these impacted local government bodies was “especially compelling” given that the organizations have the responsibility for preserving the health, safety, and welfare of their citizens, OPSB noted.  Stating that there was “general opposition from local citizens and governmental bodies” and that local impacts would outweigh the project’s benefits, the board concluded that the project would not serve the public interest, convenience, and necessity.

The Cepheus rejection is similar to the Kingwood Solar project denied by OPSB in December.  In that case, the board reviewed Kingwood’s assertions of the positive economic impacts and renewable energy choices the project would bring the community, then focused on local responses to the project.  About 76% of those testifying during a 6.5-hour hearing were opposed to the projects and expressed an overarching concern that the project was not compatible with local land use plans and would “unalterably change the rural nature of the community.”  The board also noted concerns by the Citizens for Greene Acres, a local group that intervened in the case, regarding the unique characteristics of the wildlife, parks, recreation, cultural, and historic areas that would be affected and the high density of residents that would reside within 500 feet of the project.

But once again, a critical concern for OPSB was the clear opposition of local governments impacted by the project.  Cedarville Township, Xenia Township, Miami Township, and the Greene County Commissioners had all intervened in the case and adopted resolutions opposing the project.  Although Kingwood Solar had agreed to address 39 conditions of development that it had offered in a Stipulation agreement, none of the local governments agreed to the Stipulation and instead opposed approval of the project.  OPSB concluded that local opposition, “especially as demonstrated by Greene County and the three townships affected by the project,” warranted a conclusion that the project would not serve the public interest, convenience, and necessity.

Now what happens?

It’s typical in a rejection of a utility application for the developer applicant to exercise the right to request a rehearing. That has already occurred for the Birch Solar and Kingwood Solar projects, and we can expect a rehearing request for the Cepheus denial that just occurred on January 19.  Interestingly, it was not just the solar developer that requested a rehearing of the Kingwood project application—Greene County, the affected townships, and the Citizens for Greene Acres also requested a rehearing.   While those parties stated support for the decision of the OPSB that denied the certificate, they argue that in its findings, OPSB failed to determine that there were many other grounds for denying the certificate such as incompatibility with local land use planning, incapacitation of 1,025 acres of productive farmland, and negative local economic impacts. 

Now we await the determinations by OPSB on the rehearing applications.  The projects are each on hold, and construction cannot move forward unless the OPSB reverses its decision and approves the applications. 

More questions

The recent decisions by OPSB leaves us asking a few questions.  Does three rejections establish a trend in solar project denials due to community opposition?  Did the communities involved in the 34 solar projects approved by OPSB oppose those projects?  Do the local communities in the projects that are still pending before the OPSB oppose or support the projects, and how will community voices affect the review of those projects?  While we don’t have the answers, we’ll keep monitoring developments in large-scale solar development as we consider these important questions.

By: Jeffrey K. Lewis, Esq., Wednesday, January 18th, 2023

The 2023 Farm Office Live Season kicks off this Friday, January 20, 2023, from 10:00 - 11:30 AM.  Our team of specialists and attorneys will be presenting on: 

  • Federal Program Updates
  • Upcoming Programming
  • Power of Attorney Documents
  • Legislative and Regulatory Documents
  • Crop Inputs and Budget for 2023
  • Timely Tax Issues

The monthly Farm Office Live webinar is always free, and registration is available at  Register once and you'll receive notices of all of our 2023 webinars. The registration site also houses our archive of all Farm Office Live webinar recordings and materials.

By: Robert Moore, Thursday, January 12th, 2023

Legal Groundwork

As farm machinery has become more complex and reliant on computer software, the right-to-repair issue has become a prominent issue in the farm community.  Farmers are sometimes prevented from repairing their own equipment because they do not have access to needed diagnostic tools or are otherwise barred due to embedded software.  Farmers have voiced their criticism of manufacturers as right-to-repair has become a prominent issue in the agricultural community.

In an effort to address the right-to-repair issue, the American Farm Bureau Federation (AFBF) and John Deere recently entered into a memorandum of understanding (MOU) in which Deere agrees to provide access to documentation, data and diagnostic tools used by the company’s authorized dealers.  This development was likely a response to pressure that Deere and other manufactures were under to allow right-to-repair.  New York recently passed a right-to-repair law and Senator Tester introduced right-to-repair legislation in the U.S. Senate earlier this year. 


Software User License

The issue of right-to-repair is related to a user’s license.  The term “license” has a specific meaning under the law.  Someone who holds a license for a product is allowed to use the product but does not own the product.  In 2016, Deere began using a user’s license for the software in its machines.  Essentially, when a customer would buy a machine from Deere, the buyer had ownership of the steel but did not own the software that makes the machine operate.    

Software licensing has its roots in 1980’s software.  The burgeoning consumer software industry initially sold its software to customers and retained no rights to the software.  These software developers began to see purchasers of their software reverse engineer the software and development slightly different software that resulted in the same functionality.  In essence, a person could buy the software, make a change to the software to potentially avoid copyright infringement, but end up with software that did the same thing as the originally purchased software.  This process essentially allowed for the stealing of intellectual property from the software developer, but the developers had little legal recourse.

To overcome this loss of intellectual property, software developers began selling a license to use the software.  The software license allowed the purchaser to use the software, but the software developer retained ownership.  The license agreement expressly prohibited reverse engineering or using the software in other ways that jeopardized the software developer’s intellectual property.  By keeping ownership,  software developers could take legal action against people who tried to copy and resell the software.

The software license worked reasonably well for many years.  The vast majority of software users were oblivious to the license agreement and continued using the software as they always had.  The licensing arrangement help protect the software developers’ intellectual property.  However, in the last twenty years or so, software began to be embedded in electronic devices blurring the lines between the software and the hardware. A new tractor seems to be as much a computer running software as it does a power unit pulling implements.  



The integration of software into farm machines came to light in 2016 when John Deere implemented a software user license agreement to presumably protect its intellectual property.  Its licensing agreement clearly stated that reverse engineering or copying of the software is prohibited.  However, Deere seems to have taken it one step further.  Farmers and independent repair shops were prohibited from having the diagnostic tools and manuals required to make repairs.  This denial of diagnostic tools effectively made it impossible for farmers and independent mechanics to make repairs on some John Deere equipment.  Many people in the farm community expressed their concern about the license agreement and saw it as scheme to keep the repairs, and the fees from those repairs, all within the John Deere dealer network.  Farmers wanted to be able to repair their own equipment, or use other independent third parties, to potentially save money and to have more timely service, especially during busy times like planting and harvest.

Due to pressure from a combination of the new legislation in New York, the right-to-repair legislation introduced in the Senate and dissatisfaction expressed by farmers, John Deere likely felt it was best to make some concessions with farmers while keeping ownership of the software.  This speculation is supported by the fact that AFBF agreed to “refrain from introducing, promoting, or supporting federal or state "Right to Repair" legislation that imposes obligations beyond the commitments in this MOU.”  So, it seems AFBF agreed not to pursue right-to-repair legislation in exchange for Deere loosening its prohibitions of right-to-repair.

While it is impossible to foresee all the future implications for an agreement like the one between AFBF and Deere, it does seem that it is a reasonable compromise.  Farmers can now have access to diagnostic tools to allow for self-repairs while Deere keeps ownership of its software.  Critics argue the agreement does not go far enough and Deere still has too much control over self-repairs.  We will see over the next few years if the agreement is, in fact, a reasonable compromise.


Memorandum of Understanding

It is noteworthy that the agreement between AFBF and John Deere is memorialized within a Memorandum of Understanding.  For those not familiar with an MOU, there may be some curiosity as to its legal context.  MOUs are most often used at the beginning of a negotiation to ensure that both parties are starting with the same understanding of their current positions, to make clear what each party is seeking from the negotiation and that it is worthwhile for both parties to move forward.  Unlike a contract, an MOU is generally not legally enforceable.  Because the agreement is an MOU, neither AFBF nor Deere is legally bound to its terms.  Neither party has legal recourse if the other party does not honor its commitments as outlined in the MOU. If either party reneges on its commitments, the party at fault will likely receive criticism in the public opinion realm but will likely have no legal liability.



The John Deere software licensing issue is a good example of how new technology can require new strategies and concepts in the law.  Prior to the 1980’s, copyright law had worked just fine for books and movies but it did not work well for the new medium of software.  So, the concept of software licenses was developed to address the threats to the software industry. Twenty years later when the line between software and hardware began to blur, software licenses were again modified to protect the developer of the software.  In the case of John Deere, perhaps they went a bit too far in enforcing their licenses.  The threat of unfavorable legislation and criticism from customers probably caused John Deere to walk back their stance on prohibition of diagnostic tools to allow self-repairs.  Hopefully, the agreement between John Deere and AFBF has found a reasonable middle ground that benefits all parties.



Posted In: Business and Financial, Contracts
Tags: Right-to-Repair
Comments: 0
Picture of Adams Lake, Ohio
By: Peggy Kirk Hall, Tuesday, January 10th, 2023

The Environmental Protection Agency (EPA) made a big splash when it released its final rule for defining “waters of the United States” (WOTUS) on December 30. Immediate criticism and support for the new rule surfaced as many undertook the unenviable task of interpreting the rule’s 514 pages of text.  Perhaps some enjoyed the challenge of deciphering the latest development in WOTUS.  But how many responded with a bit of weariness, asking what this “new” rule really means for agriculture and, more importantly, does it really matter?

What does the new final WOTUS rule mean for ag?

There are several answers to this question.  The first and most practical answer is that the rule changes which waters are subject to federal jurisdiction under the Clean Water Act (CWA).  Through its permit programs, the CWA aims to protect water quality by preventing discharges of pollutants, dredge, or fill into a water that fits within the rule’s definition of “waters of the United States.”  A water that falls into any of five categories now laid out in the new WOTUS rule is a “water of the United States” that will be subject to CWA permit requirements and regulations, once the rule is effective.  But the rule also contains exceptions and exclusions to CWA jurisdiction, and waters that fall into these categories won’t be subject to CWA regulation.

The categories, exceptions, and exclusions all attempt to draw lines around waterways that are at risk for pollution and dredge and fill activities and thus should be protected under the CWA.  It is the less “obvious” waterways, like wetlands and ephemeral streams, that create consternation and raise the eternal question:  when is a water sufficiently connected to an “obvious” water body, and thus at risk for harm, to warrant CWA regulation?  The new rule tries, once again, to answer this difficult question.  As it does so, it repeats many of the categories, exceptions, and exclusions that we’ve seen in previous WOTUS rules, but there are some changes and attempts at clarification.  For an explanation of the new rule’s categories, exceptions, and exclusions, see this summary of the rule by our partner, the National Agricultural Law Center.  Agricultural interests have reacted to the changes in the rule; see this article for those reactions.

A second and more skeptical answer to the question of what the rule really means for agriculture is that it modifies the landscape for legal challenges to WOTUS.  As history illustrates, the new WOTUS rule will be challenged as the agencies interpret and enforce the rule against agriculture and other regulated communities.  New rule, new arguments, new court decisions--it’s a cycle we’ve witnessed before.  And a legal challenge to the validity of the rule itself, not just to an application of the rule, is also likely. The court cases that arise from such challenges might help answer the question of what the rule really means for agriculture or might instead create more confusion and continued battles.

Does the new rule really matter?

If you’ve followed WOTUS recently, you may know that the United States Supreme Court (SCOTUS) heard an appeal in October by the Sacketts, landowners who were affected by an agency interpretation that subjected their property to CWA jurisdiction.  That challenge centered on whether the “significant nexus” test is an appropriate test for determining whether the wetlands on the Sackett property fall into the definition of “waters of the United States.” The new WOTUS rule contains a renewed EPA attempt to clarify the “significant nexus” test and also introduces a new “material influence” standard for smaller waters and wetlands.  As we await the SCOTUS decision, we must acknowledge that its outcome could require EPA to rewrite any parts of the rule, especially the significant nexus and material influence provisions, that conflict with the Court’s holding.

Due to the impending SCOTUS decision and potential legal challenges to the rule, the WOTUS rule might not even go into effect.  The rule cannot be effective until 60 days have passed from the date it is published in the Federal Register.  It has not yet been published in the Federal Register, so the 60-day time clock is not yet ticking.  There’s a slight possibility SCOTUS will rule before that effective date, and also a possibility that if the rule does become effective, immediate legal challenges will put the rule on hold.  In both situations, we have an answer to the question of what the rule means for ag:  possibly nothing.

WOTUS weariness

I have never experienced such exhaustion over a legal issue as I have with WOTUS.  That’s because we have yet to solve the problem despite a long, long, parade of court cases and revised rules.  We still await clarity to the definition of WOTUS and certainty on which waters should be subject to CWA.  Congress could take a shot at doing so, given that Congress enacted the CWA and established the very term, “waters of the United States.”  Yet Congress sits silent on the issue. 

For me, it is the overlooked questions, and the need to examine the big picture, that most contribute to WOTUS weariness.  Is the WOTUS battle effectively addressing water quality?  Is it time to admit that a fix to WOTUS might require a new approach?  Under the old adage of “check your premises,” perhaps we should examine the premise upon which WOTUS rests—waters that are “inside” the scope of the definition are similar, all under the same risks, and should all be regulated by CWA.  While the obvious and easily identifiable water bodies can benefit from WOTUS and CWA, should we quit trying to define those other waters and instead focus on different mechanisms that manage water quality risks to them?  Would we get further, faster, with a new approach?

The final question:  is there actual improvement in water quality that comes with yet another rule, another change, and more challenges to the scope of the definition of WOTUS?  The answer to that question, I fear, is no--but a focus on that question could be a way to overcome WOTUS weariness.

Read the new WOTUS rule from the EPA, and additional EPA resources about WOTUS.  More on the Sackett case is in this recent blog post.

By: Robert Moore, Thursday, January 05th, 2023


Legal Groundwork

Most of us, at some point, will need the services of an attorney.  Attorneys seem to be ubiquitous in our society with almost everyone having some idea of what an attorney is or what an attorney does.  However, many people may not know what it takes to become an attorney.  Understanding the process to become an attorney may help us better understand the legal profession and in turn allow us to make a more informed decision when we need to retain an attorney’s services.  The following is a brief summary of the process to become an attorney.

The first step on the path to becoming an attorney is to obtain a four-year undergraduate degree.  An undergraduate degree is a minimum requirement to attend law school.  Many people who plan to go to law school will obtain an undergraduate degree in history, political science or English.  These areas of study are thought to provide a good foundation for law school.  However, applicants are accepted to law school with a wide variety of areas of study.  From personal experience, law schools will accept an applicant with a B.S. in Dairy Science.  Law schools like to have diversity in their student populations.  An uncommon degree or atypical degree, like Dairy Science, can make the applicant more attractive by adding diversity to the law school.

There is an exception to the four-year degree requirement.  Some law schools may allow someone who has completed 3 years of undergraduate work to complete their fourth year of an undergraduate degree by completing their first year of law school.  This is known as the 3+3 program.  

Earning a law degree is the next step.  It typically takes three years to complete a law degree although some law schools offer a part-time program that takes four years to complete.  In the first year or two, students are required to take core law classes such as contracts, constitutional law and criminal law.  In the last year of law school, law students take elective courses that match with their interests.  The degree awarded upon completing law school is a Juris Doctor (JD).  It is possible to go beyond a JD and receive a master’s degree in law (LLM).  LLMs are in a focused area of the law such as taxation or agricultural law.

In the last year of law school, students will begin the process of requesting permission to join the state bar.  The Ohio Supreme Court oversees the admission of new attorneys.  A part of the application process is a character fitness interview.  The applicant will meet with two attorneys, usually in their county of residence. The two interviewing attorneys will evaluate whether the applicant has suitable qualities to be an attorney. The evaluation includes a review of prior criminal charges or citations, an analysis of financial stability and an assessment of a demeanor and temperament suitable to practice law.  The character fitness review seeks to ensure that new attorneys have the requisite background and character to serve clients.

The next step is to pass a professional conduct exam. Each law student must take an exam that focuses on issues such as conflicts of interest and attorney/client privilege.  The professional conduct exam in Ohio is a multiple-choice exam.

After receiving a law degree, passing the character fitness review and successfully completing the professional conduct exam, the law student takes the bar exam.  This notorious exam is two days long.  Part of the test is multiple choice and part is a written test.  The bar exam must be passed before becoming an attorney in Ohio.  The exam is taken in person and is available in February and July of every year.  The passage rate for the July, 2022 bar exam was 72% for all takers and 80% for first time takers.  To put this in perspective, 20% of the people who spent three years in law school and passed all the other requirements were not permitted to be attorneys because they did not pass the bar exam.  The bar exam can be taken as many times as needed to pass. Failing a bar exam does not mean the person can never be an attorney, it just means they need to take the bar exam until passed. Upon passing the bar exam, new attorneys are sworn in by a justice of the Ohio Supreme Court.  

Becoming an attorney is a long process taking at least seven years of school in total.  Law schools ensure each new attorney has achieved certain academic standards and the Ohio Supreme Court confirms that every new attorney has some level of competence in the law and has the character fitness to assist clients in their legal endeavors.  The next time you hire an attorney, you can be assured that the attorney has met the academic requirements of a law school and the competency and character fitness requirements of the Ohio Supreme Court.


Posted In: Legal Education
Tags: attorney
Comments: 0
By: Robert Moore, Tuesday, December 27th, 2022


Legal Groundwork

As we wind down 2022 and look forward to 2023, there are few changes related to estate planning that will occur in the new year.  The following is a summary of those changes.


Annual Gift Exclusion

The annual gift exclusion is the amount that one person can gift to another person with no estate tax implications.  In 2023, the annual exclusion will increase from $16,000 to $17,000.  This means that a person can gift $17,000 to as many people as they wish without causing a gift tax or a reduction of their federal estate tax exemption.  For example, Grandfather gifts $17,000 to each of his three children and seven grandchildren.  Grandfather gifted a total of $170,000 without incurring a gift tax or reducing his federal estate tax exemption.  The gift can be money, real estate, machinery, ownership in a business entity or just about any other asset.


Federal Estate Tax Exemption

The federal estate tax exemption is the amount of net worth exempt from estate taxes at death.  If a person dies with a net worth less than the exemption, no estate tax will be owed.  If a person dies with a net worth exceeding the exemption, the amount exceeding the exemption will be subject to a 40% estate tax.  In 2023, the exemption will increase from $12.06 million to $12.92 million. 

To further explain the estate tax exemption, let’s continue the prior example using 2023 values.  Grandfather has a net worth of $13.0 million. If he were to die with this net worth, $80,000 would be subject to estate taxes.  However, after he makes gifts to his children and grandchildren, his net worth is now $12.83 million.  Grandfather’s net worth is now less than the federal exemption, so if he dies, there will be no estate taxes.


2032A Limit

The IRS allows eligible farmers to reduce their estate valuation by valuing farmland at agricultural value rather than fair market value.  This reduction in value is non unlimited.  In 2023, the IRS will allow a reduction of $1,310,000, an increase from the 2022 limit of $1,230,000.  Eligibility requires the decedent, among other things, to have been a farmer with at least 50% of their assets being farm assets and at least 25% of their assets being farmland. 

Consider the following example using 2023 values.  Bill was a retired farmer and died with a net worth of $14 million.  He was eligible for 2032A so his estate was entitled to a $1,310,000 reduction.  After applying the section 2032A reduction, Bill’s estate was valued at $12,690,000 which is below the federal estate tax exemption.  By applying 2032A, Bill’s estate is able to avoid estate taxes.

It should be noted that applying 2032A to an estate is complicated and should be done with the assistance of legal counsel.


Christmas ornament of Ohio capitol hanging on tree
By: Peggy Kirk Hall, Tuesday, December 20th, 2022

A new law giving local governments zoning authority over small-scale solar facilities may feel like a gift to counties and townships dealing with solar development conflicts.  The late amendment was one of a few surprises from the legislature as it wrapped up its lame duck session last week. 

Several other pieces of legislation affecting agriculture and natural resources that passed include local preemption of pesticides, loosening oil and gas drilling reviews on state lands, and new knowledge requirements for environmental health specialists that inspect retail food establishments. Here’s a summary of the agricultural related bills that now await the Governor’s action.

Zoning authority over small scale solar -- H.B. 501

An amendment to a township bill will grant counties, townships, and municipalities regulatory authority overthe location, erection, construction, reconstruction, change, alteration, maintenance, removal, use, or enlargement of any small solar facility, whether publicly or privately owned, or the use of land for that purpose.” The bill defines a “small solar facility” as one that has a single interconnection point to the grid and is under 50 MW. That number is important, because it addresses solar facilities that were not subject to S.B. 52, passed last year, which gave counties and townships new authority over wind and solar facilities that are over 50 MW. 

Agriculture – H.B. 507

This bill began as a simple provision reducing the number of poultry chicks that can be sold in lots from six to three.  Before it passed, however, the Senate Agriculture & Natural Resources Committee added six amendments, including these:

  • Local preemption of pesticides

Prohibits a political subdivision from regulating or banning the packaging, registration, labeling, sale, storage, distribution, use, or application of a pesticide registered with ODA on private property.

  • Environmental health specialists and food safety regulations

Requires ODA and ODH to adopt new rules for evaluating Environmental Health Specialists’ knowledge of food safety laws and to include the evaluations when assessing a board of health’s ability to license retail food establishments and food service operations.  Also revises several food safety laws to align them with state and federal laws.

  • Green energy in competitive retail energy laws

Defines “green energy” to be any energy that releases reduced air pollutants and cumulative air emissions or is more sustainable and reliable relative to some fossil fuels or is generated using natural gas, but excludes natural gas energy from renewable energy credits, except for gas from biologically derived methane.

  • Internet sales exemption from auction laws

Exempts from auctioneer and auction firm licensure requirements a person who, in any
calendar year, sells not more than $10,000 of personal property via an auction
mediation company (for example, eBay) if the company provides fraud protection to the buyer; and the property is the person’s own personal property, or the property is the personal property of another (sold without compensation).

  • Oil and gas drilling on state land

Requires a state agency to lease agency-owned oil and gas resources “in good faith” until new rules for nominating the development of resources are adopted by the Oil and Gas Land Management Commission.  The leasing party must demonstrate insurance and financial assurance and register with ODNR.

  • Towing authorizations for conservancy districts

 Authorizes a conservancy district police department to order the towing and storage of
a motor vehicle when the vehicle is an abandoned junk vehicle and when left on private or public property for a specified time.

Tax amnesty and appropriations – H.B. 66

H.B. 66 sets up the possibility of a tax amnesty program in 2023 and allocates $6 billion in one-time appropriations of COVID relief funds. And Medicaid draw down funds.

  • Tax amnesty

Allows a two-month tax amnesty program in 2023 for delinquent state taxes, local sales and use taxes, income tax withholding and more, but only if additional revenues from amnesty will be needed to meet General Revenue Fund obligations.

  • Ag-related appropriations

$4.5 million to Ohio Department of Agriculture for grants to county agricultural societies.

$250 million to Ohio Dept. of Development for water quality grants program.

Millions to Ohio Department of Natural Resources for state and local parks, and improvement, recreation, and conservation projects.

What proposals didn’t pass?

Since we’re at the end of the two-year session of the 134th General Assembly, any proposed legislation that did not pass is now dead.  Some of those proposals will be reintroduced next session, but we might never see others again.  The two most notable ag-related bills that died include:

Many solar developers were hoping this bill would pass, as it provides incentives for smaller scale subscription-based solar projects and solar projects on brownfield sites.  Landowners considering leases with solar developers who stated they were doing community solar projects must note that, because the bill did not pass, there is currently no legal authority to construct a community solar project in Ohio.

This proposal would have streamlined the process for landowners challenging compensation for property taken by eminent domain, increased the burden of proof by an agency using eminent domain, and expanded attorney fee and expense rewards for property owners.  It would also prohibit takings of property for recreational trails, an issue that has plagued northeast Ohio.  Sponsors say they will reintroduce next session.

What packages will the new year bring?

We’ll be keeping an eye on the new General Assembly, which will likely include new committee members and leadership on both the House Agriculture and Conservation and Senate Agriculture and Natural Resources Committee.  Our quick wish list for next session starts with:

  • Revisions to the agricultural and agritourism exemptions in county and township zoning law.
  • Mowing date and procedural revisions to the noxious weeds law
  • Updates and clarifications to the partition fence law
  • Streamlining and clarification of home-based and farm-raised food licenses

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Posted In: Food, Renewable Energy, Zoning
Tags: legislation
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By: Robert Moore, Thursday, December 15th, 2022

Legal Groudwork

Many people are familiar with a Like-Kind Exchange (LKE) as a strategy to potentially save taxes on the sale of real estate.  While it is true LKEs can be used to defer significant taxes, the process required to implement LKEs it often not well understood.  The following are answers to a few of the more common questions about LKEs.  A better understanding of LKEs may help you determine if a LKE may be an option for your next real estate transaction.


What Property Can Be Exchanged?

Prior to January 1, 2018, many different types of property could be exchanged including machinery and livestock.  The 2018 Tax Cuts and Jobs Act restricted the type of property allowed for a LKE to only real estate.   Fortunately, real estate is defined broadly in the context of a LKE.  Real estate used in a LKE are subject to the following rules:

  1. Must be held for business or investment purposes but does not need to be similar in grade or quantity
  2. Primary residences do not qualify
  3. Properties must be held in the United States

Other than personal residences, almost any other type of real estate can be exchanged.  For example, an office building can be sold and the proceeds used to buy farmland.  These two very different types of real estate would likely qualify for a LKE provided they are held for business or investment purposes.


Are There Different Types of LKEs?

There are generally three different types of LKEs.  The first is a simultaneous trade which involves one owner exchanging their real estate for real estate owned by another.  The exchange occurs by the owners executing deeds transferring their real estate to each other.  For example:

Andy owns farmland in Ohio valued at $1 million.  He makes a deal with his friend Ashley.  Andy will trade his farmland for Ashley’s farmland in Illinois valued at $1 million.   Andy executes a deed transferring his farmland to Ashley and Ashley executes a deed transferring her farm to Andy.

The above example shows how a simultaneous trade works.  The parties simply swap their property.

Another type of LKE is a deferred exchange.  This strategy involves selling real estate, then using those proceeds to buy replacement real estate.  The following is an example of a deferred exchange:

Andy owns farmland in Ohio valued at $1 million.  He decides he wants to buy farmland in Illinois.  Ashley wants to sell her farmland for $1 million.  Andy sells his farmland in Ohio and uses those sale proceeds to purchase Ashley’s land for $1 million.  Andy will not pay tax on the sale of the Ohio farmland because he purchased a replacement property.  Ashley will pay tax on her sale because she did not purchase a replacement property.

The other type of LKE is a reverse exchange.  This LKE is used when the replacement property is purchased first and then the owned real estate is sold.  This strategy is used when, due to timing, the replacement property must be purchased before the relinquished property is sold.  The following is an example of a reverse exchange:

Same facts as above except that the farm in Illinois that Andy wants to buy is going to sell next week.  Andy does not have time to sell his Ohio farm first.  Andy buys the Illinois farm first using cash from his savings.  Andy essentially loans $1 million  to the title company.  The title company takes title to the Illinois land and holds until Andy can sell the Ohio land.  Two months later he sells the Ohio farm and uses those sale proceeds to pay for the Ohio property with the original loaned funds being returned to Andy. 

A reverse exchange is complicated and usually requires the assistance of companies that specialize in LKEs.  Furthermore, the person doing the reverse exchange must have enough money available to purchase the replacement property while waiting on the owned property to sell.


Are Taxes Avoided with a LKE?

Technically, taxes are deferred with a LKE.  The reason it is a deferral of taxes is that the tax basis follows the taxpayer.  This can best be explained using an example:

Andy paid $300,000 for a farm he owns in Ohio.  The Ohio farm is currently valued at $1 million.  He has decided that he wants to purchase a farm in Illinois valued at $1 million.  He executes a LKE by selling the Ohio farm and purchasing the Illinois farm.  The tax basis in the Ohio farm of $300,000 is transferred to the Illinois farm.  So, instead of the Illinois farm having a tax basis of the purchase price ($1 million), it has a tax basis of $300,000.  If Andy sells the Illinois farm, he will pay capital gains tax on the sale price exceeding $300,000.  Therefore, the tax implications of the LKE were deferred until the Illinois property is sold by causing the tax basis of the Ohio farm to transfer to the Illinois farm. 

As the above example shows, a LKE defers capital gains tax but does not necessarily eliminate taxes.  By transferring the tax basis from the relinquished property to the replacement property, the capital gains will be fully realized upon the sale of the replacement property.


What if the Properties are not the Same Value?

Properties being exchanged are rarely the same value and some money may need to be paid to offset the difference in value. Because money is not eligible for a LKE, that portion of the exchange will be taxable.  Consider the following example.

Andy owns a farm valued at $1.2 million and intends to participate in a simultaneous exchange for a farm valued at $1 million owned by Ashley.  Andy will receive Ashley’s property plus $200,000.  The LKE will defer taxes on the $1 million property received but Andy will pay tax on the $200,000 payment. 


Is Timing important for LKEs?

Timing is very important for a LKE.  A simultaneous exchange, as the name would suggest, must occur by transferring the properties at the same time.  For a deferred exchange, the replacement property must be identified within 45 days of the sale and the replacement property must be purchased with 180 days of the sale.  For a reverse exchange, the relinquished property must be sold within 180 days of the purchase.  There is no flexibility with these deadlines, if a deadline is missed the LKE is not allowed.


Who Can Participate in an LLC?

In a LKE, the same person must be on both sides of the exchange.  A person can be a business entity, trust, or estate in addition to an individual.  This rule can be an issue when a business entity owns the property because the entity, and not the individual owners, must complete the exchange.  For example:

Andy and Ashley are the owners of AB Farms LLC that owns Blackacre farm.  They decide to sell Blackacre farm.  Only AB Farms LLC is eligible to use the sale proceeds in a LKE.  Neither Andy nor Ashley can take their share of the sale proceeds and participate in a LKE.

Another issue may be related parties.  Related parties are defined in IRS sections 267(b) and §707(b)(1) and are generally brothers, sisters, spouse, ancestors and lineal descendants for individuals and for business entities with more than 50% of the stock, membership interests or partnership interests owned by a related party.  Some types of LKEs are not available to related parties and for other LKEs there are special rules for related parties.  The details for related parties are extensive LKEs are beyond the scope of this article.  Be sure to work with an attorney familiar with LKEs when related parties are involved.


Who Handles the Money?

In a deferred exchange, the sale proceeds cannot be held by the seller.  An intermediary, usually a title company, will hold the money in escrow after the property is sold and before the replacement property is purchased.  Any sale proceeds held by the seller are immediately ineligible for a LKE.  In a reverse exchange, an intermediary holds the purchased real estate until the relinquished property is sold.  In a deferred exchange or reverse exchange, the intermediary serves a vital and necessary role.


The above questions and answers are some of the more common questions with general answers.  There are many rules, exceptions and details in addition to the issues discussed in this article.  Before engaging in a LKE, be sure to consult with an attorney familiar with LKE rules.  You only get one chance to get a LKE right, any missteps will likely cause the LKE to fail and tax will be owed on the exchange.

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Tags: like-kind exchange
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