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This article marks the beginning of a new series, Principles of Government, where we explore key legal concepts shaping public discourse. Our goal is to provide a clear, unbiased, and nonpolitical explanation of these issues, allowing readers to form their own opinions on the social, political, and economic impacts. As new developments arise, we will continue expanding this series to keep you informed.
Tariffs have been a widely discussed issue recently, particularly as President Trump considers implementing new or increased tariffs on imported goods. More broadly, tariffs have played a central role in U.S. trade policy for centuries, shaping economic growth, international relations, and domestic industries. While they are often used to protect American businesses from foreign competition, tariffs can also lead to higher prices for consumers and retaliatory measures from other countries.
Agriculture, in particular, has long been sensitive to tariffs. Farmers and agribusinesses rely on imported equipment, fertilizers, and other inputs, meaning tariffs can raise production costs. At the same time, American agricultural products exported abroad can be subject to retaliatory tariffs, making them more expensive and less competitive in foreign markets. Understanding how tariffs work, who pays them, and the legal authority behind their implementation is crucial for assessing their broader economic and political impact. In this article, we will break down the fundamentals of tariffs, their role in U.S. trade policy, and the source of authority to impose tariffs.
What Is a Tariff?
A tariff is a tax or duty imposed by a government on imported goods. Tariffs serve several purposes, including generating revenue for the government, protecting domestic industries from foreign competition, and sometimes serving as a tool in international trade negotiations. When a country imposes tariffs, it raises the cost of imported goods, making domestically produced alternatives more competitive. Tariffs are typically applied as a percentage of the value of the imported goods but can be a fixed amount per unit of goods.
Who Pays the Tax on a U.S. Tariff?
When the U.S. imposes a tariff on imported goods, the tax is paid by the importer of record, typically a U.S. company or individual bringing the goods into the country. The foreign exporter does not pay the tariff directly. Instead, the importer must pay the tariff before the goods clear customs. To offset this cost, the importer may either pass it on to consumers through higher prices or absorb it, reducing their profit margin.
Where Does the Tax Go?
The tariff revenue collected by U.S. Customs and Border Protection is deposited into the U.S. Treasury's general fund. This money is not earmarked for a specific program but becomes part of the government’s overall revenue, which can be used for federal spending, such as infrastructure, defense, or social programs.
Example
U.S. Flour Co. purchases wheat from Canada Wheat Co. for $1 million. The U.S. government imposes a 25% tariff on all Canadian wheat imports. As a result, U.S. Flour Co. must pay an additional $250,000 in tariff duties to U.S. Customs and Border Protection before the wheat can clear customs. This increases the total cost of the imported wheat to $1.25 million, which U.S. Flour Co. may either absorb or pass on to consumers through higher prices.
What is the Purpose of Tariffs?
The U.S. imposes tariffs for several key reasons, each serving different economic, political, and strategic objectives. These include:
1. Protecting Domestic Industries
Tariffs make imported goods more expensive, helping domestic producers compete with foreign competitors. This protection is particularly useful in industries where lower-cost imports might otherwise drive U.S. companies out of business.
2. Generating Government Revenue
Historically, tariffs were a primary source of federal revenue before the income tax was established. While less significant today, tariff revenues still contribute to the U.S. Treasury’s general fund and help finance government operations.
3. Addressing Trade Imbalances
By making imports more expensive, tariffs can reduce reliance on foreign goods and encourage domestic production. This can help address trade deficits by limiting the amount of money flowing out of the U.S. to pay for imports.
4. Retaliating Against Unfair Trade Practices
Tariffs are often used as a tool to respond to unfair trade practices, such as subsidies, dumping (selling goods below market value), or intellectual property theft by foreign nations.
5. Protecting National Security
Certain tariffs are imposed to safeguard industries critical to national security, such as steel, aluminum, and semiconductor manufacturing.
6. Strengthening Foreign Policy and Diplomacy
Tariffs can be used as a foreign policy tool to pressure other countries into trade negotiations or compliance with international agreements. They can also serve as leverage in broader geopolitical strategies.
What is the Legal Authority to Impose Tariffs?
The power to impose tariffs in the United States originates from the U.S. Constitution. Specifically, Article I, Section 8, Clause 1 grants Congress the authority "to lay and collect Taxes, Duties, Imposts and Excises." Additionally, Clause 3 of the same section, known as the Commerce Clause, gives Congress the power to "regulate Commerce with foreign Nations."
While Congress has the constitutional authority to impose tariffs, it has delegated much of this power to the executive branch through legislation. Several key laws provide the legal foundation for U.S. tariff policy:
- The Tariff Act of 1930 (Smoot-Hawley Tariff Act) – This law, originally designed to protect American industries during the Great Depression, set high tariff rates on many imported goods. Although many of its tariffs have been reduced over time, the law remains a foundation for U.S. trade policy.
- Section 232 of the Trade Expansion Act of 1962 – This law allows the President to impose tariffs on imports that threaten national security.
- The Trade Act of 1974 – This legislation provides the President with the ability to negotiate trade agreements and adjust tariffs, particularly in cases involving unfair trade practices by foreign nations.
So, while the authority to impose tariffs is exclusive to Congress in the Constitution, Congress has ceded at least some of its power to the President.
Conclusion
Tariffs play a significant role in U.S. trade policy, serving as tools for economic protection, revenue generation, and international diplomacy. While they can shield domestic industries and address unfair trade practices, they also have broader consequences, such as higher consumer prices and potential trade disputes. Understanding the legal framework behind tariffs helps clarify how and why they are implemented.
As we continue our Principles of Government series, we will explore more fundamental legal concepts that shape national and global policy, providing you with the knowledge to assess their impacts for yourself.
Tags: tariffs, principles of government
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The new presidential administration has raised the possibility of enacting tariffs, leading many to ask us how tariffs work and how they will affect agriculture. The tariff power is one of those topics that might have us reaching back to the last civics or government class we took and raising some questions. For example, what is the source of tariff authority, when can the government levy a tariff, and how does the tariff process play out?
A desire to answer such questions led us to develop a new blog series on the "Principles of Government." In this series, we endeavor to review and enhance our knowledge of our government and how it works. We'll begin the series this week with an explanation of the tariff power, then we'll tackle other topics like executive orders, administrative agency authority, and the Constitution. But first, we offer an answer from our OSU colleagues on the important question of how potential tariffs could affect agriculture. Thank you to our guest expert authors for the following article, which helps us understand how tariffs against Canada and Mexico could impact agriculture.
Authors:
Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Dept. of Agricultural, Environmental, and Development Economics, Ohio State University
Chris Zoller, Interim Assistant Director Agriculture & Natural Resources (ANR), Ohio State University Extension
First Trade Policy Announcement(s) by the New Administration
Both before and after the 2024 presidential election, the trade policy community has been speculating about and discussing the likely economic impact of tariffs an incoming administration might implement once in office. With the inauguration of President Trump on January 20, we now have the first view of what could be in store for US trade policy. Specifically, while new tariffs have not been imposed immediately, the President indicated the possibility that 25 percent tariffs would be applied to imports from Canada and Mexico as of February 1 (Reuters, January 20, 2025). Surprisingly, the much talked of hike in tariffs to 60 percent on all imports from China, and a 10 percent tariff on imports from the rest-of-the-world, have yet to be announced, the President instead ordering the Office of the US Trade Representative (USTR) to investigate unfair trading practices globally, and whether China complied with the US-China Phase 1 Trade Agreement signed in 2020 (Bloomberg, January 20, 2025).
Potential Impact of Tariffs on US Agricultural Sector
With the integrated agricultural market that has evolved under the North American Free Trade Agreement (NAFTA), and its renegotiated successor the US-Mexico-Canada-Agreement (USMCA), it should come as no surprise that Mexico and Canada are the top-two US agricultural export markets at $29.9 and $29.2 billion respectively (USDA/FAS, Outlook for US Agricultural Trade, November 2024). Given the importance of these two markets to US farmers, and also in light of the declining US share of China’s imports of feed grains and soybeans (Glauber, IFPRI, December 2024), a trade war between USMCA members has the potential to have a serious impact on future US farm incomes. However, any analysis of the impact of such tariffs is an exercise in economic forecasting, and will also depend on the extent to which Mexico and Canada choose to retaliate, although Canada has already indicated it will respond in kind (Associated Press, January 20, 2026).
Agricultural economists at North Dakota State University have recently analyzed various US tariff scenarios (Steinbach et al., farmdoc, and Food Policy, 2024), which they have updated to include the impact of 25 percent tariffs against Canada and Mexico (Steinbach et al., CAPTS, 2024). Their analysis focuses on the potential export market losses in 2025 for 11 agricultural commodities, using baseline export projections for 2025 from the World Agricultural Board’s (WAOB) demand and supply estimates (WAOB, 2024). The sensitivity of US agricultural exports to the imposition of foreign tariffs is based on published estimates from the 2018/19 trade wear (Grant et al., Applied Economic Perspectives and Policy, 2021).
In the following table, three scenarios are reported for five commodities: soybeans, corn, dairy products, beef and beef products, and pork and pork products, along with total projected losses for the US agricultural sector. Scenario 1 assumes 25 percent US tariffs on Canadian imports are met with 25 percent Canadian tariffs on US imports; Scenario 2 assumes 25 percent US tariffs on Mexican imports are met with 25 percent Mexican tariffs on US imports; and Scenario 3 combines Scenarios 1 and 3 with tit-for-tat additional US/Chinese tariffs of 10 percent. The latter scenario is included here given President Trump has also signaled he will introduce an additional 10 percent tariff on imports from China as of February 1 (Guardian, January 22, 2025).
Source: Steinbach et al., 2024
While the total forecast losses to the agricultural sector are quite similar for Canada and Mexico, there is clear variation across key commodities, and forecast losses for the listed commodities are also higher for US/Mexican tariffs as compared to US/Canadian tariffs. Importantly, these forecast losses increase if additional 10 percent tariffs are levied on Chinese imports, and subsequently matched by China.
While not reported in the table, if the United States were also to levy 60 percent tariffs on all Chinese imports, and 10 percent tariffs on all imports from the rest of the world, with tit-for-tat retaliation, the total value of US agricultural exports for 2025 are forecast to decline 34.4 percent, i.e., a loss of $60.6 billion. In this scenario, US soybeans would be the most vulnerable, followed by wheat and corn. At the state level, Ohio agriculture is forecast to lose -$705 million in export value in 2025 if the most extreme scenario plays out, with a loss of -$359 million for soybean exports.
Although these expected losses are obviously subject to forecast error, at a time when commodity prices have been falling, additional uncertainty about export markets due to changing US trade policy will likely exacerbate any financial stress faced by US farmers. It will also place additional pressure on the federal government to consider ways of reducing sectoral stress through further ad hoc payments to farmers similar to the Market Facilitation Program (MFP) applied during the 2018/19 trade war.
Financial planning is always a critical component of operating a farm business, and the potential negative impacts of tariffs reinforce the need to analyze costs, evaluate alternatives, and develop plans. For assistance, please contact your Extension Educator and enroll in the OSU Extension Farm Business Analysis and Benchmarking Program (https://farmprofitability.osu.edu/). Enrolling in this program will provide you an in-depth analysis of your farm business and allow you to plan for future success.
In our next post on the Ohio Ag Law Blog, we'll explain the tariff power when we kick off our new Principles of Government series.
Tags: tariffs, principles of government, canada, mexico, agricultural economics
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Originally, I reported that beneficial ownership information ("BOI") reporting requirements under the Corporate Transparency Act ("CTA") were back in effect after the SCOTUS decision in the Texas Top Cop Shop case. However, that was not the full story.
A recap of the Texas Top Cop Shop case.
In the Texas Top Cop Shop case, a US District Court for the Eastern District of Texas issued a nationwide injunction against the enforcement of the CTA and its beneficial ownership BOI reporting requirements. However, the Government appealed that decision, and a motions panel of the Fifth Circuit Court stayed the injunction, essentially reinstating the reporting requirements of the CTA. Then, three days later, a merits panel of the Fifth Circuit reversed course and vacated the stay, effectively reinstating the nationwide injunction. The Government then applied to the Supreme Court of the United States (“SCOTUS”) for a stay of the nationwide injunction. SCOTUS did grant the Government’s application for a stay and has lifted the nationwide injunction against the CTA. However, the story does not end there.
The CTA saga continues.
Earlier this month, the saga that is the CTA took another turn when a US District Court for the Eastern District of Texas issued a nationwide stay on the CTA’s Reporting Requirements in a case separate from Texas Top Cop Shop. In Smith v. U.S. Department of Treasury, the court exercised its authority under 5 U.S.C. § 705 and stayed the effective date of the Reporting Rule of the CTA while the lawsuit remains pending. As a result, while there is no nationwide injunction preventing enforcement of the CTA, the Reporting Rule's implementation is still temporarily on hold thanks to the stay in the Smith case.
What is the difference between a stay and an injunction?
Stays and injunctions are similar in that both can effectively prevent certain actions before their legality is fully resolved. However, they achieve this outcome in distinct ways. An injunction is directed at a specific party, with the court ordering them to either take or refrain from taking specific actions. While a stay can be considered a "type of injunction," it operates differently. A stay does not directly target a party’s actions; instead, it temporarily suspends the authority that allows the action, without directly dictating anyone’s behavior.
While both an injunction and a stay effectively achieve the same goal, there are important distinctions between them. For instance, obtaining an injunction against a party is generally more challenging than securing a stay while a lawsuit is ongoing. This is because an injunction requires the court to actively direct a party's actions, whereas a stay simply preserves the status quo until the case is resolved.
Where are we now?
The Government has yet to appeal the issuance of the stay in the Smith case, but the window for filing an appeal has not yet closed. It will be interesting to see how the Fifth Circuit and/or SCOTUS handles the nationwide stay as opposed to the nationwide injunction.
In summary, the latest chapter of the CTA saga confirms that businesses nationwide are not required to file BOI reports. However, businesses are still permitted to voluntarily submit their BOI reports to the US Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).
Several lawsuits challenging the constitutionality of the CTA remain pending across the country, along with reintroduced legislation aiming to repeal the CTA entirely. It’s clear that the CTA story is far from over, and we will continue to keep you informed on the latest developments.
Tags: CTA, BOI, corporate transparency act, beneficial ownership information, beneficial owners, stay, SCOTUS, Fifth Circuit
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The Supreme Court of the United States (“SCOTUS”) has issued its decision concerning the nationwide injunction against the Corporate Transparency Act (“CTA”) and its beneficial ownership information (“BOI”) reporting requirements.
On Thursday, January 23, 2025, SCOTUS ruled to allow the Government to enforce the CTA, which requires millions of businesses to file BOI reports. The justices stayed, or lifted, the nationwide injunction that had been blocking the CTA's enforcement. This decision permits the government to proceed with implementing the CTA while its merits are reviewed by the U.S. Court of Appeals for the Fifth Circuit, which is scheduled to hold oral arguments on March 25.
What does this all mean?
Although this decision lifted the injunction against the CTA, there is another lawsuit that has placed the CTA reporting requirements on hold. See our post on the Smith v. U.S. Department of the Treasury for more information. As of the time of this publication, the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury has updated their website to confirm that businesses are not currently under any obligation to file BOI reports. Business owners are encouraged to visit the FinCEN website regularly to stay informed about the latest reporting requirements and deadlines.
The push to repeal the CTA goes beyond the court system.
While multiple lawsuits have been filed challenging the constitutionality of the CTA, there has also been legislative activity aimed at repealing it. Representative Warren Davidson and Senator Tommy Tubervillehave reintroduced legislation in their respective chambers of Congress to repeal the CTA. These proposals were introduced in the previous congressional session but did not advance. With the new administration and a Republican majority in both chambers of Congress, it will be interesting to see how these efforts progress.
How do I file a BOI report?
Business owners can still voluntarily complete all BOI reporting by visiting the FinCEN website. There is no cost to file a BOI report. However, if a business engages a tax professional, attorney, or other third party to file a BOI report on its behalf, the business will be responsible for covering any professional fees associated with the preparation and submission of the report.
Reporting companies will need the following information: (1) the reporting company’s legal name, (2) tax identification number, (3) jurisdiction of formation, and (4) current U.S. address. For their beneficial owners, reporting companies will need the following information: (1) full legal name, (2) residential address, (3) a form of identification, which must be either a state issued driver’s license, a state/local/tribe-issued ID, a U.S. passport, or a foreign passport, and (4) an image of the identification used in number (3). See our law bulletin for more details on reporting requirements.
Conclusion.
For now, businesses are not required to file BOI reports with FinCEN. However, should the Government appeal the decision in the Smith case, things could change. As always, we will try our best to keep you informed of the latest developments.
Tags: Supreme Court of the United States, SCOTUS, BOI, CTA, corporate transparency act, beneficial ownership information, BOI Reporting, FinCEN, injunction, stay, legislation, Business, Business Owners, beneficial owners
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By: David L. Marrison, Field Specialist, Farm Management, Barry Ward, Director of the OSU Income Tax Schools, and Jeff Lewis, Attorney and Program Coordinator- OSU Extension.
It is tax season! The Internal Revenue Service (IRS) expects over 140 million individual tax returns to be filed by the April 15, 2025 deadline. With tax returns set to be accepted by the IRS starting January 27, it's crucial for individuals and businesses to stay on top of important tax reporting deadlines.
One of the key requirements during this time is the proper reporting of income through 1099 forms. These forms, which report various types of non-wage income, need to be furnished to taxpayers by January 31. Additionally, copies also need to be sent to the IRS by the January 31st deadline (with a few exceptions) to avoid penalties and ensure timely processing of tax returns.
This article will provide an overview of 1099 forms, highlighting the specifics of the 1099-NEC, 1099-MISC, and 1099-K forms. Additionally, we will share reporting deadlines, penalties for non-reporting, and provide resource links from the IRS.
What is a 1099 Information Return?
A 1099 form is an information return used by businesses, financial institutions, and other organizations to report various types of income paid to individuals who are not employees. These forms are typically issued to independent contractors, freelancers, and vendors to report payments made for services rendered, interest earned, dividends, and other income types.
These returns help ensure that individuals and entities report income correctly on their tax returns. There are over 20 different 1099 forms. The major forms which farm families may receive include:
- 1099-NEC Non-employee compensation
- 1099-MISC Miscellaneous income
- 1099-K Income from third party vendors
- 1099-G Unemployment compensation or other government programs
- 1099-INT Interest income
- 1099-DIV Investment dividends and distributions
- 1099-PATR Taxable distributions from cooperatives
- 1099-S Proceeds from real estate transactions
1099-NEC
One of the most common 1099 forms used is the 1099-NEC, which reports payments to non-employees. The form is required to be issued when compensation totaling more than $600 (per year) is paid to a nonemployee for certain services performed for your business. If the following four conditions are met, you must generally report payment for nonemployee compensation on Form 1099-NEC:
- You made the payment to someone who is not your employee.
- You made the payment for services for your trade or business (including government agencies and nonprofit organizations).
- You made the payment to an individual, partnership, estate, or in some cases, a corporation.
- You made payments to the payee of at least $600 during the year.
Examples of “nonemployee compensation” could include hiring a neighboring farmer to harvest, spray, or plant your crops or independent contractors such as crop consultants, mechanics, accountants, and veterinarians. Payment for parts or materials used to perform the service (if the supplying of the parts or materials was incidental to providing the service) is included in the amount reported as nonemployee compensation.
Reporting is needed for payments made to unincorporated businesses (ie. sole proprietorship or a LLC that has elected to be taxed as a sole proprietor or partnership) for compensation of $600 or greater. Generally, payments to a corporation, or a LLC which has elected to be taxed as a corporation, do not require a 1099-NEC to be issued. Two exceptions which should be noted are for payments of $600 or greater to an attorney or veterinarian, regardless of business entity (corporation or unincorporated), need to be reported on the Form 1099-NEC.
If you are required to file a Form 1099-NEC, you must furnish a statement to the recipient and to the IRS by January 31 of each year or the next business day, if the due date is on a weekend or holiday. For the tax reporting year of 2024, the form is due January 31, 2025.
A form 1099-NEC can be issued even if the payment is below the $600 threshold or is to a party that you are in doubt as to whether you are required to issue this informational return. There are no prohibitions or penalties for doing this.
Previously, business owners would file Form 1099-MISC to report non-employee compensation. As a historical note, the Form 1099-NEC was re-introduced in 2020. It was previously used by the IRS until 1982 when the IRS added box 7 to Form 1099-MISC and discontinued the 1099-NEC form. Now, this compensation is listed in Box 1 on the 1099-NEC.
A reminder that greater scrutiny has been given to the improper classification of an employee as an independent contractor. It is your duty to make sure that you have classified properly. For tax purposes, the IRS provides guidance on making this determination through behavior control, financial control, and the relationship of the parties. Details can be found in IRS publication 1779 located at: https://www.irs.gov/pub/irs-pdf/p1779.pdf
Form 1099-MISC
The Form 1099-MISC is used to report a variety of income payments made to others and are made during your trade or business (not personal). These include, but are not limited to:
- At least $10 in royalties (box 2)
- At least $600 in:
- Rents (box 1)
- Prizes and awards (box 3)
- Medical and health care payments (box 6)
- Crop Insurance proceeds (box 9)
Reporting is needed for payments made to unincorporated businesses (ie. sole proprietorship or a LLC that has elected to be taxed as a sole proprietor or partnership) for compensation for each reporting thresholds ($600 or greater for rents or $10 for royalties). Generally, payments to a corporation, or a LLC which has elected to be taxed as a corporation, do not require a 1099-MISC to be issued. However, there are exceptions as noted previously.
One question, we receive from farmers is “do I need to issue a 1099 to the landowners which I rent ground from?” As a farmer, if you made the payment for services for your trade or business (ie. your farm business), then you will need to issue a 1099-MISC to landowners who receive $600 or more in land rental payments (in aggregate).
The reporting deadlines for the 1099-MISC forms are a little different than the 1099-NEC. The 1099-MISC must be to the recipient by January 31 (similar to 1099-NEC) but are not due to the IRS until February 28 for paper copies or March 31 for e-filed returns.
1099-K
The 1099-K form may be a new form to some of our farm managers. Form 1099-K tracks income made from selling goods or providing services via payment apps and online marketplaces. Examples include (but are not limited to) PayPal, Venmo, Square, and Ebay. Payment card companies, payment apps, and online marketplaces are required to fill out Form 1099-K and send it to the taxpayer and to the IRS by January 31. You will receive a 1099-K if:
- If you take direct payment by credit or bank card for selling goods or providing services. If customers pay directly by credit, debit or gift card, you will receive a Form 1099-K from the payment processor or payment settlement entity, no matter how many payments received or how much they were for.
- A payment app or online marketplace is required to send you a Form 1099-K if the payments received for goods or services total over $5,000 (2024 limits). However, they can send you a Form 1099-K with lower amounts.
Please note the reporting thresholds will change going forward. Third-party payment network transactions previously only needed to be reported for payees with more than 200 transactions and $20,000 in aggregated payments. The American Rescue Plan Act of 2021 repealed this threshold and requires reporting for aggregate payments of $600 or more, regardless of the number of transactions.
The IRS is taking a phased in approach to the implementation of the American Rescue Plan Act of 2021 and guidance was provided on November 26, 2024 (https://www.irs.gov/pub/irs-drop/n-24-85.pdf). The phased-in reporting thresholds are:
- $5,000 in 2024
- More than $2,500 in 2025
- More than $600 in calendar year 2026 and thereafter.
Whether or not you receive a Form 1099-K, you must still report any income on your tax return. If you accept payments on different platforms, you could get more than one Form 1099-K. Personal payments from family and friends should not be reported on Form 1099-K because they are not payments for goods or services.
Additional Note:
Starting in tax year 2023, if you have 10 or more information returns, you must file them electronically. Electronic copies can be submitted through the IRIS Taxpayer Portal at http://irs.gov/iris or through a third-party software provider.
Penalties
If you fail to file a correct information return by the due date (to the IRS and/or taxpayer) and cannot show reasonable cause, you may be subject to a penalty. Penalties are changed for each information return which is failed to be filed to the IRS on time and to each payee (a penalty for each). These penalties can range from $60 to $660 depending on the number of days which the filing is late. Additional penalties can also be assessed for intentional disregard. Interest is also charged. More details can obtained at: https://www.irs.gov/payments/information-return-penalties
IRS Resources:
The following resources are available from the IRS with regards to the informational returns discussed in this article.
Publication 1220: https://www.irs.gov/pub/irs-pdf/p1220.pdf
1099-NEC: https://www.irs.gov/forms-pubs/about-form-1099-nec
1099-MISC: https://www.irs.gov/forms-pubs/about-form-1099-misc
1099-K: https://www.irs.gov/businesses/understanding-your-form-1099-k
1099 Penalties: https://www.irs.gov/payments/information-return-penalties
Disclaimer:
The information provided in this article is for educational purposes. This article was designed to provide accurate tax education information. Farm managers are encouraged to seek the assistance of qualified tax professionals with the completion of their taxes.
A couple of years ago, we published a series of posts addressing Long-Term Care (LTC) issues affecting farm families. Although there haven't been major legal changes in LTC, the costs have risen steadily, and eligibility requirements have adjusted to account for these higher expenses. We thought it would be a good time to do an update on LTC costs.
The table below illustrates the changes in LTC service costs between 2021 and 2023. In Ohio, home health care experienced the most significant percentage increase, now surpassing $75,000 per year, while nursing home costs have risen above $100,000 annually. It's likely that LTC costs will continue to climb in the foreseeable future.
*2023 Genworth Cost of Care Survey
Another important number is the Medicaid asset exemption limit. This is the amount of wealth that a person or married couple may own and be eligible for Medicaid. For Ohio, this exemption amount increased slightly as provided in the table below:
As these numbers indicate, to be eligible for Medicaid, an unmarried person can own almost no assets, and a married couple may own only a modest amount of assets. For anyone not eligible for Medicaid, LTC costs must be paid out-of-pocket until enough assets have been spent down to qualify for Medicaid. Due to the low Medicaid exemption amount, very few farmers will initially qualify for Medicaid without aggressive prior planning or spending down almost all their assets.
How can farming operations address the potential threat of Long-Term Care (LTC) costs? Unfortunately, for most farmers, there are no simple solutions. Covering LTC expenses out-of-pocket can strain the farm's finances, while qualifying for Medicaid may not be feasible for many producers. However, there are several strategies that can help mitigate LTC risks:
- LTC Insurance: Long-Term Care insurance policies can cover some or all nursing home costs. Although these policies can be expensive, and not everyone may qualify, it's worth exploring whether a LTC policy is a viable option.
- Gifting: Assets that are gifted more than five years before needing LTC services are exempt from being used to cover LTC costs. However, gifting means losing control over the asset and missing out on a stepped-up tax basis at death.
- Irrevocable Trusts: Transferring assets to an irrevocable trust can protect them from LTC costs after the five-year lookback period. While this approach offers more control over the assets than outright gifting, irrevocable trusts can be costly and require ongoing trustee management.
- Self-Insure: Some individuals choose to build up savings or other assets to cover LTC expenses. This strategy avoids complex planning and legal fees but ties up capital that could otherwise be used to expand the business.
- Wait and See: Some farm families prefer to wait and assess whether LTC costs will become a reality. They may then gift assets to protect them while retaining enough resources to manage through the five-year lookback period. This approach offers flexibility but risks five years of LTC costs.
Before choosing a strategy, it's crucial to assess the actual risk of LTC costs to the farming operation. Some may have sufficient retirement income to cover LTC expenses, negating the need for extensive planning. For others, LTC costs could threaten the farm and its land, necessitating aggressive planning. Consulting with an attorney or advisor experienced in LTC planning can help determine the best course of action for you and your farm.
Tags: long-term care, Medicaid
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December 31 saw the end of the 135th Ohio General Assembly. The assembly's Lame Duck session following the November election brought with it the passage of several bills that may have an effect on agriculture and natural resources throughout the state. Any bills the legislature did not approve before the end of the session "died" and are no longer under consideration. Here's a summary of bills the lawmakers passed, which are all now signed by Governor DeWine:
S.B. 156—Scenic Rivers. Senate Bill 156 passed ahead of the Lame Duck session and became effective on October 24, 2024. S.B. 156 transferred the authority to administer the Wild, Scenic, and Recreational River Program from the Ohio Department of Natural Resources’ (ODNR) Division of Parks and Watercraft to the Division of Natural Areas and Preserves (DNAP). Further, the bill narrowed DNAP’s scope of authority from river areas (including land around Wild, Scenic, or Recreational Rivers) to just the watercourses of rivers. At the same time, the bill expanded the types of watercourses that can be designated as wild, scenic, or recreational rivers to include headwaters of those rivers.
H.B. 364—Regards non-commercial seed sharing; noxious weed removal. The main goal of House Bill 364 is to help conserve pollinator species and support native plant habitats. To do this, the bill exempts from the laws governing seeds any "noncommercial seed sharing" that supports a number of activities. These activities include:
- Conservation of pollinators and threatened or endangered species;
- Planting and creation of native plant habitats;
- Propagation of native plants for their specific conservation;
- Operation of a seed library, provided that the seed library ensures that any seeds exchanged among the seed library’s members or the general public are open-pollinated, public domain varieties.
A “seed library” is defined 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.
Finally, the bill makes changes to the weed removal provisions in R.C. 4959.11, which requires managers of toll roads, railroads and electric railways to manage weeds along their roads and rights of way. The bill changes the specific requirement to destroy "Russian thistle, Canadian thistle, common thistle, wild lettuce, wild mustard, wild parsnip, ragweed, milkweed, ironweed and all other noxious weeds" to one that requires destruction of "noxious weeds" as defined in the law that applies to weed removal along county and township roadways. Several of the weeds removed from R.C. 4949.11 are not on Ohio's noxious weeds list and, especially in the case of milkweed, are beneficial plants for monarch butterflies and other pollinators.
S.B. 54—Establish the New African Immigrants Grant and Gift Fund. At first glance, the title of Senate Bill 54 doesn’t indicate that it has anything to do with agriculture or natural resources law. However, S.B. 54 became the “Christmas Tree” bill of the Lame Duck session, meaning that amendments not having anything to do with the original purpose of the bill were added on to it.
S.B. 54 contains two such amendments that relate to agriculture and natural resources. The first, originally found in House Bill 683, transfers $10 million from the Ohio Controlling Board Emergency Purposes/Contingencies Fund to ODA to disburse to Soil and Water Conservation Districts for drought relief to farmers affected by the 2024 drought.
The second addition to S.B. 54 is the creation of the Ohio River Commission. The Commission will be housed within the Department of Development, and its purpose will be to “develop and promote economic development, marine cargo terminal operations, and travel and tourism on the Ohio river and its tributaries.” Of note are several of the powers and duties given to the Ohio River Commission, including:
- Receive, promote, support, and consider recommendations, from public or private planning organizations, and develop a master plan for Ohio River infrastructure and transportation projects;
- Coordinate with port authorities, private port operators, metropolitan planning organizations, regional transportation planning organizations, local development districts, Ohio River service entities, utility service providers, and agricultural, tourism, and recreational interests, regarding Ohio River infrastructure and transportation;
- In conjunction with applicable state agencies, coordinate with state agencies, local governments and communities, other states, and the federal government regarding Ohio River issues;
- Evaluate policies, programs, programs of research, and priorities to offset the continued decline in coal production and consumption within the Ohio River Basin and promote prosperity in Ohio’s Appalachian region; and
- Administer development funds and seek, support, and assist the Ohio River industry in the utilization of available grants, loans, and other finance mechanisms in support of Ohio River projects.
H.B. 503—Prohibit activities re: garbage-fed swine, feral swine, wild boar. House Bill 503 is meant to address the dangers of feral swine; namely the destruction of property and the transmission of diseases like African Swine Fever to Ohio’s commercial pig population.
The bill makes it illegal to knowingly:
- Import, transport, or possess live wild boar or feral swine;
- Release wild boar or feral swine into the wild or expanding the range of a wild boar or feral swine by introducing it to a new location; and
- Purposely feed a wild boar or feral swine.
In addition, if a person knows or has reason to know that wild boar or feral swine are present on public or private property, the law requires them to report it to Ohio Department of Natural Resources’ Division of Wildlife. If wild boar or feral swine is present on a person’s property, they may immediately eradicate the swine without a hunting license, as long as they notify the Division of Wildlife and follow the Division’s instructions.
H.B. 503 also includes language that makes it illegal to feed garbage or treated garbage to swine, or to bring swine into Ohio that has been fed garbage or treated garbage. For the first violation, the Ohio Department of Agriculture can collect a penalty of up to $500 and can charge up to $1000 for subsequent violations.
With the 136th General Assembly now underway, be sure to follow the Ohio Ag Law Blog for updates on legislation we'll see in this new two-year legislative session.
Thank you to Ellen Essman, J.D. with OSU CFAES Government Affairs, for authoring this post.
We're kicking off 2025 with our first Farm Office Live webinar on Friday, January 10 at 10:00 a.m. Join us to hear from the Farm Office team of farm management and agricultural law experts for quick updates on these topics:
- Ohio Legislative Round-Up
- Farm Bill and American Relief Act of 2025
- Farm Business Analysis Program Update
- Long Term Care Update
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- 1099 Reminders
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The Corporate Transparency Act ("CTA") has reached the Supreme Court of the United States (“SCOTUS”). On New Year’s Eve, the U.S. Department of Justice submitted an application to SCOTUS, seeking either a stay of the nationwide injunction or, at a minimum, a limitation of the injunction's scope to the plaintiffs specifically named in the Texas Top Cop Shop case.
How Did We Get Here?
Although there have been multiple lawsuits filed to stop the implementation of the CTA, the nationwide injunction at issue stems from the Texas Top Cop Shop v. Garland case arising out of the Eastern District of Texas. Below is a timeline of events:
- May 5, 2024 – Six plaintiffs, including Texas Top Cop Shop, Inc., filed a federal complaint alleging that the CTA’s reporting rule is unconstitutional and asked the court to invalidate the CTA and its reporting requirements.
- June 3, 2024 – Plaintiffs filed a motion for a preliminary injunction seeking to halt the implementation of the CTA’s reporting requirements and deadlines.
- December 3, 2024 – The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the CTA, concluding that the CTA “appears likely unconstitutional.” The court did not rule on the constitutionality of the CTA but instead focused on whether the Plaintiffs satisfied the proof necessary for being awarded an injunction. See our post regarding the court’s decision to issue an injunction.
- December 9, 2024 – The Government appealed the issuance of the injunction to the U.S. Court of Appeals for the Fifth Circuit.
- December 13, 2024 – The Government filed a motion to stay the injunction issued by the lower court. A stay of an injunction essentially “lifts” or cancels out the injunction.
- December 23, 2024 – A motions panel for the Fifth Circuit granted the Government’s motion and issued a stay on the injunction against the CTA, essentially reinstating the CTA’s reporting requirements. See our post on the motion panel’s decision.
- December 26, 2024 – A merits panel for the Fifth Circuit reversed course and vacated the stay issued by the motions panel, effectively reinstating the injunction against the CTA. See our post on the merit panel’s decision.
- December 31, 2024 – The Government submitted its application to SCOTUS to review the nationwide injunction.
What Happens Next?
SCOTUS may choose to disregard the application and decline to address the challenges to the CTA, leaving the injunction intact. Alternatively, SCOTUS could opt to overturn or narrow the injunction, reinstating the CTA's reporting requirements for numerous businesses across the country. As a result, reporting companies should be prepared to promptly submit the required beneficial ownership information (“BOI”) reports.
Filing BOI Reports
Although there is no current mandate for reporting companies to file BOI reports to the Financial Crimes Enforcement Network (“FinCEN”), voluntary submissions are still being accepted. There is no charge to file a BOI report with FinCEN. Reporting companies can simply visit https://boiefiling.fincen.gov to begin the process of filing their BOI report.
Reporting companies will need the following information: (1) the reporting company’s legal name, (2) tax identification number, (3) jurisdiction of formation, and (4) current U.S. address. For their beneficial owners, reporting companies will need the following information: (1) full legal name, (2) residential address, (3) a form of identification, which must be either a state issued driver’s license, a state/local/tribe-issued ID, a U.S. passport, or a foreign passport, and (4) an image of the identification used in number (3). Note: companies formed after January 1, 2024, will also need their company applicant information. See our law bulletin for more details on reporting requirements.
As previously noted, filing a BOI report is free of charge, and a straightforward LLC with only a few beneficial owners can typically complete and submit the report with ease. However, a reporting company may opt to engage a professional, such as an attorney, accountant, or other third-party, to assist with the process for a fee.
Conclusion
While there have been no significant updates to the CTA, it is essential to stay informed about potential changes on the horizon. The Government's application to SCOTUS could lead to a shift in direction in the near future. As always, we will keep you updated on the latest developments.
Tags: CTA, BOI, beneficial ownership information, corporate transparency act, beneficial owners, SCOTUS, Supreme Court of the United States, Fifth Circuit, injunction
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The Court of Appeals for the Fifth Circuit has given us another holiday surprise! The nationwide injunction on the Corporate Transparency Act (“CTA”) and its beneficial ownership information (“BOI”) reporting requirements is once again in effect.
On December 23, 2024, we reported that the Court of Appeals for the Fifth Circuit had lifted a nationwide injunction on the CTA and its BOI reporting requirements. Consequently, all reporting obligations were reinstated for businesses nationwide. Following the Fifth Circuit’s decision to stay the injunction, the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) extended the filing deadline for most reporting companies to January 13, 2025. We knew at the time that this would not be the last we would hear of the CTA and BOI reporting requirements, but what we did not know was how quickly another update would occur.
On December 26th, just days after lifting the nationwide injunction, the Fifth Circuit issued another order vacating its stay, effectively reinstating the nationwide injunction and halting the BOI reporting requirements under the CTA once more. The court ruled that the order from the motions-panel granting the stay on the injunction be vacated “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments. . .”
How did the Fifth Circuit manage to both lift and later reinstate the nationwide injunction? The explanation lies in the distinct panels of judges that handle motions and appeals. One panel, the "motions-panel," reviewed the Government's "emergency motion for a stay pending appeal," while a different panel, the "merits panel," is evaluating the case based on its merits. These two panels reached differing conclusions regarding the federal district court's issuance of the preliminary injunction. The following timeline summarizes the events that have brought us to the current situation:
- On December 3rd, a federal district court found the CTA likely to be unconstitutional and imposed a nationwide preliminary injunction on the CTA and its BOI reporting requirements.
- The Government appealed the decision, and a motions-panel of the Fifth Circuit considered the Government's "emergency motion for a stay [of the preliminary injunction] pending appeal." On December 23rd, the panel sided with the Government, lifting the injunction based on the likelihood that the Government would succeed in proving the CTA's constitutionality. The panel did not address the merits of the case but solely ruled on whether the district court's injunction should remain in place.
- The appeal is now before the merits panel of the Fifth Circuit which gave us our latest update and vacated the motions-panel’s order granting the Government’s motion to stay the district court’s preliminary injunction. Thus, the merits panel reinstated the December 3rd injunction.
What now?
The case is currently before the merits panel of Court of Appeals for the Fifth Circuit and has been expedited to the next available oral argument panel. We may receive another update on the status of BOI reporting and the CTA in just a few short days. While the Fifth Circuit continues to review the case, there are other federal courts considering challenges to the CTA. This case, and potentially other CTA cases, can still be brought before the Supreme Court of the United States for a final determination.
However, as it stands, all BOI reporting requirements of the CTA have been suspended. While there is currently no obligation to meet the extended BOI reporting deadline, business owners can still voluntarily file their BOI reports with FinCEN. We will do our best to keep you up to date on any developments on BOI reporting and the CTA.
Tags: BOI, CTA, beneficial ownership information, corporate transparency act, injunction, stay, vacate
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