Recent Blog Posts

By: Robert Moore, Thursday, October 20th, 2022

Legal Groundwork

Long-Term Care (LTC) costs can present a significant threat to the viability of farm operations and keeping farmland with the family.  Fortunately, there are a few strategies that can help mitigate the risk of LTC costs.  Before we can know which strategy may be appropriate, assessing the true nature of the LTC risk is critical.   

The risk assessment looks at the potential costs of LTC and the ability of the farm to pay for those costs.  Paying LTC costs is a function of available income and assets that can be liquidated to pay for LTC costs not covered by income.  Generally, the assumption is that farmers will first use savings to pay LTC costs not covered by income, then non-real estate farm assets and then lastly real estate.  That is, the land is the last asset that a farmer will typically spend to pay for LTC costs.

To start the assessment, any coverage from LTC insurance policies should be calculated.  That is, to what extent will any LTC insurance payments cover LTC costs?  Also, keep in mind that most LTC policies have a term limit which should be taken into consideration.  Only LTC costs not covered by insurance payments will need to be further addressed.

Next, a realistic forecast should be made regarding available income.  It is important to keep in mind that if someone is receiving LTC, there is a good chance they will not be able to operate a farm.  So, income should probably be based more on potential retirement income than income from an operating farm or wages.  All available sources of income should be included such as retirement accounts, investments, land rents, and the sale of operating assets. The income forecast needs to be based on after-tax income. 

The income forecast is then compared to potential LTC costs.  The easiest, and most conservative comparison is between income and nursing home costs.  The most expensive type of LTC is a nursing home, so using nursing home costs is a worst-case scenario.  The first question becomes: is income adequate to cover potential LTC costs?

If there is adequate income to pay for LTC costs, other assets are not at risk.  Additionally, no further LTC planning likely needs done.  Assets are only at risk to LTC when income is inadequate to cover the costs.

For many farms, income alone will not pay for LTC costs.  In these situations, the next step is to determine how long savings will cover the deficiency.  By dividing the available savings by the income deficiency, we can determine how many years of LTC will be covered by savings.  If the savings will cover average LTC costs, then all remaining assets are likely protected.

Consider the following example.  Joe is unmarried and a farmer.  He has no LTC insurance.  He forecasts his retirement income to be $50,000 after taxes.  He has $500,000 in savings and investments, $500,000 in machinery and equipment and $2,000,0000 in land.  He assumes that a nursing home will cost $100,000/year.  His income is $50,000 short of covering the nursing home bill.  He will need to use his savings to cover the deficiency.  He can pay for ten years of nursing home costs before his savings is depleted.

The average male will require about 2.2 years of LTC.  Joe can pay for almost five times the average stay by using income and savings.  Joe’s risk analysis shows that if he is willing to use his savings, his farm assets are at low risk of being consumed for LTC costs.  It is unlikely that Joe will need more than ten years of LTC.

Many farms do not have much savings or investments as all the money goes back into the farm.  In these situations, operating assets may need to be liquidated to pay for LTC.  Like the income forecast, available operating assets should be valued as after-tax.

Consider the same example as above but Joe only has $50,000 in savings.  In this scenario, his savings will only pay for one year of LTC.  After that, he will need to sell machinery to help pay for his care.  The machinery will pay for ten years of care.  In this risk analysis, Joe’s savings and machinery are at risk to LTC costs.  However, his land is likely safe unless Joe requires more than ten years of nursing home care, which is unlikely. 

In this situation, Joe may decide that he is not willing to risk his machinery and transfers it to an irrevocable trust or elects some other strategy to protect it from LTC costs.  If he protects his machinery, he will also need to do the same for his land.

If income, savings and operating assets are insufficient to cover LTC costs, then land is at risk.  As stated above, this is almost always the asset most important to farmers and the asset requiring the most protection.  If the risk analysis shows that the land is likely at risk to LTC costs, farmers will often take action to protect the land.  Protecting the land may include gifting to heirs or transferring to an irrevocable trust.

Using the same example again, except Joe quit farming several years ago and does not own any machinery.  Using his savings, he can only pay for one year of LTC before his land is at risk.  Joe decides to gift his land to his children to avoid having to spend it down for LTC.  Joe decided upon an aggressive LTC plan due to his land being exposed to significant risk from LTC.

The examples above use a relatively simple scenario using a single person to explain the concept of risk assessment.  For married couples, the assessment is more complicated because we now have the possibility of two people having LTC costs.  Additionally, not all income can be allocated to LTC if one spouse remains at home with continuing living needs.  The concept of the risk assessment is the same for a single person and married persons, but the actual assessment is more complex for married people.

Until a risk assessment is performed, it is difficult to know what strategy to implement.  When income and/or savings is adequate to cover many years of LTC, there may not be a need for aggressive LTC planning.  If income and savings will only cover LTC for a short period of time, aggressive planning may be needed to protect assets.

An attorney familiar with LTC issues can be helpful with the risk assessment.  Before transferring assets or implementing the plan, an attorney should be consulted.  LTC planning can be complicated and technical.  Implementing the wrong plan can make things even worse.  A small investment in legal fees is worthwhile to be sure your LTC plan is the correct plan for your farm.

 

Stoney Hill Farm in Miamisburg, Ohio
By: Peggy Kirk Hall, Tuesday, October 18th, 2022

Let’s hope the marriages that began at Stoney Hill Farm in southwestern Ohio fare better than the wedding barn where they started.  Yet another lawsuit over the Stoney Hill wedding barn has ended in an adverse ruling for the owner.  The Second District Court of Appeals recently upheld a permanent injunction that for now, prevents the owner from renting the barn for weddings and other events.  

The case highlights the continuing conflicts across Ohio over what to do with wedding barns on farms.  Should wedding barns be subject to local zoning and state building and fire codes? Or should wedding barns qualify for the exemptions from zoning, building, and fire codes Ohio law provides for agricultural types of land uses?  It’s a question that has often ended up in court, as the statutory zoning exemptions for agriculture and agritourism in Ohio law are unclear and require judicial interpretation. 

How we got here

The legal battles against Powlette, the owner of Stoney Hill Farm, started in 2018.   The owner constructed a new two-story, 8,000 square foot barn on 26 acres he had purchased in Miami Township.  Declaring that the barn would be used for the agricultural purpose of housing horses, Powlette received an exemption from local zoning regulations for the barn.  That’s because Ohio’s “agricultural exemption” removes township zoning authority from agricultural land uses and structures to ensure that agriculture can take place in Ohio’s unincorporated areas. 

But when Powlette later advertised the barn as Stoney Hill Rustic Weddings and began using it to host weddings and events, the township filed a notice of zoning violation.  The township’s zoning resolution did not permit those types of uses in Powlette’s zoning district. The Board of Zoning Appeals and Montgomery County Court of Common Pleas reviewed the facts and determined Powlette was using the barn not just for agriculture but as a place of “public assembly,” in violation of zoning regulations. 

Powlette then planted grapevines on the property and began making wine, claiming those activities allowed him to continue using the barn under another part of the agricultural exemption.  That part gives zoning and building code exemptions for buildings that are used primarily for vinting and selling wine that are on land where there is viticulture, the growing of grapes. The township again disagreed that Powlette could host weddings and events in the barn and sought a permanent injunction against its continued use.  The Montgomery Township Common Pleas court reviewed Powlette’s use of the barn and determined that the winery-based zoning exemptions did not apply or allow him to hold weddings and events.  The trial court issued a permanent injunction, preventing Powlette from renting, leasing, or operating weddings, receptions, parties, or other celebratory events in the barn for a fee.  Powlette appealed the injunction to the Second District Court of Appeals, which brings us to the court’s decision on September 30, 2022.

As a side note, the Montgomery Court of Common Pleas fined Powlette $50,000 last month for continuing to hold weddings in the barn despite the permanent injunction issued by the court.  Powlette’s response is that he is not in violation of the injunction since he no longer charges a fee for the weddings.  He claims an Ohio Supreme Court case allows him to have free weddings for guests who purchase his wine. 

Additionally, note that there have been several other legal actions against Powlette from the Montgomery County Board of Building Regulations and the Fire District for building code and fire code violations, also based on the use of the structure for weddings and events and also resulting in rulings against Powlette.  And public attention has been high, with television and newspaper reporters covering the township and neighborhood conflicts over the late night, noisy wedding parties at Stoney Hill.

The Court of Appeals decision

The question Powlette raised with the Court of Appeals in the recent case is whether the Montgomery County Common Pleas court properly granted the permanent injunction.  Powlette maintains that the trial court erred by failing to find that the Stoney Hill barn is used for agriculture or agritourism, which would exempt the structure from zoning.   The appellate court reviewed the trial court’s finding that the only agricultural use in the barn was the storing of hay in the upper level of the barn, which also contained outdoor decks, decorative windows, chandeliers, two restrooms, a staging area for bridal parties, a prep area with cabinets and a refrigerator, and electrical, heating and cooling systems.  The evidence indicated, however, that the hay was stored in the barn for use as decorations or seating and not as animal feed.  The court did not see error in the trial court’s conclusion that the barn was constructed for events and not for an agricultural purpose.

The appellate court also agreed that the wedding barn should not be exempt from zoning as agritourism.  Ohio law defines agritourism as an agriculturally related educational, cultural, historical, entertainment, or recreational activity on a farm.  Powlette argued that wedding guests were educated about agriculture, were entertained by interacting with animals and taking wagon rides, that rural weddings are historical and cultural events, and that gathering for a rural wedding in a recreational event.  However, the court questioned how those activities were “agriculturally related.” With little explanation, the court stated that it could not see any connection between the wedding venue in the second story of the barn and any agricultural activities occurring on the property.  “Instead, the barn was built in order to serve as an event venue in a rural, agricultural setting,” the court concluded.

The court also disagreed with Powlette’s second argument against the trial court, that the permanent injunction it granted was overbroad and foreclosed him from any future activities that would qualify as agritourism.  Quickly dispensing with that argument, the court stated that Powlette could request that the injunction be dissolved if he properly engaged in an exempt agricultural use, such as establishing a vineyard and vinting operation as the primary use of the barn. 

What now for wedding barns?

Given that Powlette has begun planting grapes and making wine, a request to dissolve the injunction against him may be the next step of the Stoney Hill wedding barn story.  But the bigger questions remain:  should wedding barns like Stoney Hill be exempt from zoning oversight?  Should an owner be permitted to build or renovate a barn for weddings and events in any rural area, or should local zoning be able to regulate where wedding barns can be?  For now, the answer from the Second District Court of Appeals is clear:  barns built to serve as wedding venues aren’t agriculturally related to the land, don’t have an agricultural purpose, and should not be exempt from zoning.  But like marriage, the future of whether wedding barns are subject to rural zoning in Ohio could be subject to change.

Read the court's decision in Miami Twp. Bd. of Trustees v Powlette.

Combine harvesting in a field of soybeans
By: Peggy Kirk Hall, Thursday, October 13th, 2022

Fall harvest is a time of year when we hear complaints from neighbors and community residents about what we do in agriculture.  Dust, grain bin dryers, equipment taking up the road, working late into the night or early in the morning ... these are the inconveniences of living in an agricultural area.  But when do these activities become legally problematic as a “nuisance” to neighbors and others?  Not often, due to Ohio’s Right to Farm Law.  Even so, the Right to Farm Law expects us to conduct our agricultural activities according to regulations and practices that may reduce the nuisance impacts of farming, and it gives us nuisance protection when we do so.

Enacted in 1982, Ohio’s Right to Farm Law offers a nuisance defense for farming activities under certain conditions.  Ohio was one of many states that passed a Right to Farm Law in the 1980s after the highly publicized Arizona case of Spur Industries v. Del E. Webb.  In that case, the developer of a retirement community in Arizona sought to shut down a cattle feedlot that it claimed was a nuisance to its community residents.  But the Arizona Supreme Court noted that the developer “came to the nuisance,” making the previously existing feedlot activities a nuisance only because the developer chose to locate residences near the feedlot, in an agricultural area. 

Ohio adopted this “coming to the nuisance” approach in its Right to Farm Law soon after the Spur Industries case.  The law’s intent is to protect agricultural landowners from nuisance claims made by those who move into an existing agricultural area and later complain about the agricultural activities occurring in the area.  If faced with a nuisance complaint by someone who “came to the nuisance,” an agricultural landowner can use the Right to Farm Law as a defense against the complaint.

How the Right to Farm Law works

The Right to Farm Law has three requirements a landowner must meet to use the law as a defense against a nuisance claim.

  1. The agricultural activities that are the source of the nuisance complaint must be on qualifying land, which includes:
    1. Land enrolled with the county auditor as “agricultural district land,” (which is not a zoning designation) or
    2. Land “devoted exclusively to agricultural use” under Ohio’s Current Agricultural Use Valuation law.

Both of these provisions establish the same criteria for the land:  it must be either ten acres or more of land devoted to commercial agricultural production, or if less than ten acres and devoted to commercial agricultural production, it must generate a gross average annual income of $2500.  Certain land devoted to bioenergy, biomass, methane, or electric or heat energy production also qualifies, if contiguous to other qualifying land, as can land under government conservation and land retirement programs. 

Early versions of the Right to Farm Law required that the land be enrolled in the “agricultural district program” with the county auditor, not to be confused with having a zoning designation of agricultural district.  But changes to the law removed the enrollment requirement, allowing nuisance protection even if the landowner has not enrolled land in that program. 

  1. The agricultural activities were established prior to the plaintiff's activities or interest on which the action is based.

This is the “coming to the nuisance” timing element.  The agricultural activities must have been in the area first, before the person complaining of a nuisance came to the area.

  1. The agricultural activities were not in conflict with federal, state, and local laws and rules relating to the alleged nuisance or were conducted in accordance with generally accepted agriculture practices.

The intent of the law is to protect “good operators” who follow legal requirements or generally accepted agricultural practices for the agricultural activity that is the source of the complaint.  An operator who disregards law, regulations, and acceptable practices that apply to the agricultural activity loses the nuisance protection.

What are “agricultural activities”?

We often receive questions about the kinds of activities the law covers, or whether the protection applies if a farmer changes or expands an operation.  The Right to Farm Law answers these questions with the following:

"Agricultural activities" means common agricultural practices, including all of the following:

(1) The cultivation of crops or changing crop rotation;

(2) Raising of livestock or changing the species of livestock raised;

(3) Entering into and operating under a livestock contract;

(4) The storage and application of commercial fertilizer;

(5) The storage and application of manure;

(6) The storage and application of pesticides and other chemicals commonly used in agriculture;

(7) A change in corporate structure or ownership;

(8) An expansion, contraction, or change in operations;

(9) Any agricultural practice that is acceptable by local custom.

What if a farmer is threatened with a nuisance claim?

A few steps can help a farmer deal with a threatened nuisance claim.

  • Document the activity or area that is the source of the complaint with pictures, videos, notes, weather conditions, etc.
  • Review the situation to determine if there are additional management practices that could reduce any future nuisance impacts of the activity.
  • If the person takes legal action, notify your property insurance provider.  Your insurer will need to be aware of potential litigation because if the issue is one that relates to your insured activities, your insurer will defend you in a lawsuit.
  • Consider educating the person about your farming practices and the Right to Farm law.  Share articles like this one, or have an agricultural attorney draft a letter explaining the law. A person might not pursue a claim after understanding the activities or realizing that the Right to Farm Law would likely dismiss the claim.

Don't forget the good neighbor part

Although Ohio farmers have the Right to Farm Law as a defense against nuisance claims, it’s still good practice to be aware of how our farming activities affect neighbors.  While the law recognizes that we can’t remove all of the dust, noise, road use, and odors of farming, it does expect us to be “good operators.”  Being a good operator and instituting practices that can reduce nuisance impacts is the first line of defense against the potential of a neighbor nuisance claim.

Read the Ohio Right to Farm Law's "defense to a civil action for nuisance" at Ohio Revised Code Section 929.04.

Toy tractor with stacks of coins behind it.
By: Jeffrey K. Lewis, Esq., Monday, October 10th, 2022

From: Barry Ward & Jeff Lewis, OSU Income Tax Schools

Are you a farmer or farmland owner wanting to learn more about the recent income tax law changes and proposals? If so, join us for this webinar on Thursday, November 17th, 2022, from 6:30 - 8:30 p.m.

Register for just $40. If you can't attend, you will be sent a link to view the recorded webinar later at your convenience. You have unlimited views of the replay, and it will be available throughout the 2022 tax filing season. Details and registration link can be found at: https://farmoffice.osu.edu/tax/farmer-and-farmland-owner-income-tax-webinar

This webinar will focus on issues related to farmer and farmland owner tax returns. This two-hour program will be presented in a live webinar format via Zoom by OSU Extension Educators Barry Ward, David Marrison and Jeff Lewis along with Purdue faculty member Dr. Michael Langemeier. Individuals who operate farms, own property, or are involved with renting farmland are encouraged to participate.

Topics to be discussed during the webinar include (subject to change based on tax law change):

  • Farm Economy and Income in ‘22 and Outlook for ’23 
  • Deferring Taxes (deferring income, prepaying expenses), Retirement Plan Contributions, Accelerating Depreciation, Bunching Itemized Deductions, Self-employment Tax Planning, and Maximizing Permanent Tax Benefits
  • Depreciation, Bonus Depreciation, Section 179, What is “Placed in Service”? 
  • Income Averaging 
  • Employee Retention Credits 
  • Inflation Reduction Act (IRA) 
  • State Tax Updates – Ohio and Indiana 

To register: https://farmoffice.osu.edu/tax/farmer-and-farmland-owner-income-tax-webinar

For more information, contact Barry Ward at ward.8@osu.edu or Jeff Lewis at lewis.1459@osu.edu or call the OSU Extension Farm Office at 614-292-2433.

Posted In: Tax
Tags: farm management, taxes, Farm Tax, Income Tax, Agricultural Tax
Comments: 0
By: Robert Moore, Thursday, October 06th, 2022

Legal Groundwork

Business entity discounts can be a valuable tool in farm succession planning.  This strategy provides a method of reducing the values of assets that will be in an estate without the need for gifting.   Discounting can be used with any kind of entity; the key is to draft the entity’s controlling agreement to maximize the discount.

Discounting is based on two important factors: lack of marketability and lack of control.  Lack of marketability reflects the disinterest that an outside buyer would have in buying into a closely held entity.  Lack of control reflects the inability of an owner to singularly control the entity.  These two factors overlap somewhat but they essentially measure the discount that would be needed to make an arms-length buyer interested in buying an ownership interest in the entity.

The amount of discount is scrutinized by the IRS.  Owners of entitles have abused the discounting strategy in the past as a scheme to transfer ownership without incurring gift taxes or estate taxes.  A typical discount for an ownership interest that is fully subject to lack of marketability and lack of control may be around 35%.  Discounts in excess of 35% may be challenged by the IRS as excessive.  The discount is usually determined by an accountant or other financial professional that has expertise in determining business entity discounts.

Discounting can best be explained using examples.  Let’s say Mom and Dad own 400 acres of farmland valued at $3 million.  If Mom and Dad were to die with the land titled in their names, the land would be valued at $3 million in their estates.  The land is valued at its full value because either Mom or Dad can cause the land to be sold at any time through partition and they would presumably receive full, fair market value.

Now, let’s say Mom and Dad transfer the land into an LLC.  The LLC’s operating agreement includes the following provisions:

  • Land may not be sold without majority consent of ownership
  • Money cannot be distributed out of the LLC without majority consent
  • The LLC cannot be dissolved without majority consent
  • Ownership may only be transferred to the descendants of Mom and Dad

Additionally, Mom and Dad gift a 0.5% ownership interest to each Son and Daughter.  After the gift, Mom and Dad are each 49.5% owners of the LLC.   Now, neither Mom nor Dad can singularly control anything that happens with the LLC.  Due to the lack of marketability and lack of control created by the terms of the LLC operating agreement and the minority ownership (49.5%), Mom and Dad can expect to receive around a 35% discount on their ownership.

Using discounting, Mom and Dad have reduced the value of their estate by over $1 million by setting up an LLC and transferring their land to the LLC.  At a 40% estate tax rate, Mom and Dad have potentially saved Son and Daughter over $400,000 in estate taxes.  Entity discounts can same many thousands, if not millions, of dollars in estate taxes for some farm families.

The primary downside of using a business entity for discounts is the cost of establishing and maintaining the LLC.  An LLC will need to be established, an operating agreement drafted and deeds executed to transfer the land to the LLC.  Perhaps the initial startup and deed expense will be around $5,000.  The LLC will need to maintain a bank account to collect rent and pay expenses such as real estate taxes.  Additionally, the LLC will be required to file a tax return each year.  While there are startup and maintenance costs for the LLC, the savings in estate taxes usually makes establishing business entity discounts and easy decision.

It should be noted that some presidential administrations have sought to eliminate the entity discounts for family-held businesses.  So, the business entity discount can be abolished with a stroke of a pen at any time.  However,  as long as discounts are available, they can be a very valuable tool in farm transition planning.

For those farmers and landowners who may be concerned about estate taxes, a business entity may be a relatively simple but effective tool to reduce the value of the estate.  An attorney should be included in the process of establishing the LLC to be sure that the necessary provisions are included in the operating agreement to maximize the discount.  Also, a tax advisor should be consulted to ensure a thorough understanding of the tax ramifications of establishing an LLC. 

United States Supreme Court Building
By: Peggy Kirk Hall, Tuesday, October 04th, 2022

The Supreme Court of the United States takes on a second important case for agriculture next week when it hears arguments in National Pork Producers v Ross.  The Court opened its new term yesterday with a well-known case about the Clean Water Act and EPA authority over wetlands, Sackett v EPA.  In National Pork Producers, the Court will hear challenges to California’s Proposition 12, a livestock housing standards law.

Proposition 12.  Voters in California approved the Proposition 12 ballot measure in 2018, but the law’s impact spreads beyond California’s borders.  The law sets living space standards for sows, egg-layers, and veal calves—sows must have 24 square feet or more of space, egg-laying hens require at least 144 square inches, and veal calves must have at least 43 square feet.  Commonly used gestation crates for sows and battery cages for hens would not meet California’s space standards.  And Proposition 12 also prohibits the sale of products from any animal whose housing does not comply with the living space requirements. That prohibition doesn’t apply just to products of animals raised in California, but to products of animals raised anywhere and sold in California. Selling pork, eggs, or veal from animals not raised according to the standards is a crime that could result in fines, jail sentences, and civil actions.

Challenges to Proposition 12.  The out-of-state application of Proposition 12 immediately raised concerns across the United States.  Several lawsuits followed, with the primary argument being that Proposition 12 violates the Commerce Clause of the U.S. Constitution, which grants Congress the authority “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”  The Supreme Court has long determined that implicit in the Commerce Clause is a restriction on the ability of states to pass legislation that discriminates against or excessively burdens interstate commerce, referred to as the “dormant Commerce Clause.”  Opponents of Proposition 12 argue that California has burdened interstate commerce by prohibiting sales of products within the state from out-of-state livestock producers who do not comply with the California state law for animal housing. 

Federal courts disagreed with the commerce clause argument in an earlier challenge to Proposition 12, North American Meat Institute v Becerra, for which the Supreme Court of the U.S. (SCOTUS) declined review.  Another case, Iowa Pork Producers v Bonta, also alleged Commerce Clause violations along with several other constitutional challenges, and that case is now on appeal after being dismissed by a federal district court in California. 

A federal district court also dismissed the current National Pork Producers case, presented again on a Commerce Clause claim.  The Ninth Circuit Court of Appeals upheld that dismissal while agreeing that the law would “require pervasive changes to the pork production nationwide.”  The court concluded, however, that National Pork Producers had not stated a constitutional claim by alleging that Proposition 12 discriminates against out-of-state interests.  Absent a showing of discrimination, “a state law may require out-of-state producers to meet burdensome requirements in order to sell their products in the state without violating the dormant Commerce Clause.”  As long as the only conduct regulated by the law is conduct within California, the court explained, significant upstream effects beyond California would not violate the Commerce Clause.  Last April, the Supreme Court accepted the request to review the Ninth Circuit’s decision.

The SCOTUS review.   National Pork Producers, joined by the American Farm Bureau Federation, raises two questions in the current case before SCOTUS.  The first is whether the economic effects outside of California that require pervasive changes to an integrated nationwide industry state a violation of the dormant Commerce Clause.  The second question is whether Proposition 12 states a Commerce Clause claim according to an earlier SCOTUS decision in Pike v. Bruce Church, which held that even when a law doesn’t discriminate on its face against interstate commerce, the law is not permissible if its burdens greatly exceed the benefits to local commerce.

The petitioners argue that Proposition 12 is “impermissibly extraterritorial” because 99.87% of all pork sold in California comes from producers outside of the state.  They claim that the practical effect of Proposition 12 is to regulate out-of-state commerce and require significant and costly changes to sow housing across the country.  Proposition 12 also fails the Pike v Bruce Church balancing test because its "false human health rationale and philosophical preferences about conduct outside of California are outweighed by the “wrenching effect” the law has on interstate commerce."

On the opposite side, California describes the law's impact as having only a “ripple effect” both within and outside of California rather than creating an impermissible extraterritorial effect.  An upstream, practical effect, California argues, is not sufficient to render a state law invalid under the Commerce Clause.  Claiming that the petitioners overstate the economic effects of the law, the State argues that it would not be impossible to segregate animals to meet California requirements while continuing housing requirements for other markets.  California argues that “there is nothing illegitimate or insubstantial about the voters’ expressed purpose of addressing extreme methods of farm animal confinement and potential threats to the health and safety of California consumers.” 

Implications:  who should control farm animal welfare standards?  National Pork Producers and California’s Proposition 12 raise a critical question about the future of farm animal welfare standards.  Should such standards be determined on a state-by-state basis, or should there be a uniform federal standard?  While the federal Animal Welfare Act does establish animal care standards, it does not apply to farm animal care.  In the absence of a federal law for farm animals, eight states have joined California in addressing farm animal housing standards.  Ohio is one of them.  Ohio’s Livestock Care Standards for swine housing will prohibit the use of sow gestation crates after December 31, 2025, except in special circumstances.  Unlike California, however, Ohio’s law does not prohibit retail sales from animals that aren’t housed according to the state standards.  Only California and Massachusetts tie housing standards compliance to retail product sales and criminal penalties, raising the issue of controlling producers beyond the state’s borders.  A federal law, on the other hand, would equally affect all producers across the country and could preempt restrictions on sales such as in Proposition 12, but would place control over farm animal care practices in the hands of the federal government.  Perhaps we’ll more carefully analyze the federal-state question after SCOTUS issues its decision in National Pork Producers, expected early next year.

The Supreme Court will hear the oral arguments in National Pork Producers v Ross at 10:00 a.m. on Thursday, October 11.   Live audio will be available at https://www.supremecourt.gov/oral_arguments/.

Justices of the Supreme Court of the United States
By: Peggy Kirk Hall, Thursday, September 29th, 2022

The first two weeks of the U.S. Supreme Court’s new term are important ones for agriculture.  The Court will hear arguments in two critical cases:  the “Sackett” wetlands case and a challenge to California’s animal welfare law, Proposition 12.  The new term for the Supreme Court (SCOTUS) begins October 3, with the Sackett case up as the Court’s first hearing.  The Court will hear the Proposition 12 case on October 11.  We focus this article on the Sackett case and will preview the Proposition 12 case next week.

The Sackett wetlands case, round 1.  The Sacketts may have become household names across the country in 2012, after the U.S. EPA prohibited Michael and Chantell Sackett from building a home on land they had purchased near Priest Lake, Idaho.  The Sacketts had filled wetlands on the property in preparation for construction, but the EPA issued a compliance order prohibiting further filling or construction and requiring restoration of the site.  The agency claimed authority to do so by declaring the wetlands to be “navigable waters of the United States” subject to the Clean Water Act (CWA).  The Sacketts challenged the order and EPA’s authority over their land.  However, lower federal courts declined to hear the case, believing the compliance order was not yet a “final agency action” that could be reviewed since the EPA had not yet enforced the order.  The case proceeded to its first appearance before SCOTUS, where the Court held that the compliance order was indeed a final agency action that could be reviewed in court. 

Back in court.  The Sackett case returned to the lower courts for determining whether the EPA had authority over the Sackett property.  The issue became a common one for CWA cases:  whether the Sackett wetlands were “waters of the United States” that fall under the CWA and the EPA’s authority.  The challenge of that issue, however, is determining which “test” to apply to the situation.  A court establishes a “test” as a framework for analyzing an issue.  Over the years, courts have struggled to agree on a clear test for determining when a wetland qualifies as “waters of the United States” that are subject to the CWA.  At this time, there are two competing tests developed by the Supreme Court:  the “significant nexus” test advocated by Justice Kennedy and the “continuous surface connection” test proposed by Justice Scalia.  Both the Trump and Biden administrations have also attempted to clarify the proper test by way of agency rulemaking, but those efforts are now tied up in litigation and revised rulemaking.

The Ninth Circuit decision.  The Sacketts are now before SCOTUS for a second time because they believe the Ninth Circuit Court of Appeals did not use the proper test in their case.  The appellate court applied the “significant nexus test,” which states that wetlands are “waters of the United States” when there is a “significant nexus” between the wetlands and navigable waters, as determined when the wetlands “either alone or in combination with the similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other cover waters more readily understood as ‘navigable.’”  The significant nexus test represents a broader definition and would subject more wetlands to EPA authority than Justice Scalia’s test.  Many argue that it’s also unclear and creates uncertainty for landowners.

The SCOTUS appeal.  The question the Sacketts now raise with SCOTUS is whether the significant nexus test applied by the Ninth Circuit was the proper test to use for its wetland determination.  The Sacketts argue that it isn’t.  They also urge SCOTUS to adopt an alternative test akin to Justice Scalia’s test in Rapanos v. U.S., which states that wetlands should have a “continuous surface connection” to “relatively permanent, standing or flowing bodies of water” to be deemed “waters of the U.S.”  The Scalia test, by requiring a continuous surface connection between wetlands and “permanent” waters, would narrow the extent of wetlands that are subject to the Clean Water Act. 

Predictions.   The Supreme Court surprised many when it announced its decision to once again review the Sackett case.  Given the changes to the composition of the Court since it heard the Rapanos case back in 2006, a logical prediction is that the Court will not only set aside the Ninth Circuit’s application of the significant nexus test, but will also adopt Justice Scalia’s test as the proper way to determine when a wetland is a “water of the United States” subject to EPA jurisdiction under the Clean Water Act.  We won’t know whether those predictions will become truth until sometime in 2023, when we can expect another Sackett decision from the Court.

Listen to the arguments in Sackett v EPA at 10:00 am on Monday, October 3 on the SCOTUS website at https://www.supremecourt.gov/oral_arguments/live.aspx or listen to the arguments on sites like https://www.c-span.org/supremeCourt/.

By: Robert Moore, Tuesday, September 27th, 2022

Legal Groundwork

For people who are concerned about potential long-term care (LTC) costs, LTC insurance may be an option.  Several insurance companies sell these policies that pay out to cover some or all LTC costs.  There are many different types of policies and coverages available.  For example, some coverages may start soon after LTC is needed while some coverages will not begin to pay for a longer period, sometimes as long as one year.  Also, some policies are combined with a death benefit so that the policy holder can be sure that at least some benefit will come from the policy.   The following are some, but not all, of the terms and conditions to consider when exploring a LTC insurance policy:

Duration of Benefits.  Most policies cover at least one year and may cover up to five.  Policies that cover more than five years are no longer available.  Obviously, a longer-term policy is preferable but that must be balanced against the higher premiums.

Benefit Triggers.  The LTC policy will only start to pay out when certain triggers, or conditions, are met.  Before paying out, most policies require the policy holder to need assistance with at least two of the following activities: bathing, dressing, toileting, eating, transferring and continence.  Be sure to understand what conditions are required for payout to be triggered.

Waiting Period.  Policies will include a waiting period.  The waiting period may be a few days or as long as one year.  The longer the waiting period the lower the policy premiums will be.  

Daily Benefit Amount.  A LTC policy will include a daily benefit amount.  Some policies may pay 100% of the daily LTC costs.  Other policies may only cover 50% of the LTC costs.  The policy can be used to cover only that portion of LTC costs that income does not.

Inflation Protection.  Like any cost, LTC costs will increase over time.  Some policies will have inflation adjustment built in and automatically increase over time.  Other policies will offer the holder the ability to increase the coverage to keep up with inflation but this will also increase the premium.  It is important to know what type of inflation adjustment provision is in a policy.

Depending on the type of policy and robustness of coverage, LTC policies can be expensive.  Not everyone will be able to fit LTC policy premiums into their budget.  Also, not everyone is insurable.  People with significant pre-existing health care issues may not be able to obtain a LTC policy.

If a policy can be obtained to cover all LTC costs or at least cover the deficiency that income does not cover, all assets will be protected.  Therefore, the owner can keep all their assets and continue to enjoy and use them for the remainder of their lives.  LTC insurance policies, in many ways, provide the most flexible LTC plan.

It is worthwhile to at least explore incorporating a LTC insurance policy into a LTC management plan.  Many insurance agents and financial advisors can provide free estimates for policies without too much difficulty.  They can also help with a risk assessment to determine what policy may be needed for a given circumstance.  Before assuming that assets must be gifted or transferred to protect them, the possibility of LTC insurance should be explored.

Posted In: Estate and Transition Planning
Tags: long-term care
Comments: 0
By: Robert Moore, Thursday, September 22nd, 2022

Legal Groundwork

End-of-life decisions and directives can be one of the hardest parts of estate planning.  However, having an advanced directive can save your loved ones much stress and anguish in an already difficult time.  The end-of-life directives are typically completed as part of the estate planning process but can be done at any time, independent of the estate planning process.   

An end-of-life directive can be included in a Health Care Power of Attorney (HCPOA).  The HCPOA is a document that identifies a person (Agent) who has authority to act for someone (Principal) when the Principal is not able to act for themselves.  An end-of-life directive in a HCPOA gives the Agent authority to withdraw artificial life support. However, the Agent is only permitted to withdraw life support if two physicians have determined that the Principal is permanently unconscious.

A Living Will can also be used as the end-of-life directive.  This document states that in the event two physicians have determined a person to be permanently unconscious, the physician or hospital is directed to withdraw artificial life support.  The Living Will is essentially a person’s statement that they do not want to be kept on life support.

There are usually two different lines of thinking when it comes to deciding between the HCPOA and Living Will for the end-of-life directive.  Generally, the decision to use the HCPOA as the end-of-life directive sounds something like: “this is a really important decision, I want a family member involved”.  With a Living Will, the thought is: “I don’t want to burden my family with the end-of-life decision, I don’t want to be kept on life support”.

There is no right or wrong answer as to whether to use a HCPOA or Living Will as the end-of-life directive.  However, it is important to make the decision and have an end-of-life directive in place.  In an already difficult and stressful time, the end-of-life directive will lessen the burden on your loved ones by expressly stating your wishes as to artificial life support.

Normally, it is advisable to have an attorney draft legal documents.  However, the HCPOA and LW are documents that can be completed without the assistance of an attorney.  A few years ago, the medical community and legal community cooperated to develop a standard form for the HCPOA and Living Will.  These documents can be downloaded from the internet and completed relatively easily. The HCPOA can be downloaded at https://my.clevelandclinic.org/-/scassets/files/org/medicine-institute/health-care-power-of-attorney-form.pdf?la=en and the Living Will can be downloaded at https://my.clevelandclinic.org/-/scassets/files/org/medicine-institute/ohiolivingwill.pdf?la=en .  Each document includes an explanation and instruction section.

If you do not have an end-of-life directive in place, do your loved ones a favor and complete one now. Having an end-of-life directive will help your loved ones deal with a difficult situation a little more easily.

Ohio farm and rural road
By: Peggy Kirk Hall, Tuesday, September 20th, 2022

Did you know yellow grove bamboo is on Ohio’s “noxious weeds” list?  We’ve seen an increase in legal questions about bamboo, a plant that can cross property boundaries pretty quickly and create a neighbor dispute.  Weeds often cause neighbor issues, which is why Ohio has a set of noxious weed laws.  The laws aim to resolve problems around yellow grove bamboo and other species designated as “noxious weeds.”

The noxious weeds list

The Ohio legislature designated shatter cane and Russian thistle as noxious weeds years ago, then granted the Ohio Department of Agriculture (ODA) the authority to determine other noxious weeds that could be prohibited in Ohio.  Since that time, the noxious weed list has grown to include 31 weed species.   Two of the species, yellow grove bamboo and grapevines, are noxious weeds only if not managed in a certain way.  The list includes the following:

  • Shatter Cane
  • Kudzu
  • Russian Thistle
  • Japanese knotweed
  • Johnsongrass
  • Field bindweed
  • Wild parsnip
  • Heart-podded hoary cress
  • Canada thistle
  • Hairy whitetop or ballcress
  • Poison hemlock
  • Perennial sowthistle
  • Cressleaf groundsel
  • Russian knapweed
  • Musk thistle
  • Leafy spurge
  • Purple loosestrife
  • Hedge bindweed
  • Mile-A-Minute Weed
  • Serrated tussock
  • Giant Hogweed
  • Columbus grass
  • Apple of Peru
  • Musk thistle
  • Marestail
  • Forage Kochia
  • Kochia
  • Water Hemp
  • Palmer amaranth
  • Yellow Grove Bamboo, when spread from its original premise of planting and not being maintained
  • Grapevines: when growing in groups of 100 or more and not pruned, sprayed, cultivated, or otherwise maintained for 2 consecutive years

Talking about noxious weeds

Since noxious weeds can be harmful to all, the hope is that all landowners will manage noxious weeds effectively and reduce the possibility that the weeds will invade a neighbor’s property.  But for many reasons, that isn’t always the case.  When it appears that noxious weeds on a neighbor’s property are getting out of hand, first try to address the issue through neighbor communications.  A “friendly” discussion about the weeds might reveal helpful information that can reduce the neighbor conflict.  Maybe the neighbor has recently sprayed the weeds or isn’t aware of the weeds. Maybe the neighbor’s tenant is responsible for managing the land. Or, as is sometimes the case, maybe the suspected plants aren’t actually noxious weeds.  Good communication between the neighbors could bring a quick resolution to the situation.

Agronomic help with noxious weeds

Knowledge and management might be the solution to a noxious weeds problem between neighbors. For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.

Help with noxious weeds

Knowledge and management might be the solution to a noxious weeds problem between neighbors. For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.

Legal procedures might be necessary

If communication isn’t helpful or possible, the laws establish procedures for dealing with noxious weeds. Different procedures in the law apply for different weed locations.

  • If the weeds are in the fence row between two properties, a landowner has a right to ask the neighbor to clear the row of weeds within four feet of the line fence.  If the neighbor doesn’t do so within 10 days, the landowner may notify the board of township trustees.  Once notified, the trustees must visit the property and determine whether the fence row should be cleared.  If so, the trustees must hire someone to clean up the fence row.  The costs of the clearing are then assessed on the neighbor’s property taxes.
  • If the weeds are on private land beyond the fence row, a landowner can send written notice of the noxious weeds to the township trustees.  A letter describing the type and location of the weeds, for instance, would serve as written notice.  Once the trustees receive a written notice, they must notify the neighbor to cut or destroy the weeds or alternatively, to show why there is no need for such action.  If the neighbor doesn’t respond to the trustees and take action within 5 days of the notice being given, the trustees must order the weeds to be cut or destroyed.  The cost of destroying the weeds is then assessed on the neighbor’s property taxes.
  • If the neighbor is a railroad, the railroad must cut or destroy noxious weeds along the railway between June 1 and 20, August 1 and 20, and if necessary, September 1 and 20.  If a railroad fails to do so and the township trustees are aware of the problem, the trustees may remove the weeds and recover costs in a civil action against the railroad.  While the law doesn’t state it, a landowner may have to document whether the railroad follows the required cutting schedule and notify the trustees if it does not.
  • If the neighbor is the Ohio Department of Natural Resources or a park owned by the state or a political subdivision, the landowner must provide information about the noxious weeds to the township trustees.  The trustees then notify the county Extension educator, who must meet with a park authority and a representative of the soil and water conservation district within five days to consider ways to deal with the problem.  The Extension educator must report findings and recommendations back to the township trustees, but the law doesn’t require the trustees to take action on the report.  Apparently, the hope is that the problem would be resolved after considering ways to deal with it.

What if the neighbor leases the land?

We mentioned that sometimes a neighbor might not be tending to noxious weeds because it’s actually the responsibility of the neighbor’s tenant under a leasing arrangement, such as a farmland lease or a solar lease.  These types of leases should state which party is responsible for noxious weeds.  Note that the law recognizes the possibility of a leasing situation by requiring the trustee to notify the “owner, lessee, agent, or tenant having charge of the land” when the weeds are on private land and the “owner or tenant” when the weeds are in the fence row.  The “or” in these provisions can be problematic though, as that doesn’t require the township to notify both the neighbor and tenant.  A landowner might need to ask the trustees to communicate with both the neighbor and its tenant so that the parties are both aware and can resolve which is responsible for managing the noxious weeds according to the leasing arrangement. 

For more information about noxious weeds, refer to our law bulletins in the property law library on https://farmoffice.osu.edu.  For assistance identifying and managing noxious weeds, check out OSU’s guide on Identifying Noxious Weeds of Ohio at https://ohiostate.pressbooks.pub/ohionoxiousweeds/ and refer to helpful articles posted on OSU’s Agronomic Crops Network at https://agcrops.osu.edu.

Posted In: Crop Issues, Property
Tags: noxious weeds, Property, neighbor law
Comments: 0

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