Recent Blog Posts
There’s a lot of talk about carbon markets and agriculture these days. While carbon markets aren’t new, recent proposals in Congress and announcements by the Biden administration are raising new interests in them. Some companies are actively pursuing carbon trading agreements with farmers, further fueling the discussion in the agricultural community.
As is common for any new opportunity, the talk on carbon markets may be tinged with a bit of skepticism and a lot of questions. Do carbon sequestration practices have real potential as an agricultural commodity? That’s a tough question and the answer isn’t yet clear. There are answers for other questions, though, as well as resources that may be helpful for those considering carbon markets for the first time. Here’s a sampling.
What is a carbon market? A carbon market revolves around carbon credits generated by carbon reduction practices. In the farm setting, a producer who either lowers the farm’s carbon emissions or captures carbon through “sequestration” practices can earn carbon credits. Like other markets, a carbon market involves a transaction between a seller and a buyer. The seller sells a carbon credit to a buyer who can use the carbon credit to offset or reduce its carbon emissions.
Do carbon markets already exist? Yes, although they may be private markets with varying names occurring in different regions. For example, Bayer Crop Sciences began its Carbon Initiative last year, paying producers for adopting carbon reduction practices that will help Bayer reach its goal of reducing its greenhouse gas emissions by 30% in 2030. Indigo Ag began entering into long-term carbon agreements with producers in 2019, paying $15 per ton for carbon sequestration practices. Food companies and agribusinesses including McDonald’s, Cargill, and General Mills formed the Ecosystem Services Market Consortium, which will fully open its private carbon market in 2022.
Are legal agreements involved? Yes. Using a written agreement is a common practice in carbon market transactions, but the agreements can vary from market to market. Provisions might address acceptable practices, calculating and verifying carbon reductions including third-party verification, sharing data and records, pricing, costs of practices, minimum acreage, and contract period. As with other legal contracts, reviewing a carbon agreement with an attorney is a wise decision. Watch for more details about carbon agreements as we share our analysis of them in future blog posts.
What is President Biden considering for carbon markets? The Biden administration has expressed interest in developing a federal carbon bank that would pay producers and foresters for carbon reduction practices. The USDA would administer the bank with funding from the Commodity Credit Corporation. Rumors are that the bank would begin with at least $1 billion to purchase carbon credits from producers for $20 per ton. The proposal is one of several ideas for the USDA outlined in the administration’s Climate 21 Project.
What is Congress proposing for carbon markets? The bipartisan Growing Climate Solutions Act would require USDA to assess the market for carbon credits, establish a third-party verifier certification program overseen by an advisory council, establish an online website with information for producers, and regularly report to Congress on market performance, challenges for producers, and barriers to market entry. An initial $4.1 million program allocation would be supplemented with $1 million per year for the next five years. The Senate Agriculture, Nutrition and Forestry Committee has already passed the bill. The Rural Forest Markets Act, also a bipartisan bill, would help small-scale private forest landowners by guaranteeing financing for markets for forest carbon reduction practices.
Is there opposition to carbon markets? Yes, and skepticism also. For example, a recent letter from dozens of organizations urged Congress to “oppose carbon offset scams like the Growing Climate Solutions Act” and argued that agricultural offsets are ineffective, incompatible with sustainable agriculture, may further consolidate agriculture and will increase hazardous pollution, especially in environmental justice communities. The Institute for Agriculture & Trade Policy also criticizes carbon markets, claiming that emission credit prices are too low and volatile, leakages and offsets can lead to accountability and fraud issues, measurement tools are inadequate, soil carbon storage is impermanent, and the markets undermine more effective and holistic practices. Almost half of the farmers in the 2020 Iowa Farm and Rural Life Poll were uncertain about earning money for carbon credits while 17% said carbon markets should not be developed.
To learn more about carbon markets, drop into an upcoming webinar by our partner, the National Agricultural Law Center. “Considering Carbon: The Evolution and Operation of Carbon Markets” on May 19, 2021 at Noon will feature Chandler Van Voorhis, a leading expert in conservation and ecological markets. The Center also has a recording of last month’s webinar on “Opportunities and Challenges Agriculture Faces in the Climate Debate,” featuring Andrew Walmsley, Director of Congressional Relations and Shelby Swain Myers, Economist, both with American Farm Bureau. A new series by the Center on Considering Carbon will focus on legal issues with the carbon industry and will complement our upcoming project on “The Conservation Movement: Legal Needs for Farm and Forest Landowners.” There’s still more talking to do on carbon markets.
The final day of April is already here! Spring feels like it has finally arrived and planting season is in motion across Ohio. Just like farmers in the field, legislatures, government bodies, and courts across the country are hard at work addressing critical agricultural and resource law issues. We've gathered a collection of those issues for this Ag Law Harvest.
Debt relief for socially disadvantaged farmers is in the works. The USDA has announced its plans for implementing debt relief to socially disadvantaged producers mandated by the American Rescue Plan Act of 2021 that Congress passed in March. The payments will be 120% of any outstanding Farm Service Agency Direct and Guaranteed Farm Loans and Farm Storage Facility Loans held by a socially disadvantaged farmer on January 1, 2021. The additional 20% on top of the loan balance is for tax liabilities associated with the payment, as it will be considered income. For purposes of this debt relief program, a “socially disadvantaged producer” is one who is Black or African American, American Indian, Alaskan Native, Hispanic or Latino, Asian American or Pacific Islander. A producer must indicate the identification on the Customer Data Worksheet, USDA Form AD-2047, filed with the FSA. Producers who fit into the socially disadvantaged producer definition can update those forms now with the local FSA office. No other action by a producer who is eligible for the debt relief is necessary, as the FSA will notify producers of the payoff process as it occurs. For more information, visit this webpage for the USDA’s American Rescue Plan Debt Payments.
Missouri’s Truth in Labeling Law. In 2018, Missouri enacted a law making it a criminal offense to “misrepresent a product as meat that is not derived from harvested production livestock or poultry.” Violators could potentially face up to one year in prison and/or a fine up to $2,000.00. Shortly after the law went into effect, Turtle Island Foods Inc., a business that makes Tofurky (an alternative meat product) and advocacy groups such as the Animal Legal Defense Fund (collectively the “Plaintiffs”), filed a lawsuit challenging Missouri’s law on the grounds that the law violated the U.S. Constitution including the Free Speech Clause of the First Amendment, the Due Process Clause of the Fourteenth Amendment, and the Dormant Commerce Clause. The district court denied Plaintiffs’ request for an injunction determining that Missouri’s law only prohibits companies from misleading consumers. Plaintiffs then appealed to the federal circuit court. Last month the Eighth Circuit Court issued its opinion and agreed with the district court. However, the Eighth Circuit noted that the facts of this specific case did not support overturning Missouri’s law, but that facts and circumstances of another case may provide otherwise. As it stands, Missouri’s law remains in full force and effect.
Renewable Fuel Standard deadlines extended. The EPA issued its final rule extending deadlines for obligated parties to comply with Renewable Fuel Standard deadlines for 2019 and 2020. Under the extension, small refineries must submit 2019 compliance forms by November 30, 2021, and their associated attest engagement forms by June 1, 2022. For 2020, obligated parties must submit their compliance documents by January 31, 2022, and their associated attest engagement reports by June 1, 2022. Lastly, the EPA extended the deadline for obligated parties to submit attest engagement reports for 2021 to September 1, 2022, the deadline for 2021 compliance documents remains unchanged.
Ohio man sentenced for stealing grain. How often do you hear of farmers being victims of theft and a criminal on the run? Well, last month an Ohio man was sentenced to one year in prison and 5 years of probation after stealing over $94,000.00 in harvested grain. The defendant took his employer’s gravity wagon full of grain and sold it to a local co-op in Ashland County under false pretenses. After the theft was discovered, the defendant fled from Ohio, eventually having to be extradited from New Mexico. This case demonstrates just how vulnerable farmers are to potential crimes. For more information on intentional harm to farm property and your rights, check out our law bulletin.
Iowa passes agricultural trespass law. Iowa lawmakers have recently passed a new law that will make certain types of trespass on Iowa farms a criminal offense in an effort to stop animal activists and others from secretly documenting activities. House File 775 makes it illegal to take soil or water samples and samples of an animal’s bodily fluids or other byproducts. Additionally, the law makes it a crime to place or use a camera on the farm property without the owner’s consent. Proponents of the law argue that such laws are necessary to protect private property rights and prevent bioterrorism. Opponents of the bill are expected to challenge the law on First Amendment grounds.
USDA discussing current issues surrounding shipping U.S. agricultural exports. USDA had a meeting with the U.S. Department of Transportation and agricultural stakeholders to discuss the challenges of exporting U.S. agricultural products. Challenges arose in the fall of 2020 and have only continued to get worse. With the resurgence of international trade, nearly every sector of the supply chain has been under stress, including warehousing, trucking, rail service, container availability, and vessel service. Farmers have long struggled with finding a market for their products and getting a fair price for their work. With worldwide markets opening back up, the USDA and the Department of Transportation are hard at work trying to ensure that U.S. farm products reach consumers across the globe.
Farmers to Families Food Box program to end May 31, 2021. As part of the Coronavirus Food Assistance Program announced in April 2020, the Farmers to Families Food Box program was designed and implemented as a temporary relief effort to purchase produce, dairy, and meat products from American farmers and distribute these products in family-sized boxes to Americans in need. In a letter to stakeholders, the USDA announced that due to the improving economy and the access food insecure Americans have to expanded federal nutritional programs like SNAP, WIC, P-EBT, and more, the need for the Farmers to Families Food Box program no longer exists. The USDA also stated that the lessons learned from the Farmers to Food Box program will continue to be implemented in current and future programs. The USDA has already begun to offer a fresh produce box on a temporary basis through The Emergency Food Assistance Program (TEFAP) and is in the process of designing a Dairy Donation Program to facilitate the timely donation of dairy products to nonprofit organizations that distribute food to persons in need and to help prevent and minimize food waste.
Grant program to enhance the waters of Lake Erie. The Ohio Department of Agriculture (ODA) has announced that the USDA has awarded ODA’s Division of Soil and Water Conservation a five-year, $8-million grant to help improve the water quality in Lake Erie. The program will reinforce Governor Mike Dewine’s H2Ohio initiative by assisting farmers in developing nutrient management plans and conservation practices. The grant will be available to farmers in Crawford, Erie, Huron, Marion, Ottawa, Richland, Sandusky, Seneca, Shelby, and Wyandot counties. Farmers can start applying for the program through their local soil & water district office later this summer.
Radio Frequency Identification (RFID) tags replacing the branding iron? Last year the USDA’s Animal and Plant Health Inspection Service proposed to approve a rule that would require using RFID eartags for use on cattle that move across state lines. While the rule has not yet been finalized, the proposed rule, which is supposed to take effect January 2023, has not been free of controversy. The USDA believes the use of a RFID tag will provide the cattle industry with the best protection against the rapid spread of animal diseases. Some farmers, on the other hand, feel they should be able to use currently approved methods to maintain their cattle. To fight for their right, the Ranchers Cattlemen Action Legal Fund (R-CALF) has filed a lawsuit in a Wyoming Federal Court on behalf of some Wyoming cattle producers. R-CALF argues that the USDA has improperly used advisory committees to create new rules in violation of the Administrative Procedure Act and the Federal Advisory Committee Act. Essentially, R-CALF argues that neither the USDA nor its subcommittees followed correct procedure as required by federal law in order to create this proposed RFID rule. R-CALF seeks to prevent the USDA from using the recommendations obtained from the subcommittees in violation of federal law and in its place ask the court to require the USDA to revisit the RFID eartag issue with subcommittees that are compliant with federal law.
All farm employees are set to receive overtime pay in the state of Washington. Last November the Washington Supreme Court ruled that Washington’s exclusion of dairy workers from overtime pay was in violation of the state’s constitution. Since the Washington Supreme Court ruling, several class-action lawsuits were filed against Washington dairy farmers for unpaid overtime hours, threatening to wipe out the Washington dairy industry. Fearing the worst, Washington legislators worked diligently to pass Senate Bill 5172 ending the overtime exemption for all of agriculture and to make the transition for agricultural employers as smooth as possible. The prevents lawsuits for unpaid overtime from being filed after the Washington Supreme Court decision and to phase in overtime in the agriculture industry. Beginning in 2022, agricultural employees will be paid overtime for time worked over 55 hours in any one workweek and by 2024, employees shall be paid overtime for any time worked over 40 hours in any one workweek. Senate Bill 5172 awaits the Washington Governor's signature.
President Biden announced a major goal this week--for the U.S. to reduce greenhouse gas emissions by half over the next decade as compared to 2005 levels. Agriculture will play a key role in that reduction by “deploying cutting-edge tools to make the soil of our heartland the next frontier in carbon innovation,” according to President Biden. Several bills introduced in Congress recently could help agriculture fulfill that key role. The proposals offer incentives and assistance for farmers, ranchers, and forest owners to engage in carbon sequestration practices.
Here’s a summary of the bills that are receiving the most attention.
Growing Climate Solutions Act, S. 1251. The Senate Agriculture, Nutrition and Forestry Committee passed S. 1251 today. The bipartisan proposal led by sponsors Sen. Mike Braun (R-IN), Sen. Debbie Stabenow (D-MI), Sen. Lindsey Graham (R-SC) and Sen. Sheldon Whitehouse (D-RI) already has the backing of over half of the Senate as co-sponsors, including Ohio’s Sen. Sherrod Brown. The bill has come up in prior sessions of Congress without success, but the sponsors significantly reworked the bill and reintroduced it this week. The new version includes these provisions:
- Requires the USDA to conduct an initial assessment of the domestic market for carbon credits, to include assessing market actors, market demand, estimated credits in process, supply and demand of offsets, barriers to entry, monitoring and measurement technologies, barriers for small, beginning and socially disadvantaged operators, among other factors.
- Creates a Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Certification Program to ensure that technical service assistance providers who work with farmers to establish and sell carbon credits have sufficient expertise, including agricultural and forestry knowledge. Certified parties are to act in good faith to provide realistic estimates of costs and revenues and to help farmers, ranchers and forester receive “fair distribution of revenues” derived from carbon credit sales.
- Establishes an online website providing information for farmers, ranchers and foresters interested in participating in carbon markets.
- Creates an advisory council that would oversee the certification program. At least 16 of the committee’s 25 members must be farmers, ranchers, or private forest owners.
- Charges the USDA with producing a report to Congress identfying barriers to market entry, challenges raised by farmers and forest owners, market performance, and suggesting additional ways to encourage voluntary participation in carbon sequestration practices.
- Authorizes up to $9.1 million in USDA funding for the program, including $4.1 million immediately and an additional $1 million per year for the next five years.
Rep. Don Bacon (R-NE) and Rep. Abigail Spanberger (D-VA) will soon introduce companion legislation in the House of Representatives.
Rural Forest Markets Act, S. 1107. A second proposal in Congress aims to remove barriers for small-scale private forest landowners and help them benefit from carbon markets and other climate solution markets. Senators Stabenow and Braun are also sponsors of this bill, along with Sen. Angus King (I-Maine) and Sen. Shelley Moore Capito (R-WV). The bill echoes previous similar legislative attempts and includes these provisions:
- Directs the USDA to create a Rural Forest Market Investment Program to guarantee up to $150 million to finance eligible projects for rural private forest landowners to participate in an “innovative market for forest carbon or other products.”
- States that eligible projects will be those developed by private entities or nonprofits to aggregate sustainable practices by rural private forest landowners for sales in a carbon or environmental market, using approved methodologies.
- Requires that eligible tree planting projects may take place only on historically forested lands using native species and be planted at ecologically appropriate densities without causing negative impacts to biodiversity or the environment.
The interest in carbon reduction practices and monetizing carbon sequestration at the federal level doesn’t end with these two proposals—there are several more that may gain interest. While not addressing private landowners, another Senate proposal focuses on public land reforestation. The “Repairing Existing Public Land by Adding Necessary Trees Act” (REPLANT Act), with Ohio’s Sen. Rob Portman as a sponsor, proposes increased funding in the Reforestation Trust Fund for replanting 1.2 billion trees over the next ten years on public land in need of reforestation. The USDA is weighing in on the issue as well, and has recently announced plans to target carbon reduction through existing programs such as the Conservation Reserve Program. And just after passing the Growing Climate Solutions Act today, the Senate Agriculture, Nutrition, and Forestry Committee held a hearing on “Farmers and Foresters: Opportunities to Lead in Tackling Climate Change” featuring testimony from several farmers and groups. Readers may get a sense of what more is to come by viewing the hearing on the committee’s website.
Ohio’s planting season will hopefully soon be as busy as its legislative season. There’s a lot of activity down at the capitol these days and many legislative proposals are on the move. Here’s a summary of bills that could impact agriculture and rural communities. Note that the summary doesn't include the budget bill, which we'll address in a separate article.
Water quality bonds. A joint resolution recently offered in the Senate supports amending Ohio’s Constitution to create permanent funds for clean water improvements. S.J.R. 2, a bipartisan proposal from Theresa Gavarone (R-Bowling Green) and Kenny Yuko (D-Richmond Hts.) would place a ballot issue before voters in November. The issue proposes amending the Constitution to allow for the issuance of general obligation bonds to fund clean water improvements. Up to $1 billion over 10 years would be permissible, with no more than $100 million allocated in any fiscal year. Bond funds would create a permanent source of funding for the H2Ohio program, which is now dependent upon the state budget process.
Animal-drawn vehicles. A bill to increase the visibility of animal-drawn vehicles has passed the House this session after failing to make it through the legislature in the last session. H.B. 30, sponsored by Scott Wiggam (R-Wooster) and Darrell Kick (R-Loudonville), would require animal-drawn vehicles at all times to display a flashing yellow light on top that is visible from all sides of the vehicle, along with an SMV emblem and/or reflective micro-prism tape on the rear of the vehicle. The bill now awaits introduction in the Senate.
Regulations. Senate Republicans reintroduced a proposal from last session to reduce administrative regulations and the Senate has already passed the measure. S.B. 9, sponsored by Kristina Roegner (R-Hudson) and R. McColley (R-Napoleon), mandates that each state agency must reduce its regulatory restrictions 10% by 2023, 20% by 2024 and 30% by June of 2025. The bill establishes criteria for reviewing rules and restrictions for elimination and would place a statewide cap on regulatory restrictions in 2024, to be determined by the Joint Committee on Agency Rule Review. Each agency must also prepare an inventory and annual reports of its progress. The bill has not been introduced in the House.
Fair funds. A bill directing $300 million to help businesses recover from COVID-19 includes funds for Ohio’s fairs. S.B. 109, sponsored by Nathan Manning (R-N. Ridgeville) and Michael Rulli (R-Salem) includes an allocation of $4.7 million from the General Revenue Fund to the Ohio Department of Agriculture to provide financial support to county and independent fairs. The funds would be in addition to the $50,000 allocated per junior fair for the 2020 fair season from the federal CARES Act. The bill has passed the Senate and been introduced in the House, where it has received a hearing before the Economic and Workforce Development committee.
Broadband services. There is definite interest in expanding broadband access in Ohio, but the House and Senate have different proposals for doing so. Two different bills would create a grant program in the Development Services Agency to fund eligible broadband expansion projects and enable access to electric cooperative poles for distribution purposes. S.B. 8, proposed by Rob McColley (R-Napoleon), allocates $20 million for the program in 2022, while H.B. 2, sponsored by Rick Carfagna (R-Genoa Twp.) and Brian Stewart (R-Ashville) proposes $170 million of funding for fiscal years 2021 to 2023. Both bills have passed their respective chambers and are under consideration in the Senate Financial Institutions and Technology committee and the House Finance committee. Amendments under consideration in those committees include expanding the grant program to government providers and electric distribution utilities and further defining adequate broadband speeds.
Eminent domain. A House bill proposed by Al Cutrona (R-Canfield) and Reggie Stoltzfus (R-Paris Township) would amend Ohio’s eminent domain law in relation to recreational trails. H.B. 63 would allow a municipality or township to veto the use of eminent domain for a recreational trail in its jurisdiction upon request by a property owner subjected to the eminent domain action. In two hearings before the Civil Justice committee, over a dozen landowners affected by a bike path in Mahoning County testified in support of the bill. The bill has stalled however, with no further hearings on the proposal currently scheduled.
Beginner farmer credits. A bipartisan bill to help beginning farmers has passed out of committee and awaits a vote in the House. H.B. 95, sponsored by Susan Manchester (R-Waynesfield) and Mary Lightbody (D-Plain Township) establishes a tax credit for businesses that sell or rent land, animals, facilities, or equipment to a beginning farmer. Individuals with a net worth of less than $800K who are seeking entry into farming or have been farming less than ten years, will provide daily labor and rely upon farming income, demonstrate profit potential, and have sufficient knowledge and financial training can be certified by the Ohio Department of Agriculture as a beginning farmer. Income tax credits for businesses that sell or rent assets to beginning farmers would be 5% of the sale price of an agricultural asset, 10% of the annual gross rental income on a cash lease, or 15% of the gross rental income on a share lease. Additionally, beginning farmers who attend an approved financial management program can receive a tax credit for the cost of the program.
Wind farms and solar facilities. Sponsors are reconsidering controversial twin proposals that would allow citizens to use the referendum process to reject proposed wind and solar energy developments in their communities. Senators Bill Reineke (R-Tiffin) and Rob McColley (R-Napoleon) and Representatives Craig Reidel (R-Defiance) and Dick Stein (R-Norwalk) announced they will redraft their proposal after completing three hearings a piece on S.B. 52 and H.B. 118. In the hearings, opponents argued the bill would dampen the growing renewable energy industry in Ohio, be costly to project developers, and cost jobs. Supporters claimed the bill protects property rights and gives property owners and local communities a necessary voice in the siting of large-scale wind and solar developments. An alternative proposal under consideration by the sponsors would create a process for communities that want wind and solar developments to signal their interest early while still allowing those that don’t want the development to use a referendum process. A substitute bill is expected soon.
OSU Farm Financial Management Institute. Companion bills S.B. 128 sponsored by Bob Peterson (R-Washington Court House) and H.B. 239 sponsored by Rodney Creech (R-West Alexandria) would revise an existing law that establishes a Farm Financial Management Institute at OSU. The Institute purpose would be to “train interested and qualified persons to assist farmers in addressing integration of farm production practices, agricultural marketing, farm policy, and financial management challenges.” The bill proposes funding of $250K per year for fiscal years 2022 and 2023, renaming the Institute to the “OSU Farm Production, Policy, and Financial Management Institute,” and adding farm owners and managers as priority participants. The Senate bill is up for a possible vote by the Workforce and Higher Education Committee on April 21 and H.B. 239 will receive its first hearing with the Agriculture and Conservation Committee on April 20.
Two bills that have already passed this session include:
State and federal tax conformity. S.B. 18 conforms the state tax code with recent changes to the Internal Revenue Code made in the federal Consolidated Appropriations Act. It also exempts forgiven Paycheck Protection Program second draw loan proceeds and Bureau of Workers Compensation dividend rebates from the Commercial Activity Tax. The bill was effective upon passage so that its provisions would apply to the 2020 tax season.
Contract limitations. S.B. 13 will become effective June 16, 2021. After that date, the period of time for filing a legal action on a written contract will reduce from 8 to 6 years and the verbal contract limitations period will also reduce by two years, from 6 to 4 years.
Farms and financing--that's a common combination in agriculture. Because farm operators often use financing arrangements to fund the capital intensive nature of farming, we created the Financing the Farm law bulletin series. The series aims to help operators, especially new and beginning farmers, understand the legal workings of farm financing arrangements.
We've just added two new bulletins to the Financing the Farm series. "Personal Guarantees and Agricultural Loans" addresses the legalities of a personal guarantee--a personal promise made by a third party to pay the loan if the borrower fails to do so. We explain when lenders might require a personal guarantee for a loan, how a personal guarantee works, and issues and implications for entering into this type of agreement.
Our second new bulletin is "Understanding Farm Operating Loans." We discuss how operating loans can meet the cyclical needs of agricultural financing and review different types of operating loans. Security interests are a common feature of operating loans, and we explain that component of the loan agreement.
The new bulletins are available here on our Ag Law Library's Farm Finance Law shelf along with these other topics in the series:
- Promissory Notes
- Installment Contracts
- Leasing Arrangements
- Secured Transactions
- Statutory Agricultural Liens
We’re used to April showers in Ohio, but this year producers can also prepare for a showering of USDA pandemic assistance. Secretary Vilsack just announced the new “USDA Pandemic Assistance for Producers Initiative,” which will devote $12 billion to deliver financial assistance and programs for agricultural producers affected by COVID-19 market disruptions. The USDA aims to spread those programs to a wider set of producers than previous COVID-19 programs.
While many program details and rules are still under development and expected later this spring, several types of CFAP assistance are in motion now. First, the USDA announced the reopening of round two of the Coronavirus Food Assistance Program (CFAP2) on April 5. Producers who haven’t yet signed up for CFAP2 may do so for at least the next 60 days at https://www.farmers.gov/cfap/apply. USDA will be distributing $2.5 million in grants to further reach out to socially disadvantaged farmers who have not enrolled in CFAP2.
Several automatically issued payments are also in the works for eligible producers already enrolled in CFAP1 and 2. Producers need not submit new applications for these payments, and we’ve heard some producers have already received them. The payments include:
- Increased CFAP1 payment rates for cattle. Cattle producers eligible under CFAP1 will automatically receive payments based on inventory of cattle between April 16, 2020 and May 14, 2020. Rates per head will be $7 for feeder cattle less than 600 pounds, $25.50 for feeder cattle at 600 pounds or more, $63 for slaughter/fed cattle, $14.75 for slaughter/mature cattle and $17.25 for all other cattle.
- CFAP2 crop payments. Additional payments of $20 per acre for producers of eligible flat-rate or price-trigger crops under CFAP2, which includes Ohio crops of alfalfa, corn, hemp, sorghum, soybeans, sugar beets, wheat and other grains, listed at https://www.farmers.gov/pandemic-assistance/cfap.
- CFAP additional assistance payments. Formula adjustments and payments for applications filed under the CFAP AA program will include pullets and turfgrass sod, corrections for row-crop producers with non-Actual Production History insurance to use 100% of 2019 ARC-county option benchmark yield in the payment calculation, revisions to sales commodity applications to include insurance indemnities, noninsured Crop Disaster Assistance Program payments, and Wildfire and Hurricane Indemnity Program Plus payments.
The additional payments for swine producers and contract growers included in the CFAP Additional Assistance are not yet are their way. These payments are on hold as they will require regulatory revisions, but FSA is accepting applications at https://www.farmers.gov/pandemic-assistance/cfap.
Also in the still-under-development category is an additional $6 billion for new and modified programs from the Consolidated Appropriations Act as well as other unspent COVID-19 funds. The USDA projects that rules for these programs will also begin this Spring and will include funding for:
- Dairy Donation Program purchases and other assistance for dairy farmers
- Euthanized livestock and poultry
- Specialty crops, beginning farmers and local, urban, and organic farms
- Organic certification costs or to continue or add conservation activities
- Other possible expansion and corrections to the Coronavirus Food Assistance Program such as to support dairy or other livestock producers.
- Timber harvesting and hauling.
- Personal Protective Equipment (PPE) and other protective measures for food and farm workers and specialty crops and seafood processors and distributors.
- Improving the resilience of the food supply chain.
- Developing infrastructure to support donation and distribution of perishable commodities, including food donation and distribution through farm-to-school, restaurants, or other community organizations.
- Reducing food waste.
And that’s not all. Details for allocating an additional $500 million in new funding are also in development. That funding will be distributed as follows:
- $100M for Specialty Crop Block Program
- $100M for Local Agricultural Marketing Program
- $80M for Domestic Textile Mills Program
- $75M for Farmers Opportunities Training and Outreach Program.
- $75M for Gus Schumacher Nutrition Incentive Program
- $28M for National Institute of Food and Agriculture
- $20M for Animal and Plant Health Inspection Service (APHIS)
- $20M for Agricultural Research Service (ARS)
The USDA has stated that it will continue to develop program details and regulations through the spring. We’ll do our best to forecast what's to come, so stay tuned for more information on the Pandemic Assistance for Producers Initiative.
You can count on tax law to generate interest in the agricultural community and that’s certainly the case with several tax bills recently introduced in Congress. Within the last month, members of Congress proposed a flurry of tax proposals that could impact agriculture if enacted. Of course, passing tax legislation is always difficult and subject to partisanship, and we expect that to be the case with these bills.
Here’s a look at the tax proposals receiving the most attention.
Death Tax Repeal Act of 2021. Sen. Thune (R-SD) and Rep. Smith (R-MO) are the primary sponsors of S. 617 and H.R. 1712, companion bills introduced March 9 that propose to repeal the federal estate tax, which the sponsors claim to be “the most unfair tax on the books.” The Act would also repeal the generation-skipping tax and make modifications to the computation of the federal gift tax, beginning at 18% under $10,000 and incrementally increasing by an additional 2%. Cosponsors of the Senate proposal includes 30 other Republicans, and the House bill has 137 cosponsors including one Democrat. The bills were referred to committee but have yet to see any further action.
For the 99.5 Percent Act. Introduced March 25 by Senators Sanders (D-VT), Gillibrand (D-NY), VanHollen (D-MD), Reed (D-RI) and Whitehouse (D-RI) to “tax the fortunes of the top 0.5% and reduce wealth inequality,” this bill would reduce the federal estate tax exemption from its current level of $11.7 million per individual. Under the proposal, estates in excess of $3.5 million per individual and $7 million per couple would pay the estate tax, which would begin at 45% for estates between $3.5 and $10 million. The tax would increase incrementally, reaching 65% for estates over 1 billion. The proposal would also reduce the lifetime gift tax exemption from its current level of $11.7 million to $1 million but would not reduce the annual $15,000 per person per year gift tax exemption for cash gifts. It would limit the exemption for gifts to trust at $20,000 per year. Protections for farmland include allowing farmland value to be lowered by up to $3 million for estate tax purposes and increasing the maximum exclusion for conservation easements to $2 million. The bill would also prohibit reduced valuation for assets held in a pass-through entity, affecting the 35% valuation discount that is typical for farmland LLCs.
Sensible Tax and Equity Promotion (STEP) Act. A group of Democrats in the Senate introduced the STEP Act on March 29 in an effort to “close the stepped-up basis loophole by taxing unrealized capital gains when heirs inherit huge fortunes on which the original owner never paid income taxes.” The proposal would tax the transfer of property that has a net gain either during lifetime or at death. During lifetime, a completed transfer to a non-grantor trust or individual other than spouse would be subject to tax but the first $100,000 of cumulative gain would be exempt. At death, the first $1 million of appreciated assets would pass without taxation. Transfers to charity, spouses, charitable trusts, qualified disability trusts would be exempt, as would gains on residences up to $250,000 per individual or $500,000 for married couples. Taxes on illiquid property such as farms and some farm assets could be paid in installments over a 15-year period, and any taxes paid under the Act would be deductible from the federal estate tax. The bill would also require gains on non-grantor irrevocable trusts to be reported every 21 years.
Corporate Tax Dodging Prevention Act. Another bill by Sen. Sanders (D-VT) would go after the corporate tax rate. The bill would restore the top corporate tax rate to 35%, its level prior to the reduction to 21% by the Tax Cuts and Jobs Act of 2017. It also includes a number of provisions to reduce the ability of corporations to avoid paying federal taxes by moving income and profits offshore.
We are likely to see several more tax proposals in Congress in the coming year and time will tell whether any of them will have traction. Some may merely be bargaining chips among the many legislative agendas in Washington. One thing is certain--tax bills will continue to generate interest in the agricultural world, so we’ll keep readers updated on these and future proposals.
When was the last time you read your farm business insurance policy? Under your policy, do you know when coverage is triggered for loss of business profits and loss of assets? In the case below, you will learn about a dairy farm that recently dealt with the issue of stray voltage causing dairy cattle to unexpectedly pass away. Even though the farm had insurance, the farm continued to operate, albeit at a reduced capacity, while it dealt with the silent killer. The farm continued to operate under the assumption that any loss of business income and the loss of its primary assets would be covered under its insurance policy.
Mengel Dairy Farms
Mengel Dairy Farms (“Mengel”) could not begin to fathom why its dairy cattle were unexpectedly dying off. Beyond its loss of livestock, Mengel also suffered loss of milk production and business profits. The farm eventually hired an expert to help it determine the cause of death of its cattle. The expert determined that a stray electrical current was present on the property, causing the dairy cattle to die.
Mengel then proceeded to file an insurance claim with its insurance provider, Hastings Mutual Insurance Company (“Hastings”), hoping to receive insurance benefits for the lost cattle, cost of the investigation into the death of the cattle, the subsequent repairs to correct the stray electrical current, and for its lost business profits.
Hastings, however, sent out its own expert to help determine the cause of death of the cattle. Hastings’ expert could not find any stray voltage on the property but did believe that electrocution may have caused Mengel’s cattle to stop eating and ultimately die.
After its investigation, Hastings paid Mengel for the death of its cattle and the cost of the investigation into the deaths of the livestock, but Hastings rejected coverage for the loss of business income. Hastings then filed an action in the Federal District Court, asking the court to determine that there was no coverage for Mengel’s lost business income as a result of the electrocuted dairy cattle.
After Hastings filed its action, Mengel submitted a second insurance claim to Hastings for the death of additional livestock, costs of additional investigation and repair, and additional lost profits. Hastings did not provide any coverage, this time, to Mengel for its second insurance claim and instead issued a reservation of rights letter to Mengel stating that coverage for Mengel’s second claim may be subject to exclusions under Mengel’s insurance policy. Hastings then asked the court to also determine whether Hastings was required to pay for the loss of the additional dairy cattle and additional lost profits.
Coverage for Electrocuted Dairy Cattle
In its arguement to the court, Hastings claimed that under the dairy farm’s insurance policy, Hastings was not required to pay any insurance benefits for the additional dairy cattle that passed away from the stray electrical current. Hastings argued that even though death or destruction of livestock by electrocution is a covered peril under Mengel’s insurance policy, the term electrocution means instant death, and because Mengel’s cattle did not die instantly, Mengel was not entitled to insurance benefits for the cattle.
The Court disagreed. The court found that the term “electrocution” was an ambiguous term within the insurance policy because it was not expressly defined. Additionally, the court went on to analyze that coverage existed for both the death or destruction of livestock. The court determined that the term destruction encompasses more than just death. Reading the terms destruction and electrocution together, the court held that electrocution can consist of an event that does not necessarily result in instantaneous death but may still cause irreparable harm.
Therefore, the electrocution causing Mengel’s cattle to stop eating and ultimately die could be considered “destruction of livestock” which would be covered under the farm’s insurance policy.
Coverage for Lost Business Income
Since discovering the cause of death to its dairy cattle, Mengel reduced its farming operations to deal with the stray electrical current. Under Mengel’s insurance policy, coverage existed for lost business income “due to the necessary suspension” of operations. The insurance policy also indicated that the necessary suspension of farm operations must have been caused or resulted from an insured peril. Mengel thought that because it reduced operations for a covered peril (the electrocution of its livestock), it was entitled to coverage for its lost business income. Hastings disagreed and claimed that coverage did not exist for Mengel because the farm did not shut down its farming operations completely, it only reduced operations.
The court sided with Hastings. The court found that “necessary suspension” means a complete shutdown of operations, even if temporary. The court noted that a slowing down of business is not covered under the insurance policy. Therefore, Mengel’s claim for lost profits is not covered under the policy because it continued to operate at a reduced capacity.
Mengel filed its own claims against its insurer for bad faith and breach of contract. However, after the court’s determination that coverage existed for electrocuted cattle that did not die instantly and the court’s conclusion that Mengel was not owed any insurance benefits for lost profits, the parties settled their dispute out of court.
It may not be as easy as you think to determine what is covered (and what should be covered) under your insurance policy. Insurance companies do their best to draft insurance policies to be as precise as possible. Certain pre-requisites must be met in order for coverage to exist for a farmer and their business. It is vital that you understand what is covered (and not covered) under your insurance policy. You may be taking steps to remediate any issues with the assumption that insurance will cover any expenses or lost revenue you may endure, but as the above case demonstrates, this is not always true.
Ohio landowners have seen it before: when the snow flies, so do the snowmobilers. Landowners are forced to watch snowmobilers crossing their fields and driveways and cutting through woods and homesteads, without permission and apparently without concern for property damage. Two common questions from landowners arise at this time: what can I do about them, and will I be liable if there’s an accident? While the answers aren’t always satisfactory to landowners, several Ohio laws try to address these two questions.
What can you do about snowmobilers on your land?
One possibility for dealing with unwanted snowmobilers is to call local law enforcement. That might not get the results you’d like, given the difficulty of identifying and catching snowmobilers and limited law enforcement resources in rural areas. Trail cameras, pictures, or other ways of verifying the sleds and riders might be helpful. Look for the registration decal on the front of the sled, which allows tracking it to its owner. Despite these challenges, there are two sections of Ohio law that provide for criminal actions against trespassing snowmobilers if you can apprehend them:
- Ohio criminal trespass laws make it a fourth degree misdemeanor to knowingly or recklessly be on another’s land without permission or to fail to leave after seeing “no trespass” or similar signs of restricted access or being notified by an owner. Committing this type of trespass while on a snowmobile doubles the fine to up to $500, and up to 30 days in jail is also possible. The court could also award damages for harm to the landowner victim of the criminal trespass. A second offense can result in impoundment of the title to the snowmobile.
- Ohio motor vehicle laws also address snowmobilers specifically. The law prohibits a snowmobiler from operating on any private property or in a nursery or planting area without the permission of the landowner or tenant of the property. The penalty for doing so is a fine of $50 to $500 and potential jail time of three to 30 days. Note that snowmobilers are also not allowed to operate on state highways, railroad tracks and railroad rights of way, and anywhere after sunset without required lighting. The law does allow snowmobilers to drive on berms and shoulders of roads, across highways if done safely, and on county and township roads if permitted to do so by the county or township.
Another potential legal strategy is to bring a civil action against trespassing snowmobilers. Again, that requires knowing who they are and proving that they were on your property. A few laws that could apply are:
- Ohio’s law on civil trespass is a court made law, and it requires showing that a person intentionally entered another’s land without permission and caused harm to the land. If a snowmobiler harmed the property while trespassing, this type of claim allows a landowner to seek compensation for that harm. Examples of harm that might arise include damaged fences, culverts, drives, and crops.
- If the snowmobiler behaved recklessly and caused damage, another law comes into play. Ohio law prohibits a person from recklessly destroying or injuring vegetation on another’s land, which includes crops, trees, saplings, vines, and bushes. “Recklessly” means with heedless indifference to the consequences of an act. To punish the reckless behavior, the law awards compensation to the landowner for three times the value of the destroyed vegetation. This law can be particularly helpful when the ground is not frozen and snowmobiling damages the crop beneath the snow.
Other than legal action, a few management practices might be helpful in deterring snowmobilers. We’ve removed many of the old fences that used to fence in our farms, but fencing is an obvious although costly solution. If you put up a fence, it should be noticeable and not just a thin wire or two. Consider flagging the fence with neon markers. Beyond fences, other actions can help mark property boundaries clearly. No trespassing signs serve this purpose, but make sure they are easy to see when there’s snow, are visible from a distance, and are placed where snowmobilers might enter the property. You may have other ways to restrict access to the area where snowmobilers enter, but be aware that you could be liable if you set up a “trap” or dangerous situation that harms a snowmobiler, discussed in the next section.
Will you be liable if there’s a snowmobile accident on your land?
Attorneys often prefer to answer a question with “it depends” but in this case, we could add “but probably not.” Generally, Ohio law doesn’t favor making a landowner liable for harm that a trespasser suffers while trespassing. But there are a few exceptions to the general rule:
- One exception is if the landowner commits a willful, wanton, or reckless act that harms a trespasser. Shooting at a snowmobiler is a good example, as is placing a single strand of barbed wire or thin wire across a drive or opening to “stop” snowmobilers. Landowners could be liable for harm resulting from these and similar intentional acts that could harm a snowmobiler.
- Another exception to non-liability is if a landowner knows or should know that a trespasser is in a “position of peril” and fails to take ordinary care to prevent harm from the perilous situation. For example, if you know there’s a big hole in the middle of the field where snowmobilers always cross and you don’t mark it off so the snowmobilers can see it, you might be failing to protect them from a “position of peril.” Remember, the landowner must be aware of the perilous situation and must fail to take any protective measures for this exception to apply. Landowners don’t like knowing they can be liable to trespassers in such a situation, but the law expects us to protect people from harms we know of even if those people are trespassing.
The good news is that Ohio has a law that can make landowners completely immune from any liability for snowmobilers. The Recreational User Statute applies to non-residential premises like farms and parks, and states that the owner or occupant of the premises has no duty to keep a “recreational user” safe and no liability for injuries caused to or by recreational users. The catch, though, is that a recreational user is someone who has “permission” to be engaging in a recreational use on the property and is not paying for that use, unless the payment is through a leasing situation.
The practical outcome of the Recreational User Statute is that it protects landowners only if the snowmobilers have permission to be snowmobiling on the property. What if the snowmobilers never came to you for permission, or you don’t even know who they are in order to go and give them permission? One court in Ohio dealt with this situation, and concluded that a landowner who “acquiesces” to recreational users and does not tell them to leave is in effect granting permission. In that case, a snowmobiler who had snowmobiled across a farm for years without ever asking permission sued the landowners after wrecking in an area where the landowners had installed new drain tiles. Because the landowners had never told the snowmobiler to leave the property, the court held that the landowners had indeed granted permission. If other courts follow this reasoning, landowners have liability protection under the Recreational User Statute if they allow snowmobilers to use the property by way of not telling them to leave.
What solutions are we missing in Ohio?
There currently isn’t a perfect legal solution to the snowmobile problems many landowners are facing this winter. Owners can secure and mark their properties, call the sheriff, file a legal action, and hope the Recreational User Statute protects them from liability. But understandably, landowners may still get agitated and feel hopeless when they hear the snowmobiles coming.
Are there solutions that could better address landowner concerns about snowmobilers? After reviewing how other states have tackled snowmobile problems, it appears that our trespass laws are quite similar to other states. Some states have a "purple paint" law that allows landowners to mark their boundaries with purple paint marks on trees and posts, making it easier to identify the boundaries. Ohio has tried but failed to pass a purple paint law.
A more noticeable difference between Ohio and other states is that Ohio has only 100 miles of groomed snowmobile trails, according to the American Council of Snowmobile Associations. Compare that to 20,000 miles in Minnesota; 6,500 miles in Michigan; 6,000 miles in Pennsylvania and 2,500 in Illinois. Could the lack of available snowmobile trails be a contributor to our problem in Ohio?
Some of the trails in other states are on public lands while others are a mix of public and private lands. Several states work directly with private landowners to enhance their trail systems. In Indiana, local snowmobile clubs maintain and monitor 200 miles of groomed trails that the state leases from private landowners. Minnesota’s United Snowmobilers Association works with landowners who allow snowmobile trails on their property through a “Landowner Trail Permit” system. Local snowmobile clubs maintain the trails and provide signage, and only registered snowmobilers may use the trails. State law protects the landowners from liability for trail use.
Before the snow flies next year, maybe we can develop these and other new ideas to address the old problem of snowmobile trespassing in Ohio.
The Ohio General Assembly is off and running in its new session. Many bills that affect agriculture in Ohio are already on the move. Here’s a summary of those that are gaining the most momentum or attention.
Tax Conformity Bill – S.B. 18 and H.B. 48. The Senate has already passed its version of this bill, which conforms our state tax code with recent changes to the Internal Revenue Code made in the latest COVID-19 stimulus provisions of the Consolidated Appropriations Act. Both the Senate and the House will also exempt forgiven Paycheck Protection Program second-draw loan proceeds from the Commercial Activity Tax. The Senate version additionally exempts Bureau of Workers Compensation dividend rebates from the Commercial Activity Tax beginning in 2020, but the House bill does not. Both bills include “emergency” language that would make the provisions effective in time for 2020 tax returns.
Beginning farmers tax credits – H.B. 95. A slightly different version of this bill is returning after not passing in the last legislative session. The bi-partisan bill aims to assist beginning farmers through several temporary income tax credits:
- Businesses that sell or rent agricultural assets such as land, animals, facilities or equipment to certified beginning farmers can receive a 5% income tax credit for sales, a 10% of gross rental income credit for cash rents, and 15% of gross rental income for share rents.
- Certified beginning farmers can receive an income tax credit equal to the cost of participating in a certified financial management program.
Beginning farmers, among other requirements, are those in or seeking entry into farming in Ohio within the last ten years who are not a partner, member or shareholder with the owner of the agricultural assets and who have a net worth of less than $800,000 in 2021, which adjusts for inflation in subsequent years. Beginning farmers must be certified by the Ohio Department of Agriculture or a land grant institution. The House Agriculture and Conservation Committee will discuss the bill at its meeting on February 16.
Wind and solar facilities – S.B. 52. In addition to revising setback and safety specifications for wind turbines, this proposal would amend Ohio township zoning law to establish a referendum process for large wind and solar facility certificates. The bill would require a person applying for a certificate for a large wind or solar facility to notify the township trustees and share details of the proposed facility. That notification sets up opportunities for the township trustees or residents of the township to object to the application and submit the proposed application to a vote of township residents. A certificate would not take effect unless approved by a majority of the voters. A first hearing on S.B. 52 will be held on Tuesday, February 16 before the Senate Energy and Public Utilities Committee.
Grants for broadband services – H.B. 2 and S.B. 8. The Senate passed its version of this bill last week, which sets up a $20 million competitive grant program for broadband providers to extend broadband services throughout the state. The proposal would also allow broadband providers to use electric cooperative easements and poles, subject to procedures and restrictions. The bill had its second hearing before the House Finance Committee last week.
Eminent domain – H.B. 63. Based on a similar bill that didn’t pass last session, this bill changes eminent domain law in regard to property taken for the use of recreational trails, which include public trails used for hiking, bicycling, horseback riding, ski touring, canoeing and other non-motorized recreational travel. H.B. 63 would allow a landowner to submit a written request asking a municipality or township to veto the use of eminent domain for a recreational trail within its borders. The bill would also allow a landowner to object to a use of eminent domain for any purpose at any time prior to a court order for the taking, rather than limiting that time period to ten days as in current law. The bill had its first hearing before the House Civil Justice Committee last week.
Minimum wage increases. S. B. 51 and H.B. 69. Bills on each side of the General Assembly propose gradually increasing the state minimum wage to $15, but have different paths for reaching that amount. S.B. 51 proposes increasing the wage to $12/hour in 2022, followed by $1/hour increases each year and reaching $15 by 2025, which is when a federal bill proposes to establish the $15 minimum wage. H.B. 69 begins at $10/hour in 2022 with $1/hour increases annually, reaching $15 in 2027. S.B. 51 was referred last week to the Workforce and Higher Education Committee and H.B. 69 was referred to the Commerce and Labor Committee.