Recent Blog Posts

Written by Ellen Essman and Peggy Kirk Hall

Many people are still working from home, but that hasn’t stopped legal activity in Washington, D.C.  Bills have been proposed, federal rules are being finalized, and new lawsuits are in process.  Here’s our gathering of the latest ag law news.

SBA posts Paycheck Protection Program (PPP) loan forgiveness application.  We’ve been waiting to hear more about how and to what extent the SBA will forgive loans made under the CARES Act’s PPP that many farm businesses have utilized.  The SBA recently posted the forgiveness application and  instructions for applicants here.  But there are still unanswered questions for agricultural applicants as well as talk in Congress about changing some of the forgiveness provisions, suggesting that loan recipients should sit tight rather than apply now.  Watch for our future blog post and a discussion on the forgiveness provisions in our next Farm Office Live webinar.    

House passes another COVID-19 relief bill.  All predictions are that the bill will go nowhere in the Senate, but that didn’t stop the House from passing a $3 trillion COVID-19 relief package on May 15.  The “HEROES Act” includes a number of provisions for agriculture, including an additional $16.5 billion in direct payments to producers of commodities, specialty crops and livestock, as well as funds for local agriculture markets, livestock depopulation losses, meat processing plants, expanded CRP, dairy production, other supply chain disruptions, and biofuel producers (discussed below).  Read the bill here.

Proposed bipartisan bill designed to open cash market for cattle.  Last week, Republican Senator Chuck Grassley and Democratic Senator Jon Tester introduced a bill that “would require large-scale meatpackers to increase the proportion of negotiable transactions that are cash, or ‘spot,’ to 50 percent of their total cattle purchases.” The senators hope this change would bring up formula prices and allow livestock producers to better negotiate prices and increase their profits. In addition, the sponsors claim ithe bill would provide more certainty to a sector hard hit by coronavirus.  Livestock groups aren’t all in agreement about the proposal.  You can read the bill here, Senator Grassley’s press release here and Senator Tester’s news release here. 

New Senate and House bills want to reform the U.S. food system.  Representative Ro Khanna from California has introduced the House companion bill to the Senate's Farm System Reform Act first introduced by Senator Cory Booker in January.  The proposal intends to address underlying problems in the food system.  The bill places an immediate moratorium on the creation or expansion of large concentrated animal feeding operations and requires such operations to cease by January 1, 2040.  The proposal also claims to strengthen the Packers and Stockyards Act and requires country of origin labeling on beef, pork, and dairy products.  The bill would also create new protections for livestock growers contracted by large meat companies, provide money for farmers to transition away from operating animal feeding facilities, strengthen the term “Product of the United States” to mean “derived from 1 or more animals exclusively born, raised, and slaughtered” in the U.S., and, similar to the Grassley/Tester bill above, require an increased percentage of meatpacker purchases to be “spot” transactions.

Lawmakers ask Trump to reimburse livestock producers through FEMA.  In another move that seeks to help livestock producers affected by the pandemic, a bipartisan group of U.S. Representatives sent a letter to Donald Trump imploring him to issue national guidance to allow expenses of livestock depopulation and disposal to be reimbursed under FEMA's Public Assistance Program Category B.  The lawmakers reason that FEMA has "been a valued Federal partner in responding to animal losses due to natural disasters," and that the COVID-19 epidemic should be treated "no differently."  You can read the letter here.

More battling over biofuels.  Attorneys General from Wyoming, Utah, Louisiana, Oklahoma, Texas, Arkansas and West Virginia have sent a request to EPA Administrator Andrew Wheeler to waive the Renewable Fuel Standard (RFS) because of COVID-19 impacts on the fuel economy. The letter states that reducing the national quantity of renewable fuel required would alleviate the regulatory cost of purchasing tradable credits for refiners, who use the credits to comply with biofuel-blending targets.   Meanwhile, 70 mayors from across the U.S. wrote a letter urging the opposite, and criticizing any decisions not to uphold the RFS due to the impact that decision would have on local economies, farmers, workers, and families who depend on the biofuels industry.  The House is also weighing in on the issue.  In its recently passed HEROES Act, the House proposes a 45 cents per gallon direct payment to biofuel producers for fuels produced between Jan 1 and May 1, 2020 and a similar payment for those forced out of production during that time.  

New USDA rule for genetically engineered crops.  A final rule concerning genetically engineered organisms is set to be published this week.  In the rule, USDA amends biotechnology regulations under the Plant Protection Act.  Importantly, the new rule would exempt plants from regulation by the Animal and Plant Health Inspection Service (APHIS) if the plants are genetically engineered but the same outcome could have occurred using conventional breeding.  For instance, gene deletions and simple genetic transfers from one compatible plant relative to another would be exempted.  If new varieties of plants use a plant-trait mechanism of action combination that has been analyzed by APHIS, such plants would be exempt.  You can read a draft of the final rule here.

Trump’s new WOTUS rule attacked from both sides of the spectrum.  A few weeks ago, we wrote about the Trump Administration’s new “waters of the United States” or WOTUS rule.  Well, it didn’t take too long for those who oppose the rule to make their voices heard. The New Mexico Cattle Growers Association (NMCGA) sued the administration, claiming that the new rule is still too strict and leaves cattle ranchers questioning whether waters on their land will be regulated.  In their complaint, NMCGA argues that the new definition violates the Constitution, the Clean Water Act, and Supreme Court precedent.  On the other side, the Natural Resources Defense Council (NRDC), along with other conservation groups, sued the administration, but argued that the new rule does not do enough to protect water and defines “WOTUS” too narrowly.  Here we go again—will WOTUS ever truly be settled?

The Farm Office is Open!  Join us for analysis of these and other legal and economic issues facing farmers in the Farm Office Team’s next session of “Farm Office Live” on Thursday, May 28 at 9:00 a.m.  Go to this link to register in advance or to watch past recordings.

Agritourism has experienced significant growth in recent years, offering farm operators new revenue streams.  Hopefully, the recent pandemic won't hinder the growth of agritourism entrepreneurship.  Beyond COVID-19, however, there are other legal issues agritourism operators often face, and those issues can result in litigation.  We sought to identify how frequently agritourism litigation is occurring across the U.S., and what types of legal issues end up in litigation.  Our newest report for the National Agricultural Law Center, Recent Agritourism Litigation in the United States, shares the results of our research.

We categorized the agritourism lawsuits into two major categories:  land use and personal injury.  To our surprise, we identified more land use cases than personal injury cases.  Two potential explanations for this outcome are that many states across the country now have agritourism immunity laws that limit legal liability for personal injuries on agritourism operations and that personal injury cases are likely to involve insurance policies and settlements rather than litigation.  Land use cases, on the other hand, are more prevalent and center on regulatory issues such as zoning compliance and nuisance laws. 

Most clear from our research is the need for state and local governments to carefully understand and define the meaning of “agritourism,” for both personal injury and land use reasons.  The definition becomes quite important when determining whether immunity provisions protect an activity from liability for personal injuries.   The definition is also integral to assessing whether or how an agritourism activity is subject to land use laws.  Perhaps the most important result of our research is the confirmed realization that before proceeding with any “agritourism” activity, a farmer or rancher should take care to assess how state and local laws define that activity so as to reduce the risk of ending up in litigation.

The USDA’s National Agriculture Library funded our research, which we conducted in partnership with the National Agricultural Law Center.  Readers may access the report here.

Written by Barry Ward, Leader, Production Business Management and Director, OSU Income Tax Schools

In our recent Farm Office Live webinars, we’ve discussed the paid sick leave provisions in the Families First Coronavirus Response Act.  The new law recognizes that many employees have been forced by COVID-19 to stay home rather than report to work.  In such cases, the law obligates employers to provide paid sick leave but also gives federal tax credits to employers for doing so.  Here’s a summary of how the law works.

Emergency paid sick leave provision

Employers with less than 500 employees are required to provide paid sick leave to employees who are unable to work (or telework) if they have become ill with COVID-19, have similar symptoms, or must provide care to someone with COVID-19 issues.  Employees who have to care for children due to school or day care closure are also eligible for partial paid sick leave. Employers are required to provide 100 percent of the usual pay rate to an employee if they have COVID-19 or the related symptoms, up to $511 per day. If they’re unable to work due to the need to care for an affected individual or to care for children due to school or daycare closure, the employee must be paid 2/3rds of their usual pay rate up, up to $200 per day.

The following chart summarizes the requirements.

Expanded family leave provision

A second provision, the expanded family leave provision, requires employers to provide employees with up to 12 weeks of leave for COVID-19-related needs.  This leave requirement applies to employees who are unable to work due to having to care for children whose school or daycare is closed or unavailable because of COVID-19.   The first ten days of the expanded family leave are unpaid (a deductible of sorts), although the employee can use the “emergency paid sick leave provision” or accrued sick leave to cover these days if necessary.  After the first ten days, the employee is eligible to receive 2/3rd of regular pay for the remaining ten weeks, capped at $200 per day.

Note that employers with fewer than 50 employees are eligible for an exemption where the viability of the business would be threatened.  The exemption applies to the requirements to provide leave to care for a child whose school is closed or if child care is unavailable.

Employer tax credits to fully compensate for required leave

This new law provides corresponding refundable tax credits to equal all required leave provided by an employer whether the leave was required and provided under the emergency paid sick provision or the expanded family leave provision.  The credits are refundable payroll tax credits, designed to immediately and fully reimburse employers, dollar-for-dollar, for the cost of providing the required leave to their employees.

To receive the credit, employers hold on to payroll withholding as offset. Payroll withholding that can be held as this tax credit includes withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.  If this amount isn’t enough to provide the full tax credit due the employer, the employer will have to file a return with the IRS.  More information on how to claim these credits is available at: https://www.irs.gov/newsroom/covid-19-related-tax-credits-how-to-claim-the-credits-faqs

Additional details are available on the U.S. Department of Labor’s “Families First Coronavirus Response Act: Employer Paid Leave Requirements” page, here: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave

Economic relief measures in the CARES Act have proven difficult for farms, first due to confusion over which and how farmers qualify and also by soaring demand and depleted funding.   But the recently enacted Paycheck Protection Program and Health Care Enhancement Act (HR 266) should help.  The legislation injects more funds into both the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans Program (EIDL) and clarifies that farmers can qualify for EIDL loans.  The bill also came with a bonus:  additional guidance from the USDA and SBA for farmers seeking to access the programs.  Both programs are first-come, first-served, so farm businesses who haven’t applied for the funds should decide whether to do so right away.

Here’s how the new legislation affects agricultural businesses:

• Allocates another $310 billion for the PPP to provide payroll funding for eligible employers, which includes $60 billion in funding for smaller lending institutions working with PPP loan applicants.
• Doubles the EIDL program, adding another $10 billion to the SBA disaster loan program for eligible businesses.
• Clarifies that agricultural enterprises are eligible for EIDL loans.

Using the PPP:  a few quick tips

The SBA will resume accepting applications for the PPP today.  Information about the program is on SBA’s website, here.  Generally, PPP gives loans of up to $10 million at 1% interest to keep employees employed, with a loan maturity of two years and generous forgiveness provisions. 

Farm businesses, including cooperatives, with fewer than 500 employees or who fit within the definition of a “small business concern” may apply for a PPP loan through an approved lender.  Lenders include local banks as well as agricultural lenders in the Farm Credit System.  Farmers should talk first to the lenders with whom they ordinarily do business to see if the lenders are participating in the PPP.  If not, SBA provides a lender locating tool here.  

The PPP application is here.  Employers may use the loan for payroll costs or owner compensation replacement, as well as for mortgage interest, rent, and utility payments and interest payment on other debts, but 75% of the expenditures must be for payroll costs.  To determine the maximum loan amount, an employer must document and calculate aggregate payroll costs from the previous 12 months, from calendar year 2019, or from February to June of 2019 if a seasonal employer.   The SBA provides assistance on how to calculate payroll costs, and finally addresses the requirements for self-employed farms who report income on Schedule F.  Read the guidance here, and see question 3 if you’re reporting income on Schedule F. 

Upon receiving a PPP loan, a lender will set up a separate account for the funds.  Borrowers should carefully document loan expenditures.  This is not only for compliance purposes, but also because the PPP loan program includes a forgiveness component that forgives an amount equal to the sum of eligible costs and payments made during the eight weeks following disbursement of loan funds.  At least 75% of the amount forgiven has to be for payroll costs, and the amount may be reduced by reductions in total salary or wages.  Borrowers will have to apply for forgiveness, and documentation of all expenditures will prove necessary to the forgiveness process.  We’re awaiting additional guidance on the forgiveness provisions, so keep an eye out for more information on this important topic.

The EIDL program

Farm businesses and agricultural cooperatives with no more than 500 employees may also now apply for EIDL, which gives loans up to $2 million for businesses that suffer economic injuries due to COVID-19.  Because the program ran out of funds, there is a backlog in EIDL applications and the SBA is not reopening the loan portal until it catches up with the backlog.  If SBA does reopen the program, businesses apply directly through the SBA here.

Businesses may use an EIDL loan for fixed debt, payroll, accounts payable, and other operating expenses due to the pandemic, but can’t use the funds for the same purposes as the borrower’s PPP loan.  The interest rate for EIDL is higher at 3.75% (2.75% for non-profits), but the term can be up to 30 years. 

Important to note:  EIDL also includes an “emergency advance” component that provides an employer up to $1,000 per employee or a maximum of $10,000 as a grant.  A borrower doesn’t have to repay the advance, even if the borrower doesn’t ultimately qualify for a loan.  But if the borrower also has a PPP loan, the PPP forgiveness is reduced by the $10,000 EIDL advance.  The emergency advance can go towards paying sick leave, payroll, increased materials costs, rental or mortgage payments, or other obligations due to revenue losses, as long as the borrower hasn’t used PPP funds for those costs.

There's still more for farms to digest from the CARES Act.  The Farm Office team is ready to help!  Join us for "The Farm Office is Open" tonight at 8 p.m., when we'll discuss the CARES Act programs and other economic developments for agriculture.  Register for the  live webinar and access past webinar recordings here.