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It's that time again, Farm Office Live is right around the corner! We have all the hottest legal, tax, and farm management information to help you continue to emerge from "the" winter event of the season, so far.
Our program this month will feature Chris Bruynis, PhD, Associate Professor and Extension Educator, sharing information on the 2022 ARC/PLC Program decision. The Farm Office Team of Dianne Shoemaker, David Marrison, Peggy Kirk Hall, and Barry Ward will follow with discussion and updates on:
- Fertilizer price and rental rates
- Financial standards
- The Federal Farm Program
- State and federal legislation
We are offering Farm Office Live this Wednesday, February 16 from 7 - 8:30 pm, and again on Friday, February 18 from 10 - 11:30 am. Register or catch the recorded version at https://farmoffice.osu.edu/farmofficelive.
OSU is happy to welcome attorney Robert Moore to the Agricultural & Resource Law Program and Farm Office team. Many in Ohio know Robert from his years in private practice with Wright & Moore Co, LPA, the firm he joined with Paul Wright and then co-owned with his wife Kelly. Robert and Kelly are transitioning the law firm to their colleague Ryan Conklin, who along with attorney Evin Bachelor will continue representing farm clients across Ohio.
Robert grew up on a dairy farm in Coshocton County, where his family now raises beef cattle and crops. He’s a double OSU graduate, first receiving a B.S. in dairy science followed by a Master’s degree in agricultural economics.
His new position is a return to OSU, as Robert previously spent four years as an Extension Educator in Fairfield County and five years running the production business management program for OSU Extension. During that time, he began attending Capital University Law School and graduated Cum Laude with his law degree in 2005. We’re thrilled that his enthusiasm for teaching drew Robert back to OSU.
At OSU, Robert will put his years of advising farm operations on business and estate planning to work as he assumes responsibility for those areas in the Agricultural & Resource Law Program. Through our partnership with the National Agricultural Law Center, Robert will implement research projects on long-term care planning, keeping farmland in the family, and using LLCs for farm businesses. You’ll see Robert teaching for events like Farm Office Live and our Planning for the Future and Farmland Leasing workshops. Watch for articles in the Ohio Ag Law Blog and his publications on farmoffice.osu.edu. He has a great deal of knowledge to share with us.
We’re fortunate to bring Robert’s expertise to the Agricultural & Resource Law Program and expand our capacity to provide legal research and outreach to Ohio’s agricultural community. Please join us in welcoming Robert back to OSU!
Did you know that ants are the only creatures besides humans that will farm other creatures? It’s true. Just like we raise cows, sheep, pigs, and chickens in order to obtain a food source, ants will do the same with other insects. This is particularly true with aphids. Ants will protect aphids from natural predators and shelter them during heavy rain showers in order to gain a constant supply of honeydew.
Like an ant, we have done some heavy lifting to bring you the latest agricultural and resource law updates. We start with some federal cases that deal with the definition of navigable waters under the Clean Water Act, mislabeling honey products, and indigenous hunting rights. We then finish with some state law developments from across the country that include Georgia’s right to farm law and California’s Proposition 12.
Supreme Court to review navigable waters definition under the Clean Water Act. The Supreme Court announced that it would hear the case of an Idaho couple who have been battling the federal government over plans to build their home. Chantell and Mike Sackett (“Plaintiffs”) began construction on their new home near Priest Lake, Idaho but were halted by the Environmental Protection Agency (“EPA”). The EPA issued an administrative compliance order alleging that Plaintiffs’ construction violates the Clean Water Act. The EPA claims that the lot, on which the Plaintiffs are constructing their new home, contains wetlands that qualify as federally regulated “navigable waters.” Plaintiffs are asking the Court to revisit its 2006 opinion in Rapanos v. United States and help clarify how to determine when a wetland should be classified as “navigable waters.” In Rapanos, the Court found that the Clean Water Act regulates only certain wetlands, those that are determined to be “navigable waters.” However, two different tests were laid out in the Court’s opinions. The Court issued a plurality opinion which stated that the government can only regulate wetlands that have a continuous surface water connection to other regulated waters. A concurring opinion, authored by Justice Kennedy, put forth a more relaxed test that allows for regulation of wetlands that bear a “significant nexus” with traditional navigable waters. Justice Kennedy’s test did not take into consideration whether there was any surface water connection between the wetland and the traditional navigable waters. In the lower appellate court, the Ninth Circuit Court of Appeals used Justice Kennedy’s “significant nexus” test to uphold the EPA’s authority to halt Plaintiffs’ construction. Now, Plaintiffs hope the Supreme Court will adopt a clear rule that brings “fairness, consistency, and a respect for private property rights to the Clean Water Act’s administration.”
SueBee sued for “bee”ing deceptive. Sioux Honey Association Cooperative (“Defendant”) finds itself in a sticky situation after Jason Scholder (“Plaintiff”) brought a class action lawsuit against the honey maker for violating New York’s consumer protection laws by misrepresenting the company’s honey products marketed under the SueBee brand. Plaintiff claims that the words “Pure” or “100% Pure” on the Defendant’s honey products are misleading and deceptive because the honey contains glyphosate. Defendant filed a motion to dismiss the class action lawsuit and a federal district court in New York granted Defendant’s motion in part and denied it in part. Defendant asked the court to find that its labels could not be misleading as a matter of law because any trace amounts of glyphosate in the honey is a result of the natural behavior of bees interacting with agriculture and not a result of Defendant’s production process. However, the court declined to dismiss Plaintiff’s mislabeling claims. The court concluded that a reasonable consumer might not actually understand that the terms “Pure” or “100% Pure” means that trace amounts of glyphosate could end up in honey from the bees’ foraging process. The court also declined the Defendant’s request to dismiss Plaintiff’s unjust enrichment claim because of the alleged misrepresentations of the honey. However, the court did dismiss Plaintiff’s breach of express warranty claim and request for injunctive relief. The court dismissed Plaintiff’s breach of express warranty claim because Plaintiff failed to notify Defendant of its alleged breach of warranty, as required by New York law. Plaintiff’s request for injunctive relief was also dismissed because the court could not find any imminent threat of continued injury to Plaintiff since he has now learned that the honey contains trace amounts of glyphosate. The court ordered the parties to proceed with discovery on Plaintiff’s remaining claims, keeping the case abuzz.
Indigenous Hunting Rights. Recently, two members of the Northwestern Band of the Shoshone Nation (“Northwestern Band”) were cited for hunting on Idaho lands without tags issued by the state. The Northwestern Band filed suit against the state of Idaho declaring that its members possessed hunting rights pursuant to the Fort Bridger Treaty of 1868 (the “1868 Treaty”). The 1868 Treaty provided that the Shoshone Nation agreed to permanently settle on either Fort Hall Reservation, located in Southeastern Idaho, or Wind River Reservation, located in Western Wyoming. By agreeing to settle on one of the two reservations, the Shoshone Nation was granted hunting rights on unoccupied lands of the United states. However, the Northwestern Band ended up settling in Northern Utah and not on one of the two named reservations. After considering the 1868 Treaty, the Federal District Court of Idaho dismissed Northwestern Band’s lawsuit. The court held that the hunting rights contained in the 1868 Treaty were tied to the promise to live on one of the reservations, and that a tribe cannot receive those hunting rights without living on one of the appropriate reservations. Thus, the court found that because the Northwestern Band settled in Northern Utah and not on one of the reservations, the hunting rights of the 1868 Treaty did not extend to the Northwestern Band of the Shoshone Nation.
Tensions rise over Georgia’s Freedom to Farm Act. A few days ago, Georgia lawmakers introduced legislation that seeks to further protect Georgia farmers from nusiance lawsuits. House Bill 1150 (“HB 1150”) proposes to change current Georgia law to protect farmers and other agricultural operations from being sued for emitting smells, noises, and other activities that may be found offensive by neighboring landowners. Georgia’s current law, which became effective in 1980, does provide some protection for Georgia farmers, but only from neighboring landowners that have moved near the farm or agricultural operation after the current law went into effect. All neighboring landowners that lived near the farming operation prior to the current law going into effect have retained their right to sue. HB 1150, on the other hand, will prevent these nuisance lawsuits by all neighboring landowners, as long as the farm or agricultural operation have been operating for a year or more. Passing a right to farm law has proven to be difficult in Georgia. In 2020, House Bill 545, also known as the “Right to Farm bill” failed to pass before the final day of the 2019-2020 legislative session. Private landowners, farmers, and their supporters, are divided on the issue and seek to protect their respective property rights. It doesn't look like HB 1150 will have the easiest of times in the Georgia legislature.
Confining California's Proposition 12. Meat processors and businesses that sell whole pork meat in California (collectively the “Petitioners”) have delayed the enforcement of California’s Proposition 12 (“Prop 12”), for now. Prop 12 is California’s animal confinement law that has sent shockwaves across the nation as it pertains to raising and selling pork, eggs, and veal. Last week, the Superior Court for Sacramento County granted Petitioners’ writ of mandate to delay the enforcement of Prop 12 on sales of whole pork meat. Petitioners argue that Prop 12 cannot be enforced until California has implemented its final regulations on Prop 12. To date, California has yet to implement those final regulations. California, on the other hand, suggests that final regulations are not a precondition to enforcement of Prop 12 and the civil and criminal penalties that can be brought against any farmer or business that violates Prop 12. The court disagreed. The court found that the language of Prop 12, as voted on by California residents, explicitly states that California voters wanted regulations in place before the square-footage requirements of Prop 12 took effect. Therefore, the court granted Petitioners’ writ of mandate to prevent the enforcement of Prop 12 until final regulations have been implemented. The court’s writ will remain in effect until 180 days after final regulations go into effect. This will allow producers and businesses to prepare themselves to comply with the final regulations. Opponents of Prop 12 believe this is another reason why the Supreme Court of the United States should review California’s Proposition 12 for its constitutionality.
Winter is a good time to review farm leases, for both economic and legal reasons. We'll provide you current information to help with the farmland leasing process in our Ohio Farmland Leasing Update webinar on February 9, 2022 from 7 to 9 p.m. Barry Ward, Leader of Production Business Management for OSU Extension, will address the economic issues and our legal team of Peggy Hall and Robert Moore will provide the legal information.
Our agenda will include:
- Current economic outlook for Ohio row crops
- Research on cash rent markets for the Eastern Corn Belt
- Rental market outlook fundamentals
- Negotiating conservation practices
- Using leases in farmland succession planning
- Ohio's proposed law on providing notice of termination
- Ensuring legal enforceability of a lease
There is no fee for the webinar, but registration is necessary. Register at https://go.osu.edu/farmlandleasingupdate.
We’ve quickly reached the end of January, and several of the legal issues I’ve talked about in OSU’s “Agricultural Outlook” meetings have surfaced this month. If the current pace keeps up, 2022 promises to be a busy year for agricultural law. Here’s a review of three legal issues I predict we’ll see that have already begun to emerge in 2022.
Water, water. From defining WOTUS to addressing Lake Erie water quality, water law will continue to be everywhere this year. The U.S. Supreme Court just announced on January 24 that it will hear the well-known case of Sackett v EPA to review whether the Ninth Circuit Court of Appeals used the proper test to determine whether wetlands are “waters of the United States” (WOTUS). The case is one example of the ongoing push-pull in the WOTUS definition, which establishes waters that are subject to the federal Clean Water Act. The Biden administration proposed a new WOTUS rule last December that would replace the Trump-era rule, and comments remain open on that definition until February 7. Ohio has wrangled with its own water issues, particularly with agricultural nutrient impacts on water quality. We’ll see this year if the state will continue to rely on H2Ohio and similar incentive-based programs and whether the Ohio EPA will face additional litigation over its development of a Total Maximum Daily Load for Lake Erie.
Pesticide challenges. The EPA announced a new policy on January 11 to more closely evaluate potential effects of pesticide active ingredients on endangered species and critical habitats. That was the same day the agency re-registered Enlist One and Enlist Duo pesticides, but with new label restrictions and prohibited use in hundreds of counties across the U.S., including a dozen Ohio counties. An EPA report documenting dicamba damage in 2021 could form the basis for yet another lawsuit this year demanding that EPA vacate dicamba’s registration. Meanwhile, we await a decision by the U.S. Supreme Court on whether it will review Hardeman v. Monsanto, one of dozens of cases awarding damages against Monsanto (now Bayer) for personal injury harms caused by glyphosate.
Opposition to livestock production practices. Ohio pork producers watching California’s Proposition 12 will be happy with a recent California court decision prohibiting enforcement of one part of the law that went into effect on January 1. The provision requires any pork and eggs sold in the state to be from breeding pigs and laying hens that are not raised in a “cruel manner,” meaning that the animals have a certain amount of usable pen space. The California court agreed with grocers and other retailers that the law could not be enforced on sales of pork meat because the state hasn’t yet finalized its regulations. The law could be subject to further scrutiny from a higher court. Several agricultural organizations have unsuccessfully challenged the law as a violation of the Constitution’s Commerce Clause, but one of those cases currently awaits a decision from the U.S. Supreme Court on whether it will review the case. Other livestock production issues we’ll see this year include continued battles over Right to Farm laws that limit nuisance lawsuits against farms, and challenges to “ag gag” laws that aim to prevent or punish undercover investigations on farms.
There’s more to come. Watch for more of our predictions on what 2022 may bring to the agricultural law arena in upcoming posts. Or drop into one of our Agricultural Outlook and Policy meetings to hear my Ag Law Outlook. As quickly as the year is moving, we’ll soon know how many of those predictions are correct.
Did you know there is a bird with talons larger than grizzly bear claws? The Harpy Eagle’s back talons can reach lengths of 5 inches, which is larger than a grizzly bear’s claws which reach lengths of around 4 inches. Thankfully, the Harpy Eagle is not usually found in the United States, they are traditionally found in the rainforests of Central and South America.
The variety and extent of the animal kingdom can be a good analogy when we talk about the scope and variability of agricultural and resource law. “Ag law” isn’t in and of itself a core area of law, at least not an area of law taught in most law schools across the country. Those core areas of law are traditionally contracts, constitutional, tort, property, and a few others. But ag law includes most, if not all, of the core legal subjects. This includes property law, tax law, tort law, international law, intellectual property law, environmental law, contracts, business, labor and employment, and others. This week’s edition of the Ag Law Harvest shows you how diverse ag law really is. We review some legislation moving in parts of the country that deal with tax law, property law, and administrative law. We also review Federal regulations and court cases that address food law, trademark law, and antitrust law.
Florida introduces legislation to protect farmers’ preferential tax benefits amid agritourism boom. Florida’s legislature is hard at work to ensure the success of Florida’s agriculture and agritourism industries. Recently, Florida’s legislature introduced Senate Bill 1186 and House Bill 717. The purpose of both bills is to promote Florida’s agritourism industry and protect farmers when it comes to land classification, taxation, and regulation. Both pieces of legislation look to:
- Eliminate duplicate regulatory authority over agritourism by preventing local government from enacting regulations that prohibit, restrict, or otherwise limit an agritourism activity from taking place on land classified as agricultural land.
- Prevent land from being classified “non-agricultural” simply because an agritourism activity takes places on the land, so long as the agritourism activity is taking place on a bona fide farm.
- Implement a hybrid property taxation scheme which allows the buildings and other structures used for agritourism activities to be assessed at just value and added to the agriculturally assessed value of the land.
Both bills are currently making their way through their respective chamber’s committees and should be voted on soon.
Michigan looking to pass legislation to reduce fines for family farmers that do not report accidental workplace deaths to the state. The Michigan Senate recently passed a substitute for House Bill 4031, which is focused on reducing the fine incurred by family farms for not reporting the death of a family member within eight hours. Under current Michigan law, a family farm must report any fatality to the Michigan Occupational Safety and Health Administration within eight hours or face a fine of at least $5,000, which is exactly what happened to the Eisenmann family in 2019. The Eisenmann family ran a family farm and was fined $12,000 after Keith Eisenmann fell to his death while repairing a barn roof. The bill seeks to reduce the fine for families that are grieving the unexpected loss of a loved one. Although a family farm will still be required to report the accidental work-related death of a loved one within eight hours, if a family fails to do so, the substitute bill drastically reduces the penalty. The original bill passed Michigan’s House of Representatives late last year, but the substitute bill passed by the Michigan Senate clarifies the definition of family farm. The substitute bill now goes back to the House of Representatives for approval.
Bioengineered food standard now in effect. January 1st marked the first day of compliance for the Bioengineered Food Disclosure Standard (the “Standard”). The Standard requires food manufacturers, importers, and certain retailers to disclose to consumers that foods are or may be bioengineered. The Standard defines bioengineered foods as “those that contain detectable genetic material that has been modified through certain lab techniques and cannot be created through conventional breeding or found in nature.” The Agricultural Marketing Service has created a list of bioengineered foods to identify the crops or foods that are available in a bioengineered form. For more information on the Bioengineered Food Disclosure Statement visit https://www.ams.usda.gov/rules-regulations/be.
A bite into the cheesier side of trademark law. Last month, a federal court in Virginia decided on a dispute between European and American cheesemakers. The dispute arose over whether the term “Gruyere” should only be used to identify cheeses produced in the Gruyère region of France and Switzerland or whether the term can be used generically to describe a type of cheese, regardless of where the cheese is produced. The Plaintiffs, two European business groups, filed an application with the United States Patent Trademark Office (“USPTO”) to register “Gruyere” as a certification mark under 15 U.S.C. § 1127 which would only allow cheesemakers to use the term “Gruyere” if the cheese came from the Gruyère region. The U.S. Dairy Export Council and others (“Defendants”) filed an opposition to Plaintiffs’ application with the Trademark Trials and Appeals Board (“TTAB”). The TTAB found the term “Gruyere” to be generic term used to describe a type of cheese, not a cheese’s origin. Plaintiffs’ then filed suit in a federal court in Virginia. The federal court held that the “Gruyere” term had become a generic term to describe a type of cheese and failed to find the term worthy of trademark protection. The court reasoned that although the term “Gruyere” may have once been understood to indicate where a cheese came from, over time “Gruyere” became a generic term to describe a type of cheese. The court noted the term “Gruyere” has become generic overtime because: (1) U.S. regulations allow the use of the term “Gruyere” regardless of where the cheese is produced, (2) there is widespread sale and import of Gruyere cheese that is produced outside the Gruyère region, and (3) “Gruyere” is commonly used in dictionaries, media communications, and cheese industry events to describe a type of cheese without regards to where the cheese is produced. Plaintiffs have since appealed to the Fourth Circuit Court of Appeals, which means we still have a gooey situation on our hands.
USDA and Department of Justice announce commitment to protect farmers against unfair anticompetitive practices. The U.S. Department of Agriculture (“USDA”) and the U.S. Department of Justice (“DOJ”) each announced their shared commitment to enforcing federal competition laws that are aimed at protecting farmers, ranchers, and other agricultural producers from unfair, anticompetitive practices. In continuing their commitment to enforcing such laws, the agencies released a statement of principles and commitments which include:
- Farmers, ranchers, and other producers and growers deserve the benefits of free and fair competition. The DOJ and USDA are therefore prioritizing matters impacting competition in agriculture.
- The agencies will develop an accessible, confidential process for agricultural producers to submit complaints about potential violations of the antitrust laws and the Packers and Stockyards Act.
- Increased cooperation between the agencies to enforce the laws that protect agricultural producers and to identify areas where Congress can help modernize rules and regulations.
As we have seen over the past few months, the federal government is keen on preventing the consolidation of the agricultural industry in order promote fair and equal competition. The announced commitments and principles demonstrate the government’s continued dedication to cracking down on unfair practices.
Whether it's to protect family farmland, bring future generations into the operation, address special needs like retirement, disability, or remarriage--taking legal steps now can make your goals for the future of your farm a reality. Farm transition planning is so important to keeping a farm and a farm family together, but it's easy to make mistakes that can bring unintended problems in the future. Consider this this list of seven common mistakes farmers make in farm transition planning:
2. Thinking joint property titles will do.
3. Overlooking expenses at time of death.
4. Assuming no federal estate taxes.
5. Trying to be fair to all beneficiaries.
6. Failing to consider disability as well as death.
7. Avoiding communication.
We'll discuss and address all of these issues in our "Planning for the Future of Your Farm" workshops this winter. We can help you get over that procrastination hurdle, develop your goals, deal with communication issues and understand legal strategies. Join me, attorney Robert Moore, and farm management educator David Marrison for either a day-long live program or a four-part live webinar this winter, where we cover these topics:
- Developing goals for estate and succession planning
- Planning for the transition of control
- Planning for the unexpected
- Communication and conflict management during farm transfer
- Legal tools and strategies
- Developing your team
- Getting your affairs in order
- Selecting an attorney
Dates and locations for the workshops are:
- Live Zoom webinar on January 31 and February 7, 21 and 28 from 6:30--8:30 pm.
- Because of its virtual nature, parents, children, and grandchildren can easily attend this workshop, regardless of where they live!
- Day-long in-person workshops:
- February 10, 2022--OSU Extension Greene County, Xenia, Ohio
- February 25, 2022--OSU Fisher Auditorium, Wooster, Ohio
- March 4, 2022--Wood County Fairgrounds, Bowling Green, Ohio
Pre-registration is necessary for all workshops. For registration and further information, visit this link: go.osu.edu/farmsuccession. Together, let's make 2022 the year that you make plans for the future of your farm.
As promised, here is the next and final installment of “An Agricultural Employer’s 2021 Tax Obligations: A Series” discussing an agricultural employer’s requirements and obligations under Ohio law. This installment of the series provides an overview of Ohio employment taxes and additional employer obligations for Ohio’s agricultural employers. This series covers an employer’s Ohio tax obligations and requirements that arise simply because a business has employees. This series does not cover the business income or personal income tax reporting obligations of agricultural employers.
We first discuss Ohio’s income and school district taxes and then we focus on Ohio’s unemployment insurance tax and Ohio’s workers’ compensation requirement for all employers. The information contained within this series is not meant to be legal and/or tax advice, it is for educational purposes only. Agricultural employers should seek out the counsel and guidance of an attorney or other tax professional to help ensure compliance with Ohio tax law.
Ohio Employer Withholding Tax.
Ohio Employer Withholding Tax. Generally, employers are required to withhold Ohio income tax and school district tax from employees’ wages. However, under Ohio law, Agricultural employers are not required to withhold Ohio taxes from wages paid to employees, so long as the employees fall under the definition of agricultural labor in 26 U.S.C. § 3121(g). “Agricultural labor” includes all services performed:
- on a farm, in the employ of any person, in connection with the cultivating, raising, and/or harvesting of any agricultural or horticultural commodity; or
- in the employ of the owner or other operator of a farm, in connection with the operation, management, conservation, or maintenance of such farm and its tools and equipment.
Can Ohio’s Agricultural Employers Agree to Willingly Withhold Ohio’s Taxes? In short, the answer is yes. An agricultural employee must still pay Ohio income tax and their local school district tax on all income earned throughout the year. If an employee does not have their Ohio taxes withheld from their pay, they may be required to make quarterly estimated tax payments to the state. Because of this, an employee may request their employer to withhold their Ohio taxes from each paycheck. An agricultural employer is under no obligation to withhold Ohio taxes, but some do.
Ohio Withholding Exemption Certificate. It is important that each employer, even an agricultural employer, have its employees complete an Employee’s Withholding Exemption Certificate (Ohio IT 4). For agricultural employers that are not going to withhold Ohio’s taxes, it must have each employee check the box next to “I am exempt from Ohio withholding under R.C. 5747.06(A)(1) through (6)” under Section III of Form IT 4. If no Ohio IT 4 is completed, then an employer must withhold the Ohio’s taxes from an employee’s wages.
Ohio requires an employer to keep Ohio IT 4 in its records for at least four years and must make it available to the Ohio Department of Taxation upon request.
Registering as an Ohio Withholding Agent. Employers that are required (or choose) to withhold Ohio’s taxes from employees’ wages must register with the Ohio Department of Taxation. This can be done one of three ways.
- By internet. Registration can be completed online through the Ohio Business Gateway.
- By phone. Call 1-888-405-4089, listen for the message, and then press 2 to connect with an agent.
- By mail or fax. Complete Application for Registration as an Ohio Withholding Agent (Ohio IT 1) and mail it to the address provided on the form or fax it to the Ohio Department of Taxation at (614) 387-2165.
How Much Ohio Income Tax Should an Employer Withhold? To determine how much Ohio income tax to withhold, visit the Ohio Department of Taxation’s Employer Withholding Tables website.
How Much School District Tax Should an Employer Withhold? School districts impose a tax using one of two methods: traditional or earned income. School district tax rates and a district’s method of taxation can be found on the Ohio Department of Taxation’s "Employer Withholding: Table of Contents" website.
For traditional tax base school districts, an employer must use the same wage base and number of exemptions they use when calculating the employee’s Ohio income tax rate. For earned income tax base school districts, an employer must withhold at a flat rate equal to the school district’s tax rate with no reduction or adjustment for personal exemptions.
An employee’s school district is determined by the address of the employee’s residence. School districts and the corresponding four-digit codes can be found at https://www.tax.ohio.gov/finder or by contacting the applicable county auditor.
Electronic Filing Requirement. Employers are required to file and pay Ohio income and school district withholding taxes electronically. The easiest way to do this is through the Ohio Business Gateway.
Filing Frequency and Payment of Ohio’s Employer Withholding Tax. An employer’s filing frequency is determined by the combined amount of Ohio and school district income taxes that were withheld or required to be withheld during the look-back period. Ohio’s look-back period is the 12-month period ending June 30th of the preceding calendar year. An employer’s filing frequency is re-evaluated every year.
Ohio’s Income Tax Filing Frequency:
Quarterly. Ohio employers that withheld $2,000 or less in Ohio taxes will be required to file and pay taxes every calendar quarter. Ohio’s form IT 501 and payment are due by the last day of the month following each calendar quarter.
Monthly. Ohio employers that withheld more than $2,000 but less than $84,000 in Ohio taxes will be required to file and pay taxes every month. Form IT 501 and payment are due within 15 days after the end of each month.
Partial-weekly. Ohio employers that withheld $84,000 or more in Ohio taxes are required to make payment of withheld taxes within three banking days from the end of each “partial-weekly period.” There is no form that is required to be filed each time tax payments are filed. There are two “partial-weekly periods” in which an employer can be categorized. An employer’s partial weekly period depends on the day it issues payroll.
Partial-weekly Period 1: An employer is in period 1 if it issues payroll on Saturday, Sunday, Monday, or Tuesday.
Partial-weekly Period 2: An employer is in period 2 if it issues payroll on Wednesday, Thursday, or Friday.
Remember, payment is due within three banking days from the end of each period. So, if an employer issues payroll on Wednesday, it must submit payment of Ohio taxes within three banking days starting on Friday.
School District Tax Filing Frequency. School district tax filing frequency is the same as an employer’s Ohio income tax filing frequency except for employers that qualify as partial-weekly filers. Partial-weekly employers are required to file school district tax on a monthly basis. Every time an employer files and remits the school district tax they must complete “Payment of School District Income Tax Withheld” (Ohio SD 101), which can be found on the Ohio Business Gateway.
Quarterly and Annual Forms. An employer’s filing obligations do not end by filing the above forms each time it remits payment of Ohio’s taxes. The following are additional forms that must be completed by an employer either on a quarterly or yearly basis. Not every form listed below needs to be completed by every employer. Certain forms correspond with an employer’s filing frequency classification. These forms can be found on the Ohio Business Gateway.
Quarterly/Monthly Filers. Employers that qualify to file and pay Ohio income taxe on a quarterly or monthly basis must file an “Annual Reconciliation of Income Tax Withheld” (Ohio IT 941). Ohio IT 941 is typically due no later than January 31 of the following year (the 2021 tax year deadline has been extended to March 2, 2022). The total tax withheld on Ohio IT 941 must equal the amount reported on Ohio IT 3 (discussed below).
Partial-weekly Filers. Employers that must pay Ohio taxes on a partial-weekly basis must file a “Quarterly Reconciliation of Income Tax Withheld” (Ohio IT 942) by the last day of each month following a calendar quarter for the 1st, 2nd, and 3rd Quarters. A different Ohio IT 942 form titled “4th Quarter/Annual Reconciliation of Income Tax Withheld” is to be filed by partial-weekly employers by January 31 of the following year (the 2021 tax year deadline has been extended to March 2, 2022). Partial-weekly employers do not submit Ohio IT 941.
“Transmittal of W-2 and 1099-R Statements” (Ohio IT 3). All employers must submit Ohio IT 3, which can be done electronically on the Ohio Business Gateway. Ohio IT 3 requires an employer to report and upload employee W-2s/1099-Rs. The amount of Ohio taxes withheld and paid by an employer must match the information contained within the W-2s and 1099-Rs. Ohio IT 3 is usually due by January 31 of the following year (the 2021 tax year deadline has been extended to March 2, 2022).
“Annual Reconciliation of School District Income Tax Withheld” (Ohio SD 141). Employers must also submit Ohio SD 141, which can be done electronically on the Ohio Business Gateway. Ohio SD 141 compares the amount of school district tax withheld and paid by an employer and the information contained within the W-2s and 1099-Rs uploaded when an employer files Ohio IT 3 (see above). The amount of school district tax withheld and paid should match the information contained within the W-2s and 1099-Rs submitted by an employer. Ohio SD 141 is usually due by January 31 of the following year (the 2021 tax year deadline has been extended to March 2, 2022).
Ohio Unemployment Insurance Tax.
When are Agricultural Employers required to pay Ohio’s Unemployment Insurance? Agricultural employers must pay the Ohio Unemployment insurance tax if it:
- Paid cash wages of $20,000 or more in a calendar to agricultural employees in the current calendar year or the preceding calendar year; or
- Had at least 10 agricultural employees for some portion of a day in 20 different weeks in the current year or the preceding year
Other Ways Employers can Become Liable for Ohio’s Unemployment Insurance Tax. An employer can also be required to pay the Ohio Unemployment Insurance tax if it:
- Is subject to the Federal Unemployment Tax Act (“FUTA”) in either the current calendar year or preceding calendar year.
- Acquires a business that was subject to Ohio’s unemployment insurance tax.
- Elects to cover its employees voluntarily.
Employer Must Report Its Own Liability. Employers are required to report liability by filing “Report to Determine Liability” (JFS 20100) to the Ohio Department of Job and Family Services (the “ODJFS”), which can be done online at https://thesource.jfs.ohio.gov. The ODJFS will determine an employer’s liability based on the information provided in JFS 20100. If an employer is deemed to be liable for Ohio Unemployment Insurance, the ODJFS will issue a 10-digit employer account number.
Employer Reporting. Liable employers are required to file quarterly reports to the ODJFS. Agricultural employers that must pay into the Ohio unemployment insurance fund must file the “Employer’s Wage Detail Report” and the “Quarterly Summary Report.” Employers who had no workers or paid no wages during a quarter are still required to file the above-mentioned reports. Employers with fewer than 200 employees should file their quarterly reports by using the Ohio Business Gateway or ODJFS’s “The SOURCE Online” The reports must be filed no later than the last day of the month following the end of a calendar quarter.
Employer Contributions. Like FUTA, only the employer is responsible for Ohio’s unemployment insurance tax. Payments made into the Unemployment Insurance Trust Fund are called “contributions.” Contribution rates are determined by an employer’s “experience rating” which is a measure of how much an employer has paid in unemployment taxes and has been charged in benefits. For more information about contribution rates, visit https://jfs.ohio.gov/ouio/uctax/rates.stm.
Contributions are due no later than the last day of the month following the end of a calendar quarter. To determine how much tax is due each quarter, an employer multiplies its unemployment tax rate by the amount of taxable wages paid during the quarter. Contributions must be made each quarter until the “taxable wage base” for each employee has been met. The taxable wage base for 2022 is $9,000. This means that an employer is only required to pay its unemployment insurance tax rate on the first $9,000 dollars earned by each employee. If an employer is unable to make a contribution, the unpaid balance will bear an annual interest rate of 14%, compounded monthly.
Ohio Workers’ Compensation
While not technically a “tax,” every employer in the state of Ohio, with one or more employees, must have workers’ compensation coverage. This includes agricultural employers. There are, however, certain businesses that do not have to carry workers compensation coverage. These businesses include:
- Sole proprietors with no employees
- Partnerships with no employees
- Family farm corporations with no employees
- Limited liability company acting as a sole proprietorship with no employees
- Limited liability company acting as a partnership with no employees
As you can see, the common attribute shared by the exempt businesses listed above is the fact that those businesses have no employees. What this means is that if anyone, other than an owner, is performing services for a business and being paid for those services, then the business is required to carry workers’ compensation coverage. So, for example, if a couple owns and operates a small family farm corporation and only the couple performs the work on the farm, then workers’ compensation coverage is not required.
Elective Workers’ Compensation Coverage. For those employers that are not required to carry workers’ compensation coverage, they may still elect to do so. Oftentimes, businesses elect to carry workers’ compensation insurance to prevent the devastating side effects of a serious injury sustained by an owner. Using the example of the family farm corporation from above, if the couple decides not to carry workers’ compensation coverage and one of them is injured while farming, their health insurance company may deny their claim because the injury was work-related. Generally, on-the-job injuries must be covered through workers’ compensation, not an individual’s health insurance. So, the couple could begin to amass a large sum in medical bills due to the lack of insurance coverage, possibly bankrupting the farm corporation.
Applying for Workers’ Compensation Coverage. Employers required to carry workers’ compensation coverage must apply for coverage by submitting the “Application for Coverage (U-3)” to Ohio’s Bureau of Workers’ Compensation (“BWC”) which can be found at https://www.bwc.ohio.gov/employercoverage. Employers electing to obtain coverage can apply by submitting the “Application for or Request to Cancel Elective Coverage (U-3S)” which can be found by visiting https://info.bwc.ohio.gov/wps/portal/gov/bwc/for-employers/employer-forms/application-for-request-cancel-elective-coverage.
Workers’ Compensation Premiums. The BWC calculates an employer’s premium based on several factors, including total payroll, type of work performed by employees, and an employer’s workplace injury record.
Premium Payments. Installment payments of an employer’s premium is based upon a schedule chosen by the employer. The BWC will send an invoice to each employer for premium/installment payments. Payments can be made through an e-account on the Ohio Bureau of Workers’ Compensation website.
Alternative Premium Rate Plans. It's no secret that workers' compensation insurance can be a costly expense for an employer. However, the BWC does have alternative premium rate plans for employers looking to reduce the cost of workers' compensation insurance. These alternative rate plans allow employers that operate similar businesses to join together to potentially achieve a lower premium rate than they could obtain as individual employers. For more information on alternative premium rate plans visit https://www.bwc.ohio.gov/downloads/blankpdf/altrate.pdf.
Conclusion. This series was split into two posts because of the massive amount of information presented. However, the broad overview of this series was very surface level. There are many exemptions, exceptions, alternate requirements, or additional requirements based on an employer’s unique circumstances that we did not cover for the sake of brevity. That is why is it important to speak with an attorney or other tax professional so that they can help you navigate federal and state tax laws to make sure you are fulfilling your obligations as an employer and to address any questions or concerns that you may have.
References and Resources:
Ohio Administrative Code Chapter 4123, Bureau of Workers’ Compensation, https://codes.ohio.gov/ohio-administrative-code/4123
Ohio Bureau of Workers’ Compensation, BWC Basics for Employers, https://www.bwc.ohio.gov/downloads/blankpdf/BWCBASICS.pdf
Ohio Bureau of Workers’ Compensation, Workers’ Compensation Overview, https://info.bwc.ohio.gov/wps/portal/gov/bwc/for-employers/workers-compensation-overview
Ohio Department of Job and Family Services, Employer’s Guide to Ohio Unemployment Insurance,http://www.odjfs.state.oh.us/forms/num/JFS08201/pdf/
Ohio Department of Job and Family Services, Unemployment Insurance: Employer Resource Hub, https://unemploymenthelp.ohio.gov/employer/
Ohio Department of Job and Family Services, UI Tax for New Employers, https://jfs.ohio.gov/ouio/uctax/UITaxForNewEmployers.stm
Ohio Department of Taxation, 2022 Ohio Employer and School District Withholding Tax Filing Guidelines,https://tax.ohio.gov/static/employer_withholding/2021%20filing%20guidelines%20updates_rev%2012-22-21.pdf
Ohio Department of Taxation, Estimated Payments, https://tax.ohio.gov/wps/portal/gov/tax/individual/resources/estimated-payments
Ohio Revised Code Chapter 4141, Unemployment Compensation, https://codes.ohio.gov/ohio-revised-code/chapter-4141
Ohio Revised Code Chapter 4123, Workers’ Compensation, https://codes.ohio.gov/ohio-revised-code/chapter-4123
Ohio Revised Code Chapter 5747, Income Tax, https://codes.ohio.gov/ohio-revised-code/chapter-5747
Ohio Revised Code Chapter 5748, School District Income Tax, https://codes.ohio.gov/ohio-revised-code/chapter-5748
As we settle into 2022 and regroup after a busy holiday season, one of things an agricultural employer should be thinking about is taxes, more specifically, have they met their obligations when it comes to federal and state employment taxes. In this two-part series, we discuss the federal and state taxes that an employer is required to withhold from employees’ wages and the tax obligations that an agricultural employer is solely responsible for. This series covers the taxes and obligations an employer has because of the wages paid to employees. This series does not cover the business income or personal income tax reporting obligations of agricultural employers.
The first part of this series focuses on federal taxes and an employer’s obligations when it comes to social security, Medicare, federal income, and federal unemployment taxes. We also discuss when to pay the taxes and how to pay them. The information contained within this series is not meant to be legal and/or tax advice. Agricultural employers should seek out the counsel and guidance of an attorney or other tax professional to help them ensure they are compliant with their obligations under federal tax law.
Social Security and Medicare Taxes. Generally speaking, an employer must withhold social security and Medicare taxes from the wages it pays its employees. However, there are special rules for agricultural employers. The $150 Test or the $2,500 Test will help determine if an agricultural employees’ wages are subject to social security and Medicare taxes along with federal income tax withholding requirements.
All cash wages that an employer pays to an employee during the year for farmwork is subject to social security, Medicare, and federal income tax withholding requirements if either of the following tests are met:
- The $150 Test. An employer pays cash wages to an employee of $150 or more in a year for farmwork.
- This includes all cash wages paid on a time, piecework, or other basis.
- The $2,500 Test. The total that an employer paid for farmwork (cash and non-cash wages) to all employees is $2,500 or more during the year.
Annual cash wages of less than $150 paid to a seasonal farmworker are not subject to social security and Medicare taxes, or federal income tax withholding, even if an employer pays all farmworkers $2,500 or more. However, these wages do count towards the $2,500 Test to determine whether other farmworkers’ wages are subject to social security and Medicare taxes.
Social Security Tax Rate. The social security tax is 6.2% for both the employee and the employer on the first $142,800 paid to each employee in 2021. This means that an employer must withhold 6.2% of the employee’s wages for social security and the employer must match the 6.2%.
Medicare Tax Rate. The Medicare tax rate is 1.45% for each employee, on all wages earned. An employer must withhold Medicare taxes from an employee’s wages and pay a matching amount.
Federal Income Tax Withholding. An agricultural employer must withhold federal income tax from the wages of farmworkers if the wages are subject to social security and Medicare taxes (i.e. is the $150 Test or $2,500 Test met?). The amount of federal income tax withheld is determined by the gross wages paid to an employee (before any taxes are taken out).
To know how much federal income tax to withhold from an employee’s wages, an employer should have a Form W-4 (“W-4) on file for each employee. The Internal Revenue Service (“IRS”) redesigned Form W-4 for 2020 and beyond. The new W-4 no longer asks employees to report the number of withholding allowances they are claiming. The IRS encourages employees to file an updated W-4, but it is not a requirement to help determine the employee’s federal income tax withholding.
How much does an employer withhold for federal income tax? The best answer a lawyer can give to this question is, it depends. Luckily, the IRS has provided a tool to help employers determine the amount of federal income tax to withhold from an employee’s wages. The Income Tax Withholding Assistant for Employers allows employers to enter an employee’s W-4 information to calculate the amount of federal income tax to withhold. Note: The Income Tax Withholding Assistant will not be available after 2022. The IRS suggests using the Income Tax Withholding Assistant to become familiar with how to use the worksheets and tables in Publication 15-T to be able to calculate the amount of federal income tax to withhold after 2022.
What if my employee claims he or she is exempt from federal income tax withholding? An employee may claim an exemption from federal income tax withholding because they had no federal income tax liability last year and they expect to have no income tax liability this year. However, the employee’s wages are still subject to social security and Medicare taxes.
To claim the exemption, an employee must indicate the exemption on their W-4. The exemption is not permanent and is only for that year. To continue to be exempt, an employee must provide their employer a new W-4 by February 15. If an employee does not provide a new W-4 by February 15, the employer is required to start withholding federal income tax as if the employee had checked the Single or Married filing separate box on their W-4. If an employee provides a new W-4 after the February 15 deadline, an employer may apply the exemption to future wages but should not refund any taxes withheld while the exempt status was not in place.
Notice to Employees About Earned Income Credit (“EIC”). An employer must notify employees who have had no federal income tax withheld that they may be eligible for a tax refund because of the EIC. One easy way an employer can meet this requirement is by having the EIC notice on the back of the Form W-2 issued to all employees.
Depositing Social Security, Medicare, and Federal Income Taxes. Employment taxes must be deposited by electronic fund transfer (“EFT”). Normally, an EFT is made to the federal government using the Electronic Federal Tax Payment System (“EFTPS”). EFTPS is a free service provided by the Department of Treasury. For more information on EFTPS visit EFTPS.gov or call 800-555-4477. If an employer does not want to use EFTPS, it can arrange for its tax professional, financial institution, payroll service, or other trusted third party to make electronic payments on its behalf.
When to Deposit Social Security, Medicare, and Federal Income Taxes. An agricultural employer’s deposit schedule is determined from the total tax liability reported on Form 943, line 13, for the lookback period. The lookback period is the second calendar year preceding the current calendar year. Since we are in 2022, the lookback period will be 2020. This means that an employer’s status as either a “monthly schedule depositor” or “semiweekly schedule depositor” will be determined by the amount on Form 943, line 13 from 2020.
The terms “monthly schedule depositor” or “semiweekly schedule depositor” are not based on how often an employer pays its employees or how often it will be required to make tax deposits. The terms simply identify which set of rules an employer must follow. As discussed above the deposit schedule an employer must follow is determined by the total tax liability reported on Form 943, line 13. For 2022, an employer is a:
- Monthly schedule depositor if it reported $50,000 or less in 2020.
- Semiweekly schedule depositor if it reported more than $50,000 in 2020.
Monthly Deposit Schedule. If an employer is a monthly schedule depositor, it must deposit employment taxes on wages paid during a calendar month by the 15th day of the following month. If an employer does not pay any wages in a calendar month, it has no deposit requirement for the following month.
Semiweekly Deposit Schedule. If payday falls on a Wednesday, Thursday, or Friday, then an employer must deposit taxes by the following Wednesday. If payday falls on a Saturday, Sunday, Monday, or Tuesday, then an employer must deposit taxes by the following Friday. This is a very simplified explanation and assumes an employer has one payday for all employees. If an employer has multiple paydays for different employees, it should speak with an attorney or other tax professional to help determine when taxes should be deposited.
Federal Unemployment Tax Act (“FUTA”). FUTA, in conjunction with state unemployment systems, provides unemployment compensation to workers who have lost their jobs. Most employers pay both federal and state unemployment taxes. Additionally, only the employer is responsible for the FUTA tax, nothing is withheld from an employee’s wages for FUTA.
Agricultural Employers and FUTA. An agricultural employer is required to file Form 940 and pay FUTA tax if it:
- Paid cash wages of $20,000 or more to farmworkers in any calendar quarter in 2021 or 2022, or
- Employed 10 or more farmworkers during at least some part of the day (whether or not at the same time) during any 20 or more different weeks in 2021 or 20 or more different weeks in 2022.
When determining whether an employer meets either test above, employers must count the wages paid to H-2A workers, even though the wages paid to H-2A workers are not subject to FUTA.
Form 940 Due Date. Form 940 is due by January 31. If an employer made deposits on time and in full, they may file Form 940 by February 10.
FUTA Tax Rate. The FUTA tax rate is 6% for 2021. The tax applies to the first $7,000 an employer pays to each employee. There is a tax credit that may be applied against the FUTA tax rate for any amounts paid into state unemployment funds. The maximum credit is 5.4%. An employer is entitled to the maximum credit if it paid state unemployment taxes in full, on time, and on all the same wages that are subject to FUTA. Visit the instructions for filing Form 940 for further FUTA tax credit guidance.
Depositing FUTA Tax. FUTA taxes are deposited by EFT and are generally deposited on a quarterly basis. To calculate an employer’s FUTA tax, it should multiple the amount of wages paid to employees by .6% during the quarter. This percentage may have to be adjusted depending on an employer’s entitlement to the FUTA tax credit for state unemployment contributions. When an employee’s wages reach $7,000 for the calendar year, an employer does not have to figure any additional FUTA tax for that employee.
Conclusion. The above information is a very general overview of an employer’s tax obligations when it comes to its employees. As you can see, federal tax law can be daunting. We barely scratched the surface when it comes to specific exemptions or additional obligations for an agricultural employer. For example, agricultural employers may not always employ farmworkers or employees “engaged in agriculture.” The requirements and obligations of an employer that employs both farmworkers and non-farmworkers be may different than what is discussed above. Therefore, we cannot stress enough, the importance of speaking with an attorney or other tax professional so they can help you navigate federal tax law and your obligations as an employer.
Look out for our next and final installment of “An Agricultural Employer’s 2021 Tax Obligations: A Series” where we will be discussing an agricultural employer’s requirements and obligations under Ohio tax law.
References and Resources:
Internal Revenue Service, Publication 15 - (Circular E), Employer's Tax Guide, https://www.irs.gov/pub/irs-pdf/p15.pdf
Internal Revenue Service, Publication 15-A - Employer's Supplemental Tax Guide, https://www.irs.gov/pub/irs-pdf/p15a.pdf
Internal Revenue Service, Draft Publication 51- (Circular A), Agricultural Employer's Tax Guide, https://www.irs.gov/pub/irs-dft/p51--dft.pdf
Internal Revenue Service, Publication 225 - Farmer's Tax Guide, https://www.irs.gov/pub/irs-pdf/p225.pdf
Winter is a good time to review farm leases, and current information is critical to that process. That's why our Farm Office team is offering its Ohio Farmland Leasing Update, a webinar on February 9, 2022 from 7 to 9 p.m. I'll be joined for the webinar by co-speakers Barry Ward, Leader of Production Business Management for OSU Extension, and attorney Robert Moore.
On the legal side, we'll share legal information to help parties deal with addressing conservation practices in a leasing situation, using leases in farmland succession planning, Ohio's proposed new law about providing notice of termination, and ensuring legal enforceability of a lease. On the economic side, Barry Ward will provide a current economic outlook for Ohio row crops, research on cash rent markets for the Eastern Corn Belt, and rental market outlook fundamentals. We'll also overview farmland leasing resources.
There is no fee for the webinar, but registration is necessary. Register at https://go.osu.edu/farmlandleasingupdate.