Recent Blog Posts | Farm Office (2024)

An agricultural easem*nt is a legal instrument that can protect farmland from non-farm development and preserve the legacy of family land for the future. An earlier blog post explains how an agricultural easem*nt works and answers common questions about agricultural easem*nts. As we explained, an agricultural easem*nt not only preserves farmland but can also be a valuable financial and tax tool that can enable a transition of the farm to the next generation. But are there drawbacks to agricultural easem*nts? Here's a summary of potential negative implications of easem*nts that landowners should also consider.

It's difficult to forecast the future of a farm. The very nature of the easem*nt requires a best estimate of how the farmland might be used for agriculture into the future--a challenging task. The Deed of Agricultural Easem*nt the parties agree to must predict agricultural activities that are consistent with the easem*nt and those that would violate the easem*nt. There could be future problems if the predictions and forecasting aren’t flexible enough to accommodate agriculture in the future.

The “perpetuity” requirement. While it’s possible to draft an easem*nt that lasts only for a certain term of years, most agricultural easem*nts remain on the land “in perpetuity,” or permanently. The programs that pay a landowner to grant an agricultural easem*nt and the federal income and estate tax benefits for donating all or part of an easem*nt require that the easem*nt is perpetual. This differs from the conservation programs we’re accustomed to in agriculture that require shorter term commitments, and it can be a deterrent to a landowner who wants future generations to have a say in what happens to the land. These concerns might be addressed in the deed of agricultural easem*nt, however, which may provide sufficient flexibility to address those future concerns.

Termination can be difficult and costly. Hand in hand with the perpetuity issue is the difficulty of terminating an agricultural easem*nt once it’s in place. Typically, both parties must agree on a termination and a court of law must determine that conditions on or surrounding the land make it impossible or impractical to continue to use the land for agricultural purposes. Attempts to terminate without following the stated procedures can result in penalties for the current landowner. If there was a payment for the agricultural easem*nt, a deed of easem*nt will likely require the landowner to reimburse the paying party for the proportionate share of the fair market value of the land with the easem*nt removed and will also require the party receiving the reimbursem*nt to use the funds only for similar conservation purposes.

Eminent domain can be an issue. As one Ohio farm family has learned, an agricultural easem*nt might not protect the farmland from an eminent domain proceeding. In Columbia Gas v. Bailey, 2023-Ohio-1245, the Bailey family was forced to litigate an attempt by Columbia Gas to use eminent domain for the construction of a gas pipeline across their farmland. Their predecessor had placed an agricultural easem*nt on the farmland in 2003, and the family argued the easem*nt prevented the taking of land for the pipeline under the doctrine of “prior public use.” That doctrine prohibits an eminent domain action that would destroy a prior public use. The court agreed that the agricultural easem*nt did create a prior public use on the land, and the court shifted the burden to Columbia Gas to prove that the pipeline would not destroy the established prior public use. Rather than doing so, Columbia Gas withdrew its eminent domain proceeding and moved the location of the pipeline. The court's decision to recognize an agricultural easem*nt as a prior public use might provide some protection from eminent domain for future owners of agricultural easem*nt land but, like the Baileys, landowners may have to fight a long, expensive battle to prove that an eminent domain action would destroy an established prior public use.

Lenders and other interests must be on board. A landowner must deal with any existing mortgages, liens, leases, or easem*nts on the farmland before entering into an agricultural easem*nt. The State of Ohio’s agricultural easem*nt, for example, requires a lender to subordinate a mortgage to the rights of the easem*nt holder. Renegotiation of the mortgage might be necessary, and the lender might require a paydown of the outstanding mortgage if the property’s value could reduce below that amount. Without subordination and other approvals, a landowner will not be able to enter into an agricultural easem*nt.

Local governments must be on board. Ohio’s program for purchasing agricultural easem*nts requires a landowner to submit a resolution of support from the township and county where the land is located. This means the local governments must agree that committing the land to agriculture is consistent with local land use plans. An early conversation with local officials is necessary to ensuring consistency with the community’s future plans.

There will be monitoring. An easem*nt holder has the responsibility of ensuring there is not a violation of the easem*nt or conversion of the land to non-agricultural uses. This means there will be a baseline or “present condition” report of the easem*nt property upon easem*nt creation and monitoring of the property “in perpetuity.” An annual visit to the property and completion of an annual monitoring report by the easem*nt holder is common.

It's a lengthy process. Agricultural easem*nts don’t pop up overnight. Especially when applying for funding from competitive programs like Ohio’s Local Agricultural Easem*nt Purchase Program or the NRCS Agricultural Land Easem*nts Program, it can be a year or more before an agricultural easem*nt is in place.

Planning and integration with plans is necessary. An agricultural easem*nt is one piece of what can be a complex plan addressing a landowner’s expansion, retirement, estate, and transition needs. A landowner would be wise to work with a team of professionals—financial planner, tax professional, attorney—to ensure that an agricultural easem*nt integrates with all other parts of the plan.

Still interested? Ohio landowners interested in learning more about agricultural easem*nts may want to consider these steps:

• Review the resources on the Ohio Department of Agriculture’s Office of Farmland Preservation.
• Talk with other landowners who have entered into easem*nts. Refer to the Coalition of Ohio Land Trusts landowner resources and landowner stories.
• Visit American Farmland Trust’s Farmland Information Center.
• Talk with a “local sponsor” or land trust in your area. The Office of Farmland Preservation provides a list of local sponsors for the Clean Ohio Agricultural Easem*nt Purchase Program on its website.
• Talk with your attorney, financial planner, and accountant about the implications of entering into an agricultural easem*nt.

Posted In: Business and Financial, Conservation Programs, Environmental, Estate and Transition Planning, Property
Tags: agricultural easem*nt, farmland preservation, farmland protection, conservation easem*nt, Clean Ohio
Comments: 0

Income Tax Schools 2023
OSU Extension Announces Two-Day Tax Schools for Tax Practitioners &
Agricultural & Natural Resources Income Tax Issues Webinar
Barry Ward & Jeff Lewis, OSU Income Tax Schools

Tax provisions related to new legislation as well as issues related to trusts and estates, retirement, sales of business property, and income for both individuals and businesses are among the topics to be discussed during the upcoming Tax School workshop series offered throughout Ohio in October, November, and December.

The annual series is designed to help tax preparers learn about federal tax law changes and updates for this year as well as learn more about issues they may encounter when filing individual and small business 2023 tax returns.

The tax schools are intermediate-level courses that focus on interpreting tax regulations and changes in tax law to help tax preparers, accountants, financial planners and attorneys advise their clients. The schools offer continuing education credit for certified public accountants, enrolled agents, attorneys, annual filing season preparers and certified financial planners.

Our instructors are what make the difference in our program. Most have been teaching OSU tax schools for over 20 years and make themselves available long after the class to make sure attendees get through the tax filing season.

Attendees also receive a class workbook that alone is an extremely valuable reference as it offers over 600 pages of material including helpful tables and examples that will be valuable to practitioners. Summaries of the chapters in this year’s workbook can be viewed by visiting:
2023 National Income Tax Workbook Topics

A sample chapter from a past workbook can be found at:
https://taxworkbook.com/about-the-tax-workbook/

This year, OSU Income Tax Schools will offer both in-person schools and an online virtual school presented over the course of four afternoons.

In-person schools:
October 26-27, Ole Zim’s Wagon Shed, Gibsonburg/Fremont
October 30-31, Presidential Banquet Center, Kettering/Dayton
November 2-3, Old Barn Restaurant & Grill, Lima
November 7-8, Muskingum County Conference and Welcome Center, Zanesville
November 16-17, Hartville Kitchen, Hartville
November 20-21, Ashland University, John C. Meyers Convocation Center, Ashland
November 28-29, Nationwide & Ohio Farm Bureau 4-H Center, Columbus

Virtual On-Line School presented via Zoom:
December 1, 4, 6, & 8, 12:30 – 4:45 p.m.

Register two weeks prior to the school date and receive the two-day tax school early-bird registration fee of $425.This includes all materials, lunches, and refreshments. The deadline to enroll is 10 business days prior to the date of each school. After the school deadline, the fee increases to $475.

Additionally, the 2023 Checkpoint Federal Tax Handbook is available to purchase by participants for a discounted fee of $70 each. Registration information and the online registration portal can be found online at:https://go.osu.edu/tax2023

In addition to the tax schools, the program offers a separate, two-hour ethics webinar that will broadcast Monday, December 11th at 1 p.m. The webinar is $25 for school attendees and $50 for non-attendees and is approved by the IRS and the Ohio Accountancy Board for continuing education credit.

A webinar on Ag Tax Issues will be held Wednesday, December 13th from 8:45 a.m. to 3:20 p.m. If you are a tax practitioner that represents farmers or rural landowners or are a farmer or farmland owner that prepares your own taxes, this five-hour webinar is for you. It will focus on key topics and new legislation related specifically to those income tax returns.

Registration, which includes the Ag Tax Issues workbook, is $180 if registered at least two weeks prior to the webinar. After November 29, registration is $230. Register by visiting:https://go.osu.edu/tax2023.

NEW! Introduction to Tax Preparation Course.
New this year, we are offering an introduction to tax preparation course. Our instructors are highly qualified tax professionals presenting a real-world approach to tax preparation. This course is designed for professionals with 0-5 years of experience and seeks to help build a foundation for which all tax professionals can continue to build off of. To read more about our introductory course and the topics covered visit,https://farmoffice.osu.edu/tax/new-introduction-tax-preparation-course.

The introductory course will be held on November 13th and 14th at the Der Dutchman in Bellville, Ohio. The course has been approved for continuing education credits by the IRS, the Ohio Accountancy Board, and the Ohio Supreme Court. Registration is $425 prior to October 30th. Registration fees increase to $475 beginning November 1st. Registration includes a 300+ page workbook created by our instructors to help you throughout the beginning of your career!

Contact Barry Ward at 614-688-3959, ward.8@osu.edu or Jeff Lewis at 614-247-1720, lewis.1459@osu.edu for more information.

Posted In: Legal Education, Tax
Tags: tax, Tax Preparation, Tax Professional
Comments: 0

Questions from farmers and farmland owners about agricultural easem*nts are on the rise at the Farm Office. Why is that? From what we’re hearing, the questions are driven by concerns about the loss of farmland to development as well as desires to keep farmland in the family for future generations. An agricultural easem*nt is a unique tool that can help a farmland owner and farming operation meet goals to protect farmland from development or transition that land to the next generation. Here are answers to some of the questions we’ve been hearing.

What is an agricultural easem*nt? An agricultural easem*nt is a voluntary legal agreement by a landowner to use land primarily for agricultural purposes and forfeit the right to develop the land for other purposes, either permanently or, less often, for a term of years. In an agricultural easem*nt, a landowner grants an easem*nt “holder” the legal right to enforce the easem*nt against a landowner or other party who attempts to convert the land to a non-agricultural use. A written legal instrument details and documents this agreement between a landowner and the easem*nt “holder.” The agricultural easem*nt instrument must be recorded in the county land records, and the agricultural easem*nt is binding on all future landowners for the duration of its term.

A state legislature must authorize the use of the agricultural easem*nt instrument, and Ohio’s legislature did so in 1999. At that time, the legislature adopted a detailed legal definition of “agricultural easem*nt” in Ohio Revised Code 5301.67(C):

"Agricultural easem*nt" means an incorporeal right or interest in land that is held for the public purpose of retaining the use of land predominantly in agriculture; that imposes any limitations on the use or development of the land that are appropriate at the time of creation of the easem*nt to achieve that purpose; that is in the form of articles of dedication, easem*nt, covenant, restriction, or condition; and that includes appropriate provisions for the holder to enter the property subject to the easem*nt at reasonable times to ensure compliance with its provisions.

The legislature also required in Ohio Revised Code 5301.68 that a landowner may only grant an agricultural easem*nt on land that qualifies for Ohio’s Current Agricultural Use Valuation (CAUV) program under Ohio Revised Code 5713.31.

Is an agricultural easem*nt the same as a conservation easem*nt? No, not in Ohio, but they share the same legal concept of dedicating land to a particular use. Ohio also allows a landowner to grant a conservation easem*nt, which is a promise to retain land predominantly in its natural, scenic, open, or wooded condition and forfeit the right to develop the land for other purposes. A conservation easem*nt might allow agricultural land uses, and an agricultural easem*nt might allow some conservation uses. The terms used in federal law and some other states vary from Ohio, and include “agricultural conservation easem*nt” or “agricultural land easem*nt.”

Who can be a “holder” of an agricultural easem*nt? Ohio law answers this question in Ohio Revised Code 5301.68, which authorizes only these entities to enter into an agricultural easem*nt with a landowner:

• The director of the Ohio Department of Agriculture;
• A municipal corporation, county, or township;
• A soil and water conservation district;
• A tax exempt charitable organization organized for the preservation of land areas for public outdoor recreation or education, or scenic enjoyment; the preservation of historically important land areas or structures; or the protection of natural environmental systems (generally referred to as a “land trust” or a “land conservancy.”)

What kinds of land uses would be inconsistent with keeping the land in agricultural use? That depends on the terms in the written deed for the agricultural easem*nt. Activities that might violate the agreement to maintain the land as agricultural include subdivision of the property, commercial and industrial uses, major surface alterations, and oil and gas development. It’s typical to identify the homestead or “building envelope” area and allow new buildings, construction and similar activities within that area, but those activities might not be permitted on other parts of the land. Review the Ohio Department of Agriculture’s current Deed of Agricultural Easem*nt through the link on this page: https://agri.ohio.gov/programs/farmland-preservation-office/landowners.

Can a landowner transfer land that is subject to an agricultural easem*nt? Yes. An agricultural easem*nt does not restrict the right to sell or gift land, but it does carry over to the new landowner. That landowner must abide by the terms of the agricultural easem*nt.

Are there financial incentives for entering into an agricultural easem*nt? Yes. There are several financial incentives:

• The Ohio Department of Agriculture’s Office of Farmland Preservation oversees the Local Agricultural Easem*nt Purchase Program, which provides Clean Ohio grant funds to certified local sponsors to purchase permanent agricultural easem*nts in their communities. It’s a competitive process that requires a landowner to work with an approved local sponsor to apply for the program and to donate at least 25% of the agricultural easem*nt’s value if selected. A landowner can receive up to 75% of the appraised value of the farm’s “development rights,” with a payment cap of $2,000 per acre and $500,000 per farm per application period.
• Federal funds are also available through the Natural Resource Conservation Service’s Agricultural Conservation Easem*nt Program. This program is also competitive and requires a landowner to work with an approved partner to determine eligibility and apply for easem*nt funding. NRCS may contribute up to 50 percent of the fair market value of the agricultural land easem*nt.
• There are also federal income tax incentives for donating a portion or all of an agricultural easem*nt’s value to a qualified charitable organization. Internal Revenue Code section 170(h) allows a landowner to deduct the value of the easem*nt up to 50 percent of their adjusted gross income (AGI) in the year of the gift, with a 15-year carryover of excess value. That AGI percentage increases to 100% for a “qualified farmer” who earns more than 50% of their gross income from farming.
• There can also be federal estate tax benefits for land subject to a permanent agricultural or conservation easem*nt. The land is valued at its restricted value, which lowers the estate value. Additionally, Section 2055(f) of the Internal Revenue Code allows donations of qualifying easem*nts to a public charity to be deducted from the taxable value of an estate. Up to 40% of the value of land restricted by an agricultural or conservation easem*nt can be excluded from the value of an estate if the easem*nt meets Internal Revenue Code section 2031(C) provisions, limited to $500,000.

How can a family use an agricultural easem*nt to enable farm transition goals? Here’s an example. John and Sue are fourth generation owners of 250 acres of farmland they plan to leave to their child Lee, and they want the land to remain as farmland into the future. Lee is committed to farming and wants to farm, and John and Sue would like Lee to have more land to improve the viability of the farming operation. They find a local sponsor and apply to Ohio’s Local Agricultural Easem*nt Purchase Program, offering to donate 25% of the agricultural easem*nt value to the program. They are selected for the funding and receive a payment of $2,000 per acre for the agricultural easem*nt. They use the $500,000 in easem*nt proceeds to purchase additional farmland for Lee. John and Sue receive a federal income tax credit for the portion of the easem*nt value they donated to qualify for the program, and carryover the amount until it is fully used, up to 15 years.

What are the drawbacks of agricultural easem*nts? There are challenges and drawbacks of agricultural easem*nts, and we’ll discuss those in our next blog post.

Agricultural easem*nts require legal and tax advice and careful planning. Our short Q&A doesn’t address all of the nuances of agricultural easem*nts. It’s a big decision, and one that should align with current goals and estate and transition plans. To determine if an agricultural easem*nt works for your situation, seek the advice and planning assistance of knowledgeable legal and tax professionals.

Posted In: Conservation Programs, Environmental, Estate and Transition Planning, Property
Tags: farmland preservation, farmland protection, agricultural easem*nt, conservation easem*nt, transition planning, estate planningtax
Comments: 0

Ohio has over 76,000 farms and 13 million acres of farmland. In such a large and diverse industry, conflicts commonly arise that can lead to disputes, litigation, and appeals. Ultimately, these conflicts can cause harmful effects that threaten the viability of Ohio agriculture. To address these issues, a new program has been developed - Ohio Farm Resolution Services at The Ohio State University (OFRS). The goal of OFRS is to cultivate solutions to the conflicts that impact Ohio's farms and farm families.

OFRS will provide a three-pronged approach to assist farms and farm families in resolving problems and conflicts:

1. Education resources. The first approach will be to provide educational resources that may lead to a resolution. Educational resources may be in the form of bulletins, publications, articles or individual discussions. For example, OFRS may provide a law bulletin on farm leasing to a tenant and landowner involved in a lease dispute. Some disputes can be resolved through education alone.
2. Consultation and informal resolution services. OSU Extension attorneys and farm management specialists will be available to meet with parties to assist with resolving their issues. These services will be more informal and may include sitting at the kitchen table with a family struggling with transition planning or perhaps meeting in a pasture to discuss shared fence line concerns between neighboring farmers.
3. Formal mediation. Sometimes conflicts escalate to hard feelings and entrenched positions. When this happens, formal mediation may be appropriate. This process will involve the intervention of a trained mediator to assist the parties in negotiating jointly acceptable resolution of issues in conflict. The mediator meets with the parties at a neutral location, often shuttling between separate rooms, where the parties can discuss the dispute and explore a variety of solutions. Formal mediation is often the last step before litigation.

Most consultation and mediation services will be conducted by OFRS’ primary consultants/mediators: Peggy Hall, David Marrison, Jeff Lewis and Robert Moore. OFRS will also develop a pool of outside mediators who can assist with matters that require special or unique technical knowledge. OFRS is committed to providing individuals who have both the knowledge and skill to help understand and resolve issues.

OFRS will be able to assist on a wide variety of matters. The following are issues for which OFRS can provide assistance:

• Family communication
• Farm transition planning
• Business entities
• Business practices
• Land use
• Property issues/neighbor issues
• Zoning
• Farm leases
• Energy leases
• Farm labor issues
• Farmland drainage
• Crops/agronomy/soils disputes
• USDA administrative appeals
• ODA administrative appeals
• Farm lender/creditor negotiations

OFRS is available to provide educational and consultation services now. Mediation services will be available beginning in January 2024. For more information or to refer someone to OFRS, contact Robert Moore at moore.301@osu.edu or 614-247-8260. Information is also available at farmoffice.osu.edu/ofrs.

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Tags: Resolution, OFRS
Comments: 0

In the previous post “Artificial Intelligence – What Is it and How to Use It” (May 31, 2023), I briefly discussed AI, how it works and some of its potential uses. There is no doubt that AI will have profound effects on each of us and our society in general. In this post, I am going to examine how AI works for a specific task related to agricultural law and measure its performance.

Surveys by Ohio State University indicate around 50% of farmland in Ohio is leased. Therefore, farm leases are an important legal document for many Ohio farmers. While some farm leases are still only verbal, many tenants and landowners recognize the benefits of a written lease and have at least a basic written lease in place. Some leases are written by the tenant or landlord while other leases are written by attorneys. The issue addressed in this article is: is AI ready to draft your farm lease?

The Process

To address the above question, ChatGPT and Google Bard, two of the more prominent AI interfaces, were each tasked with the following: “draft a cash farm lease”. This command was broad and vague but would likely reflect what a tenant or landowner might request. This exercise was performed on May 30, 2023 and each AI tool provided a cash farm lease. The exercise was again performed on October 4, 2023 to assess if AI’s capabilities changed over time.

To measure the effectiveness of AI, the drafted leases were compared to the recommended lease terms provided in OSU Extension’s bulletin “What’s In your Farm Lease? A Checklist of Farm Lease Provisions”. This bulletin was written by Peggy Hall and provides 26 key terms that should be included in most farm leases. Each draft lease was scored based on the number of terms that were included.

The Results

The following is the score for each draft, with the score reflecting the number of recommended terms from the lease bulletin that were included in the lease drafts:

ChatGPT, May 2023 8

Google Bard, May 2023 10

Chat GPT, October 2023 9

Google Bard, October 2023 7

As the scores show, neither ChatGPT nor Google Bard included even one-half of the recommended terms and the best was 10 out of 26 or 38%. Two important items of note. First, no drafts included terms to prevent the tenant from assigning the lease to someone else – an extremely important provision to include in farm leases. Second, no drafts addressed landowner or tenant signatures needing notarized.¹

I would describe these drafts as “bare minimum” leases. They are probably better than having no lease at all, but they could be much better and do not include several key terms. Also, there was no significant improvement of performance over time. In fact, the Google Bard score was lower in the later draft. Asking ChatGPT or Google Bard to “draft a farm cash lease” is not going to provide a satisfactory lease.

Providing Input to AI to Improve Output

As I discussed in my prior AI post, one of the benefits of AI is the ability to chat with it. That is, you can provide feedback to the AI to assist it in providing a better outcome. So, that’s what I did. After reviewing the first two rounds of lease drafts, I asked ChatGPT and Google Bard to draft a third cash farm lease and to specifically include the 26 recommended terms from the lease bulletin. The resulting leases were better and scored as follows:

ChatGPT 16

Google Bard 20

As you can see, the scores increased significantly. So, the feedback provided to AI was integrated into the resulting drafts and made the leases better. This is one of the major advancements of AI. It allows someone like me that has little computer proficiency to provide untrained input that causes a significantly better result.

While the scores did increase, there were still some major issues with the drafts. I was probably generous in the scoring and gave credit if an issue was addressed, even if somewhat incomplete. For example, in its first two drafts, ChatGPT did not include a term addressing who receives FSA payments, the tenant or landowner. ChatGPT did address this issue after being prompted but stated that the landowner would receive all FSA payments. According to FSA rules, the tenant must receive at least some of the program payments and it is customary for the tenant to receive all FSA payments. So, while ChatGPT included a term about FSA payments, the included term was not completely accurate or correct.

Google Bard also had similar issues. In its first two drafts, it did not address what happens in the event of eminent domain takes a portion of the leased property. A typical lease term would say that the tenant is compensated for any crop damage caused by eminent domain and the landowner would keep the acquisition proceeds. Google Bard included a provision about eminent domain but stated the tenant would receive all eminent domain proceeds. Allowing the tenant to keep eminent domain proceeds would be very unusual and not something a landowner should agree to.

I would assess these leases as “better but still not good”. These drafts did include more of the recommended terms but included many of them in an insufficient or incomplete manner. The third round of leases did show that AI can learn and improve with feedback but also that it has a long way to go. The craft and nuance of drafting legal documents still seems to belong to the domain of people.

Conclusion

There are some well-known people, such as Elon Musk, who claim that we should have serious concerns about AI eventually taking over the world. Their concerns may be valid, but as of now I don’t believe AI is going to take over farm lease drafting anytime soon. An experienced attorney can do a much better job of drafting a farm lease than today’s AI. For a tenant or landowner who are unwilling to hire an attorney or may not have the resources to pay an attorney, a farm lease drafted by AI may be better than nothing but that’s about it. The best source of legal services remains to be attorneys and likely will be for the foreseeable future. AI is not ready to replace your attorney – yet.

Posted In: Business and Financial
Tags: artificial intelligence, farm leases
Comments: 0

Two separate, but very similar, pieces of legislation are working their way through the Ohio Legislature and could end up affecting your farmland’s current agricultural use value (“CAUV”).House Bill 187 (“HB 187”)andSenate Bill 153 (“SB 153”)both seek to adjust how property values are assessed in Ohio and some of those proposed changes specifically affect CAUV.

Both proposed bills aim to make temporary adjustments to CAUV for farmland. These changes will impact farmland that undergo reappraisal or triennial updates in 2023, 2024, or 2025. The adjustment does not alter the CAUV formula itself but rather calculates a farm's CAUV at its next reappraisal or update as the average between the CAUV for that year and the CAUV it would have if it were in a county that had reappraisals or updates in the two previous years.

TheOhio Legislature has provided the following example: “[C]onsider a farm located in a county that undergoes a reappraisal in 2023. If the formula were applied for that year, the farm’s CAUV would be $200 per acre. However, if the farm had been reappraised in 2022, its value would have been $190 per acre, and if it had been reappraised in 2021, its value would have been $180 per acre. Under the bill, the farm’s reappraisal value will be $190 per acre (the average of $180, $190, and $200).”

Again, these proposals for CAUV adjustments are only temporary, and the current valuation rules will be reinstated starting in 2026. For example, if the farm mentioned above undergoes a triennial update in 2026, its value will be determined without averaging, following the currently existing rules. Furthermore, if the 2023 CAUV tables, which prescribe the per-acre value of each soil type, have already been published before the proposed legislation takes effect, the Ohio Department of Taxation must update these tables within 15 days after the bill becomes effective to reflect the changes introduced by the Legislature.

As of the morning of October 5, 2023, HB 187 has gone through committee and is ready to be voted on by the House. The Ohio Senate had its third hearing on SB 153 on October 3, 2023, but has yet to report the bill to the floor for a vote. Some County Auditors have come out in “indirect opposition” to both bills, arguing that the proposed legislation would create a logistical nightmare for tax billing purposes. Lastly, there are some differences between the two pieces of legislation - unrelated to CAUV - that would have to be worked out between the House and Senate before we have a final bill that could take effect. We will continue to monitor the situation and keep you up to date on any changes.

Posted In: Property, Tax
Tags: Farmland, cauv, tax, property tax
Comments: 0

By Wm. Bruce Clevenger, Frank Becker, Shelby Tedrow, Grant Davis, and Ken Ford

Ag lenders are keeping farm businesses moving forward.Agriculture is a capital intense industry.Land, buildings, livestock, and equipment are the largest assets on the balance sheet.Additionally, the cash flow needs of seed, chemicals, fertilizers, feed, and supplies are cumulative to the number of dollars needed to operate the business.

Ohio State University Extension has scheduled four seminars in Ohio for Agricultural Lenders. The dates are Tuesday, October 17th in Ottawa, Ohio; Wednesday, October 18th in Wooster, Ohio; Thursday, October 19th in both Washington Court House, OH, and Urbana, OH.Registration deadlines are October 10, 11 and 12, for Ottawa, Wooster, and Washington Court House/Urbana, respectively.

These seminars are excellent professional development opportunities for Lenders, Farm Service Agency personnel, county Extension Educators and others to learn about critical agricultural topics facing the industry across the state and nation such as farm policy, risk management, market outlook, and business analysis.

Featured topic and speaker at all locations in 2023…

Farm Bill 2023 Update: Direct from Washington D.C. by: John Newton, Ph.D., Chief Economist to Senator John Boozman, Ranking Member of the U.S. Senate Committee on Agriculture, Nutrition & Forestry.Newton: Ohio State University Graduate: Ph.D 2013, M.S. 2012, B.S. 2010.

2023 Topics and Speakers by Location

Ottawa, OH – October 17, 2023

• Economics of Farm Drainage: Calculating a Payback Period & Lease Terms When Installing Drainage Improvements. – Wm. Bruce Clevenger, OSU Extension Field Specialist, Farm Management
• Farm Bill 2023 Update: Direct from Washington D.C. – John Newton, Ph.D., Chief Economist to Senator John Boozman
• Farm Insurance Policy: “I think I’m covered if that happens” – Robert Moore, J.D., OSU Extension Attorney, OSU Ag & Natural Resources Law Program
• USDA – Farm Service Agency Loan Program Update – Kurt Leber, Northwest Ohio FSA, District Director – Farm Loan and Farm Program
• Commodity Grain Markets: Trends and Prospects – Seungki Lee, Ph.D., Ohio State University, Dept of Ag, Environ, & Development Economics.
• Farm Business Analysis and Benchmarking Program – Clint Schroeder, OSU Extension, Program Manager
• Economic View from the Farmgate: Land, Inputs, Margins & Tax Policy – Barry Ward, OSU Extension, Leader, Production Business Management

Wooster, OH – October 18, 2023

• Tools for Farmland Preservation – Tate Emerson, Killbuck Watershed Land Trust
• Financing Food and Agriculture – Shoshana Inwood, OSU Community, Food, and Economics Development & Jessica Eikleberry, Farmland Preservation Specialist – Wayne County Planning Office
• Farm Bill 2023 Update: Direct from Washington D.C. – John Newton, Ph.D., Chief Economist to Senator John Boozman
• Dairy Market Outlook and Industry Updates – Jason Hartschuh, OSU Extension Field Specialist, Dairy
• Economic View from the Farmgate: Land, Inputs, Margins & Tax Policy – Barry Ward, OSU Extension, Leader, Production Business Management
• Farm Insurance Policy: “I think I’m covered if that happens” – Robert Moore, J.D., OSU Extension Attorney, OSU Ag & Natural Resources Law Program

Urbana, OH – October 19, 2023

• Economic View from the Farmgate: Land, Inputs, Margins & Tax Policy – Barry Ward, OSU Extension, Leader, Production Business Management
• Farm Bill 2023 Update: Direct from Washington D.C. – John Newton, Ph.D., Chief Economist to Senator John Boozman
• FarmOn and On Farm Records – Bruce Clevenger, OSU Extension, Field Specialist – Farm Management
• Livestock Outlook and Update – Garth Ruff, OSU Extension, Field Specialist – Beef Cattle
• Commodity Grain Markets: Trends and Prospects – Seungki Lee, Ph.D., Ohio State University, Dept of Ag, Environ, & Development Economics

Washington Court House, OH – October 19, 2023

• Livestock Outlook and Update – Garth Ruff, OSU Extension, Field Specialist – Beef Cattle
• Farm Bill 2023 Update: Direct from Washington D.C. – John Newton, Ph.D., Chief Economist to Senator John Boozman
• Commodity Grain Markets: Trends and Prospects – Seungki Lee, Ph.D., Ohio State University, Dept of Ag, Environ, & Development Economics.
• Economic View from the Farmgate: Land, Inputs, Margins & Tax Policy – Barry Ward, OSU Extension, Leader, Production Business Management
• FarmOn and On Farm Records – Bruce Clevenger, OSU Extension, Field Specialist – Farm Management

The registration cost to attend one of the Ag Lender Seminars is $75.00 per guest. Payments can be made by credit card online or mail a check. Registration is open online at:https://u.osu.edu/aglenderseminars/

Registration questions can be directed to Wm. Bruce Clevenger, OSU Extension Field Specialist, Farm Management, at 419-770-6137 or clevenger.10@osu.edu

OSU Extension conducts the seminars from input from Ag Lenders, County Extension Educators and Extension Specialists. The seminars are designed to provide information that Ag Lenders will use directly with their customers, indirectly within the lending industry, and as professional development for current issues and trends in production agriculture. OSU Extension has been offering Ag Lenders Seminars for over 40 years.

Posted In: Business and Financial
Tags: Ag Lender Seminar, Insurance, Farm Records, tax, Beginning Farmer Tax Credit, farm bill
Comments: 0

Happy Fall Y’all! We are back with another monthly edition of The Ag Law Harvest. This month’s edition brings you an Ohio Supreme Court case that clarifies a party’s obligations under express indemnification provisions in a contract, an Ohio woman’s fight against a local zoning ordinance that sought to remove her pet ducks, and agricultural labor updates.

Common Law Notice Requirements May No Longer Exist Under Express Indemnification.
The Ohio Supreme Court recently made asignificant decisionregarding indemnification clauses in contracts. Indemnification is the right of one party to be fully reimbursed for payments they made on behalf of another party who should have made those payments. There are two types of indemnity: express and implied. Express indemnity is when a written contract explicitly states that one party will reimburse the other under certain circ*mstances. Implied indemnity is a common law principle where each party is responsible for their own wrongdoing, and the wrongdoer should reimburse the injured party.

In this case, Discovery Oil and Gas contracted with Wildcat Drilling, which included an express indemnification provision. Wildcat was supposed to indemnify Discovery for any fines related to pollution or contamination from drilling. When Wildcat violated Ohio law by using brine improperly, Discovery settled with the Ohio Department of Natural Resources for $50,000 without notifying Wildcat and requested reimbursem*nt. Wildcat refused, arguing that Discovery didn't follow Ohio common law, which requires notice before settling a claim.

The Ohio Supreme Court sided with Discovery, stating that the express clause in the contract indicated the parties' intent to deviate from common law principles. The court clarified that notice requirements for indemnification are determined by the contract terms. Depending on the contract, parties may not need to provide notice before settling a claim and seeking reimbursem*nt. This ruling emphasizes the importance of contract language in determining indemnification obligations.

Medina County Woman Has All Her Ducks in a Row.
A Medina County woman is able to keep her pet ducks after a battle with the Village of Seville and an interpretation of its zoning ordinances. Ms. Carlson, the owner of the ducks at issue, fought to keep her pet ducks after being ordered to remove them from her property by Wadsworth Municipal Court. Ms. Carlson appealed the municipal court’s ruling, arguing that Seville’s zoning ordinance against “poultry and livestock” is unconstitutionally vague.The appellate court agreed with Ms. Carlson.The appellate court found that Seville’s ordinance against poultry focused on hens, roosters, coop hygiene, and the sale of poultry byproducts such as meat and eggs. The court held that an ordinary person would not be able to understand that keeping other birds, such as ducks, as companion animals would violate Seville’s ordinances. Therefore, Ms. Carlson could not be found to have committed an unclassified misdemeanor by owning pet ducks. However, had Ms. Carlson been keeping the ducks and selling theirbyproducts such as duck eggs and meat, there might have been a different outcome.

Farm Labor Stabilization and Protection Pilot Program.
The U.S. Department of Agriculture (“USDA”) hasannounced the opening of the Farm Labor Stabilization and Protection Pilot Program (“FLSP”). The FLSP will award up to $65 million in grant funding to provide support for agricultural employers to implement new hearty labor standards/procedures and update existing workplace infrastructure to help promote a healthy and safe work environment. The USDA states that the purpose of the FLSP program is “to improve food and agricultural supply chain resiliency by addressing challenges agricultural employers face with labor shortages and instability.” The FLSP has three goals: (1) drive U.S. economic recovery and safeguard domestic food supply by addressing current labor shortages in agriculture; (2) reduce irregular migration from Northern Central America through the expansion of regular pathways; (3) improve working conditions for all farmworkers. Qualified applicants can receive grants ranging from $25,000 - $2,000,000. The application window closes on November 28, 2023. For more information, view the USDA’sfact sheet on the FLSP.

Department of Labor Publishes Proposed Rule to Amend H-2A Regulations.
The U.S. Department of Labor (“DOL”) Employment and Training Administration (“ETA”) haspublished a proposed rule titled “Improving Protections for Workers in Temporary Agricultural Employment in the United States.” The proposed rule seeks to amend several H-2A program regulations by:

• Adding new protections for worker self-advocacy.
• Clarifying when a termination is “for cause.”
• Making foreign labor recruitment more transparent.
• Making wages more predictable.
• Improving workers’ access to safe transportation.
• Enhancing enforcement to improve program integrity.

Read more about the proposed rule by visiting theDOL’s news release. The comment period on the proposed rule ends November 14, 2023.

Department of Homeland Security Publishes Proposed Rule Amending H-2 Program.
The U.S. Department of Homeland Security (“DHS”) haspublished a proposed rule titled “Modernizing the H-2 Program Requirements, Oversight, and Worker Protections.”The DHSannouncedits intent to strengthen protections for temporary workers through the H-2A and H-2B worker programs by providing greater flexibility and protections for participating workers, and improving the programs’ efficiency. The proposed rule would:

• Provide whistleblower protection to H-2A and H-2B workers who report their employers for program violations.
• Extend grace periods for workers seeking new employment, preparing for departure from the United States, or seeking a change of immigration status.
• Establish permanent H-2 portability, allowing employers to hire H-2 workers who are already lawfully in the United States while the employer’s H-2 petition for the worker is pending.

The comment period for the proposed rule ends on November 20, 2023.

Posted In: Animals, Contracts, Labor
Tags: Ohio Supreme Court, Contract Terms, Indemnification, Farm Labor, Agricultural Labor, Zoning Ordinances
Comments: 0

In the world of real estate transactions, deeds play a crucial role in transferring property ownership from one party to another. Ohio, like many other states, offers several types of deeds, each with its own set of characteristics and implications. Understanding the differences between these deeds is essential for both buyers and sellers. In this article, we will explore four common types of deeds in Ohio: General Warranty Deed, Limited Warranty Deed, Quitclaim Deed, and Fiduciary Deed, and highlight the distinctions between them.

General Warranty Deed

A General Warranty Deed is one of the most comprehensive and protective deeds available in Ohio. When a property is conveyed through a General Warranty Deed, the seller (grantor) provides an extensive set of warranties and assurances to the buyer (grantee). These warranties include:

a. Warranty of Title: The seller guarantees that they hold clear and marketable title to the property and will defend the buyer against any claims or defects in title that may arise before or during their ownership.

b. Covenant of Quiet Enjoyment: The seller promises that the buyer will have peaceful and undisturbed possession of the property, free from interference or claims by others.

c. Covenant Against Encumbrances: The seller assures the buyer that there are no outstanding liens or encumbrances on the property, except as specified in the deed.

General Warranty Deeds provide the highest level of protection to buyers and are typically used in traditional real estate transactions. They are considered the gold standard of deeds.

Example: Farmer buys a farm from Seller. Later, Farmer tries to use the farm as collateral and discovers there is an unpaid contractor's lien from the previous owner to Seller. With a General Warranty Deed, Seller is responsible for addressing and clearing the lien so that Farmer can proceed with their plans.

Limited Warranty Deed

A Limited Warranty Deed, also known as a Special Warranty Deed, offers a more limited set of warranties compared to a General Warranty Deed. In a Limited Warranty Deed, the seller guarantees that they have not caused any defects in title during their ownership, but they do not warrant against defects that may have existed before their ownership. Essentially, the seller is only responsible for title issues that occurred while they owned the property.

Limited Warranty Deeds are commonly used in commercial real estate transactions and can offer some protection to buyers while limiting the seller's liability.

Example. Using the previous example with a Limited Warranty Deed, Seller would not be liable to Farmer because the title issue was created prior to Seller owning the property. Seller would only be liable to Farmer if the title issue was created while Seller owned the farm.

Quitclaim Deed

A Quitclaim Deed is a deed that conveys the seller's interest in a property without making any warranties or guarantees about the quality of title. Essentially, the seller is saying, "I'm giving you whatever interest I have in this property, if any." Quitclaim Deeds are often used in situations where property is transferred between family members, in divorce settlements, or to clear up questions about property ownership.

It's important to note that while Quitclaim Deeds provide no warranties, they can be a quick and straightforward way to transfer property interests when the parties involved trust each other.

Example: Sarah and her sibling, David, jointly inherited a farm. Sarah decides to buy out David's share, and they use a Quitclaim Deed for the transfer. David, by signing the Quitclaim Deed, is essentially relinquishing any interest he may have in the farm without making any claims or guarantees about the farm's title. This allows Sarah to take sole ownership.

Fiduciary Deed

A Fiduciary Deed is used when the person transferring the property is acting as a fiduciary, such as an executor of an estate or a trustee of a trust. These deeds convey the property interest held by the estate or trust to the designated beneficiaries. A fiduciary deed warrants that the fiduciary is acting in the scope of their appointed authority, but it does not guarantee title of the property. This deed relieves the executor or trustee of liability for title defects so that people will be more willing to serve in a fiduciary capacity.

Example. Sarah's father passed away and she is the trustee of his trust. As part of the trust administration, she needs to transfer ownership of her father's farm to herself and her siblings. Sarah would use a Fiduciary Deed to convey the property to the beneficiaries. If a title defect is later discovered, Sarah will not be liable to the beneficiaries.

Conclusion

In Ohio, the choice of deed in a real estate transaction is a critical decision that can have significant legal and financial implications for both buyers and sellers. General Warranty Deeds offer the highest level of protection, while Limited Warranty Deeds limit the seller's warranties to their period of ownership. Quitclaim Deeds provide no warranties at all but can be useful in certain situations. Fiduciary Deeds are used in trust and estate scenarios, recognizing the grantor's fiduciary role.

Before entering into any real estate transaction in Ohio, it is advisable to consult with legal professionals who can provide guidance on the most appropriate type of deed for your specific situation. By understanding the differences between these deeds, you can make informed decisions and ensure a smooth and legally sound property transfer process.

Posted In: Property
Tags: deeds
Comments: 0

We know farms are subject to more risks than ever before and we know the important role insurance plays in protecting our farm assets. But how many of us actually read and understand our farm insurance policies? The failure to read a policy is probably not due to apathy but is more likely due to the complex nature of an insurance policy. Reading and understanding an insurance policy is difficult for anyone other than those in the insurance industry. But it's a critical necessity for farm risk management.

Our newest publication can help. Farm Insurance: Covering Your Assets provides a general description of farm insurance and insurance policies. This information will help a farmer understand how farm insurance coverage works. Our goal with this publication is to prepare farmers for a review of policy provisions with their insurance agents and ensure the farm has a comprehensive and carefully tailored insurance policy. We've coupled the publication with a new law bulletin, Farm Liability Insurance: Examining Your Covered Activities and Assets, which provides a quick reference list of farm activities and assets that might not be covered in a standard farm liability insurance policy.

Robert Moore, attorney with the OSU Agricultural & Resource Law Program, authored the publication with the assistance of Jeff Lewis, attorney with OSU's Income Tax Schools, and Zachary Ishee and Samantha Capaldi, National Agricultural Law Center Law Fellows. The National Agricultural Law Center and the USDA National Agriculture Library provided funding for the project in partnership with OSU Extension. Find the new publications in our Business Law Library on Farm Office at https://farmoffice.osu.edu/law-library/business-law.

Posted In: Business and Financial
Tags: farm insurance, Insurance, liability, risk management
Comments: 0