Our Voice

Governor’s Water Quality Law Is Not Enough

The issue of water quality continues to increase in political importance.  Candidates, on both sides of the aisle, from areas rural and urban, are running on platforms of water quality.  Two Republicans, Craig Lang and Ray Gaesser, are currently running for Iowa Secretary of Agriculture focused on water quality and soil health.

Last November, Des Moines voters elected Josh Mandelbaum to the city council.  “Protecting Public Health and Standing Up for Water Quality” was one of the pillars of his campaign.

Governor Kim Reynolds set water quality as a high priority during her Condition of the State address last month.  On January 31, Reynolds signed SF 512 into law.  Clearly, Reynolds saw value in having the water quality bill be the first signed this session, thus making it the first law for her to sign as governor of Iowa.

SF 512 is projected to produce $270.2 million for water quality projects over the next 11 years, according to Iowa’s nonpartisan data agency.

According the Cedar Rapids Gazette, “The money will come from converting an existing sales tax on metered water to an excise tax and, as Vision Iowa bonds are repaid, using those funds, too.”

The water quality law will not generate new money for the state, which means under the law the state will fund water quality efforts by reducing money currently being used to fund other programs.

The level of water quality action does not appear to match its political attention. The state needs to address more questions, engage more interests, and leverage more money to attack the enormous problems with water quality in Iowa.

Several Iowa organizations argue the solution that has been signed into law is not adequate.  They claim Iowans expect more significant action on water quality.

  •  “Where are the voices of environment, habitat, conservation, watershed planning, public health and sustainable agriculture in this process and in this bill?”
    -Iowa Environmental Council Executive Director Jen Terry
  • “Senate File 512 represents a timid response to a vital need for establishing widespread, sustained and measurable progress on an issue important to farmers and all Iowans.” Iowa Soybean Association (ISA)  ISA CEO Kirk Leeds adds, “It’s nibbling around the edges of what’s truly needed. While some additional funding continues to point us in the right direction, it doesn’t get us too much further down the road in achieving the kind of results we all know are attainable and necessary.”
  • “We appreciate the Legislature’s continued attention to water quality, but this effort is incomplete.  There remains much more work to be done. The cost of the nutrient reduction strategy is estimated at over $4 billion and Iowa needs immediate, substantial, dedicated funding and a collaborative watershed approach to adequately implement that strategy.”
    Iowa’s Water and Land Legacy (IWILL) Coalition

According to the IWILL Coalition, Iowa voters overwhelmingly support funding the Natural Resources and Outdoor Recreation Trust Fund: 83 percent support the Trust and 69 percent support raising the sales tax 3/8 of a penny to fund the Trust.  IWILL further argues almost 90 percent of likely Iowa voters describe pollution of rivers, lakes and streams as a serious problem in Iowa.

Iowa voters created The Natural Resources and Outdoor Recreation Trust Fund in 2010. It is a permanent and constitutionally protected funding source to ensure these natural spaces are preserved for generations to come. However, the legislature has not yet funded it. IWILL advocates raising the sales tax 3/8 of a penny to fund the Trust Fund.

Hopefully, Governor Reynold’s signature is the beginning of the discussion surrounding water quality in this legislative session and not the end.  There is still much more work to be done to clean up Iowa’s water.
—-

The Agricultural Law Center continues to engage in this debate with Our Water and other resources, like Director Neil Hamilton’s presentation “High Hopes Meet Hard Truths: Facing the Reality of Iowa’s Water Quality Policy.”

Upcoming Teleforum on Tax Reform and Impacts on Agricultural Producers

As I mentioned in my last post, tax reform will be an issue to watch in 2018. The legislation enacted in late 2017 has many agricultural producers, attorneys, accountants and other industry professionals quickly working to learn about potential impacts on agricultural producers and businesses.

For those of you interested in learning more about tax reform and implications for the agricultural industry, mark your calendars now for January 30 and register for the upcoming teleforum: “The Tax Cuts and Jobs Act: Reviewing Key Provisions Impacting Agricultural Producers”.

Presented by the American Agricultural Law Association, the premier association for agricultural law and policy professionals, and Iowa State University’s Center for Agricultural Law & Taxation, this two hour teleform is open to both AALA members and nonmembers.  AALA’s mission is to “inform and engage the law and policy professionals who serve all facets of the agricultural and food communities.” As part of that mission, AALA offers periodic educational opportunities, like this teleforum, that are open to all.

This two-hour teleforum includes a panel of experts from across the country, with a discussion focusing on key provisions of the new tax law impacting agricultural producers and businesses. In addition to discussing generally applicable sections, it will address the 199A deduction and its potential application to different types of income, including income derived from farm rentals and payments from cooperatives. Other topics will include potential individual income tax changes to producers, impacts on estate planning and basis after death, and changes related to depreciation and like-kind exchanges. The forum will also highlight several ambiguities in the law, noting the need for further regulatory guidance.

You can learn more about this upcoming teleforum and register by visiting the AALA website. Again, this is a free teleforum, open to members and non-members.  However, if you are a non-member involved in the agricultural or food law/policy realm, take a moment to check out the association, its benefits, and consider joining!

I have the privilege of serving as the current president of AALA and have been a member since I was a first-year law student, which has been over 15 years now. Drake has a long history of involvement and leadership in AALA.  AALA is comprised of a wonderful group of professionals that are knowledgeable, dedicated, and as friendly and welcoming as you will ever find.  I am passionate about this organization, its people, and all the work our members do across the country (and world), in all facets of food and agriculture.  If you have questions about AALA, please do not hesitate to reach out to me or visit the AALA website to learn more.

 

Who Else May Have An Interest

Of the 36,000,000 acres of land in Iowa, more than 33,000,000 acres are farmland.  Iowa landowners include people who inherited the land, while others are new farmers who purchased farmland as an investment or as a rural residency.

The Drake Agricultural Law Center created the Iowa Landowners Legal Guide as a tool to be utilized by any type of landowner. This guide provides videos and text for those who want to gain a better understanding of the legal rights and responsibilities of owning Iowa farmland.

Today’s post features the video “Who Else May Have an Interest?”  In the video, you’ll find that even if a person owns land, he or she does not have total liberty to do whatever he or she wants to do to the land.  In Iowa, there is a long list of people and institutions other than the owner with a legal interest in the farmland.  The video explores 10 of these groups.

We encourage landowners and aspiring landowners to watch the video to better understand how owning farmland legally binds them to others in ways they might not have considered.

What We Expect in 2018

As we look forward to 2018, there are many changes, concerns, and areas of uncertainty with potential effects on the food and agricultural industries and rural America.  I have listed below a few of the key topics and issues I think we will hear about frequently in the coming year.

  • Water Quality/Environmental Issues – Much attention is going to be paid to the Iowa Legislature when it opens its session in January on the issue of water quality within the state. There appears to be growing recognition that the state needs to do something more to work to address concerns throughout the state, but consensus on how to move forward at the state level is still lacking (bills in both the House and Senate failed to move forward in 2017).  Other states in the Midwest are far ahead of Iowa with various voluntary and mandatory programs (check out Minnesota and Ohio as examples), it’s time for the state to step up and focus on developing comprehensive and coordinated plans, with sufficient funding for implementation, to improve water quality within the state and address concerns related to agricultural run-off.  The Des Moines Register Editorial Board recently weighed in on this issue and Iowa Public Radio did a live River to River discussion dedicated to water quality in October 2017. I suspect you will see much more in the media on this topic in the coming days and months, along with other environmental concerns including climate change, chemical drift and damage (particularly dicamba), and organic regulations. On our radar: watch for the upcoming “Our Water” series from the Agricultural Law Center.
  • Tax Reform Implications – While the debate continues as to who will benefit from the Tax Reform Bill passed and signed at the end of 2017, there is no doubt that it’s going to be keeping many accountants and lawyers busy over the coming year. The Estate Tax was one of many key provisions of interest to the agricultural community, but there are others that may impact decisions being made related to filing your 2017 taxes as well.  The ISU Center for Agricultural Law & Taxation has a comprehensive summary of the bill, including possible impacts on the agricultural industry.  One particular area of concern I have: the effect on charitable organizations. Ideally, contributions will remain stable to charitable organizations in 2018, despite many Americans no longer being able to deduct charitable contributions due to the higher standard deduction.  I have concerns for all charitable institutions in this area, but particularly those in rural communities.  Rural charitable organizations already face struggles to obtain funding, and the needs of rural communities are not decreasing (see this recent article from The Hill on Rural Poverty and the 2017 USDA Summary of the annual Rural America at a Glance report).
  • Trade – While USDA touted agricultural trade wins in an end of year press release, all eyes are still on the continuing NAFTA negotiations as we move into 2018. Despite concerns that the current Administration was ready to withdraw from the agreement in 2017, talks have continued and are scheduled into 2018. In large part, the agricultural industry is supportive of NAFTA, as Canada and Mexico purchase about 30% of our agricultural exports each year. However, there are divides within agriculture and NAFTA remains a deeply divisive issue both within agricultural and within other industries, such as manufacturing, that believe NAFTA has caused more harm than good.  Manufacturing, agriculture and other areas share something in common other than being key NAFTA topics: they are also vital to our rural communities.  Predictions are dire as to what may happen to the farm economy should the US withdraw from NAFTA, impacting not just those directly involved in the production industry, but their communities as well.  As we look ahead to 2018, rural communities may see some of the most direct impacts should the United States withdraw from NAFTA.
  • Food Waste – Food waste continues to be a topic of interest, particularly when it comes to issues surrounding the environment and food security. While there has been increased attention to the food waste problem, federal legislation has stalled several times and much more needs to be done.  While 2018 could be a big year for food waste legislation, especially if it gets brought into the Farm Bill, state and local initiatives could be the key to seeing a real impact on this issue.  Programs to support food donation, educate consumers, and increase community food recycling/composting areas that need additional support and resources.  Research into how to manage and dispose of food waste needs to continue, and there needs to be increased awareness of how individual consumer choices related to food waste have a significant cumulative effect. Just a few examples of organizations locally working to address this issue include the Iowa Waste Reduction Center, which has been working in this area locally, partnering with rural communities and coordinating the Midwest Food Recovery Summit in 2017. For several years, Drake University has partnered with Sodexo and many local organizations to rescue food from campus that would otherwise go in the trash to get it to those who can use it through the NextCourse Food Recovery program (initiated by Law School Professor Ellen Yee and coordinated by undergraduate students and other partners). In the Des Moines community, Eat Greater Des Moines helped develop the ChowBank app, working to connect business and foodservice entities with leftover food to social service entities helping feed people in need. In the coming year, I hope to help increase education regarding legal issues and protections related to food donation, and work with partners to increase awareness and education.
  • Infrastructure – Agriculture requires a strong infrastructure system to succeed, and rural communities in particular are struggling to replace aging roads, bridges and other infrastructure systems. Digital infrastructure in rural areas remains a pressing need, as many rural communities continue to have no access to reliable broadband service.  Broadband service is more than just a personal luxury, for businesses and business development in rural areas, it is a necessary component for growth, competition, and success.  This is a topic receiving federal attention, the House Agricultural Committee held a hearing in 2017 focused on “The State of Infrastructure in Rural America”, USDA’s Rural Development initiatives include some support for both physical and digital infrastructure, and infrastructure is slated as a priority for 2018 by the Administration.  As (if) infrastructure legislation does move forward in the coming year, my hope is that rural areas receive particular focus and can remain competitive for funding opportunities.
  • Opioid Epidemic – The nationwide opioid epidemic is hitting communities across the country hard, but rural communities face additional challenges in the fight to combat the continuing increase in opioid abuse. Access to treatment facilities, medical treatment, and mental health resources are a significant issues, as are lack of transportation options and difficulties addressing some of the root causes of abuse (including increased poverty, food security, and unemployment in rural areas). USDA has been leading a combined effort to address the epidemic at the federal level, and just recently, the American Farm Bureau Federation and the National Farmers Union announced a partnership and campaign to raise awareness of the impact of the opioid epidemic on rural communities.  With a goal of providing easy access to information and resources, this campaign highlights the fact that this is not just an individual or family issue, but one that impacts communities as a whole.  If we are to succeed in reducing opioid abuse, communities need to come together as a whole and take steps to provide support and resources and think long-term regarding underlying issues.  Agricultural businesses and rural communities are directly affected by this epidemic, such as when it comes to finding and keeping qualified employees and maintain a safe workplace.  There is no one easy answer to this epidemic, and it shows no sign of abating in the near future.  Together, with a multi-faceted and long term approach, rural (and urban) communities can work to provide support and combat opioid abuse and addiction, and hopefully, provide long-term support for others in the community as well working to combat substance abuse and other mental health challenges.
  • Food Labeling – Genetically engineered food labels will be in the news again in 2018, as USDA is required to release the National Bioengineered Food Disclosure standard by mid-year. After contentious debate, state laws, litigation, and a lot of money being spent on both sides of the issue, federal legislation was passed and enacted in June 2016 giving USDA two years to develop the disclosure standard and determine what is the definition of “bioengineered” when it comes to food ingredients, what the threshold for disclosure is, and how or if disclosure must occur (among other actions). I expect this is going to spark much debate and potentially litigation no matter what the final regulations look like, but the real question remains as to if there will be any long term effect on consumer decisions and attitudes.  Many companies have maintained the disclosure statements added to labels in response to Vermont’s labeling law (no longer in effect as it was preempted by the federal law), and some companies have made changes to product ingredients to shift away from using genetically engineered crops and products.  Organic food standards are also something to watch in 2018, and may receive renewed consumer interest when the bioengineered regulations are released.  I think that 2018 will continue to see consumer demand as an increasing power when it comes to decisions made by food companies, with a trickledown effect to agricultural producers and agricultural companies.  This debate also highlights the need for increased consumer education regarding food and agricultural production, as well as the continued debate over nutrition and health in our food system.
  • Food safety – A continuing area of concern, both domestically and internationally. The FDA continues to roll out Food Safety Modernization Act regulations and being enforcement, requiring much education for both the industry and new inspectors. Meanwhile, the agency remains underfunded.  A recent GAO report emphasized the need for a comprehensive strategy to address what they called a “fragmented” federal food safety system.  Food safety outbreaks continue to be a concern, including a current E.coli outbreak in the U.S. and Canada that is thought to be tied to romaine lettuce but for which there is little information available. Internationally, concerns remain over foreign inspections and food safety standards for imported foods. The previous administration was increasing enforcement at the corporate level, but given the current regulatory climate I suspect that will not remain true.  Food safety outbreaks, recalls, FSMA implementation, and numerous other related issues will remain hot topics in 2018.
  • Farm Bill – No “what’s ahead in 2018” list can be complete without a mention of the Farm Bill. 2018 is slated to be the year for passage of the next Farm Bill, and while discussions and hearings have been going on for months, much uncertainty remains as to what the next Farm Bill will look like.  Budget cuts remain a concern when it comes to many programs, and there are fears that environmental, new/minority farmer, and specialty crop programs may see cuts and changes, and I think it likely we will see less emphasis on conservation and more programs responsive to the current challenges in the farm economy. Crop insurance will also be a focus, and as always, the debate as to whether supplemental nutrition programs should be part of this bill will continue.  The Supplemental Nutrition Assistance Program (often referred to as food stamps) has come under renewed fire this past year. I think it possible significant changes could be seen in 2018, particularly with more authority and administrative power passed on to individual states.  However, the contentious atmosphere in Congress at the moment, combined with what seems to be a general consensus that a Farm Bill needs to be passed this year, may mean that in large part we see little change to the current Bill in order for there to be one that gets enough support to pass.

Tax bill means more of the same for farmers

My dad told me when he first started farming in the 1970s that he was making money and was proud to pay taxes.  As the world changed, he realized the only way he could continue to farm was by figuring out how not to pay income taxes.  His realization was not to break the law, but to follow it strategically.

Farm bills are important to the success of us as American farmers, but arguably second in importance to the tax code.  Previous congresses have passed, presidents have signed, and courts have upheld tax law that encourages farmers to reinvest farm income in their farms.  Significant tax incentives discourage farmers from spending farm income on anything other than farm expenses.

The new tax bill continues a familiar theme by encouraging farmers to reinvest income in their farms to avoid taxation.  When farmers reinvest in their farms, individual farmers benefit with more successful operations, rural communities benefit from more circulating dollars, farm employees benefit from more jobs, and American families benefit with more abundant food.

Already tax professionals are working overtime to help farmers understand what this new law will mean for our farming operations.  Despite the added professional help for our understanding, a growing number of farmers are being left out of the conversation because they have little knowledge the tax code treats farms differently than most businesses.  Many new farmers do not understand that taxes are one of the most important tools for success on their farm.  New farmers doing retail agriculture, or local foods, are a group particularly uninformed about the special tax provisions offered to farmers.

I have attended farming conferences focused on new farmers for 18 years. I can count on one hand the number of times my fellow panelists and presenters have talked about Schedule F, the form used to report income and expenses related to farming. While Schedule F is obscure to the general public, it is essential to farm survival.

Unfortunately, food and agricultural professionals avoid educating new farmers about Schedule F, especially those serving the non-commodity farmers practicing alternative, sustainable, or retail agriculture.

This lack of information hinders new farmers from building lasting farming operations. If a farmer uses farm income for household or living expenses, they will slow their wealth building potential. On an hourly basis, it makes a lot more sense to work off farm for $20 an hour and pay taxes on that income than to pay taxes on the return to labor and investment from the farm.

To be fair, the incentives for farmers to have off-farm income are very high and extend beyond the tax code.  For one thing, it generally takes longer than an hour to generate $20 of net income on the farm.  Having someone in the household earning money away from the farm is an economically rational choice.  Employer-provided health insurance is another incentive for an off-farm job.

In fact, the majority of farms in the United States use almost none of their farm income for household living.  Instead, they use farm income to build wealth by investing in their farms and they use off-farm income from sources such as employment or nonfarm investments for household expenses. This tax bill, the first major income tax reform in over 30 years, continues to support the current model for American farms encouraging wealth creation while discouraging taxable farm income, which is net farm income after expenses.

The fine details of what this tax bill will mean for farmers will emerge in the coming year, but it appears this bill reinforces the need for farmers to understand and use tax provisions unique to agriculture to maintain successful farms, especially in the face of low commodity prices and tightening margins in retail agriculture.

I heeded my dad’s observations when my husband and I bought our own farm in 2005.  We have not earned net income from farming, but we have built wealth by reinvesting more than 100% of our farm income back into our farm. We have hired teenagers, spent nearly a fortune at the local coop, hired contractors to put conservation structures like ponds on our farm, and paid tens of thousands of dollars in interest on loans.  We have kept every receipt for gloves, tools, tractor repairs, and vet bills.  We have tracked every mile driven whether it was a delivery or a trip to the bank or a visit to the county USDA office.  We have also hired someone to prepare our tax returns to make sure we are both following the law and claiming every expense (deduction) congresses, presidents, and the courts have allowed us to claim.

In my nearly 20 years of advocating for those pursuing sustainable agriculture, I have seen a great need for helping new farmers understand the importance of the Schedule F to their farming operation.  The new tax bill continues an economic structure that both new farmers and those who serve farmers need to be better understand.

A Farmer’s Take on the Iowa Statewide Greenhouse Gas Emissions Inventory Report

My dad didn’t farm like my grandpa, and I don’t farm like my dad.  For five generations, my family has been changing how we farm in Iowa and I fully expect the next five generations to keep changing as well.

It is time for a change in the way farmers farm.

The 2016 Iowa Statewide Greenhouse Gas Emissions Inventory Report from the Iowa Department of National Resources provides some bad news by the numbers for agriculture. While all greenhouse gas (GHG) emissions in Iowa are down 2% from 2015 and 9.29% lower than the peak in 2007, emissions from agriculture have slowly risen over the past four years nearer to the peak in 2007.

Agriculture continues to be the largest contributor toward Iowa’s GHG emissions, making up 31% of the total.  Not included in this total is GHG emissions from fossil-fuel fired agricultural equipment like tractors and combines, as they are included in the transportation sector.

Iowa farmers are not yet fully engaged in dealing with greenhouse gas emissions and climate change that is caused by us.  This is to all of our detriment, and the time has come for us to act. We have the opportunity to embrace the change and make a profit.

Farmers have already done this. Farmers led in wind energy generation policy, development, and practice, which, in turn, benefitted the environment and our pockets. The lion’s share of the reduction in GHG emissions since 2007 came from an increase in wind energy generation and the decrease of coal fired energy. Farmers and landowners were paid over $20 million in 2016 in lease agreements for the generators turning on their land.

As we lead the nation in wind energy generation, we can also lead the nation in carbon farming while reducing emissions and increasing our profits.

Obviously, we’ll have to modify our farming systems, but that’s something we are doing all the time.

The 2016 Iowa Statewide Greenhouse Gas Emissions Inventory Report provides an opportunity to develop a vision to how Iowa agriculture can change to sustainably produce commodities to meet the growing demand.  As we evolve our farming systems to reduce emissions and to sequester carbon, we can solve most of our water quality problems, too.

I’m going to keep trying to improve Iowa farming practices, because I know that’s what my great-great grandfather did and I hope my great-great grandniece will keep doing.

Iowa Landowner’s Legal Guide in Practice

My husband Pat and I bought a farm in 2005.  In the first 5 years of owning our farm, we had more questions than we had answers.  I grew up on a farm.  Pat had spent his whole life in and around Des Moines.  Together we had to navigate the challenges and opportunities of developing our farm while leveraging all the resources we could find.

I drew on my childhood experience and called my parents who had farmed for more than three decades.  We reached out to professionals, such as our attorney, our banker, and our ag service providers.  Pat offered important insights because he wasn’t locked into ways of thinking about the farm that might have been part of my family’s traditions but not necessarily limited by Iowa ag law.  We also tapped into my network of fellow food and agriculture professionals.

Not everyone who owns or is planning to own farmland is as fortunate as I have been to work with agriculture lawyers, extension educators, and elected officials.  But, many of the questions we’ve dealt with are answered in the Agricultural Law Center’s new resource The Iowa Landowner’s Legal Guide.

The guide covers many of the issues that challenged us whether we were dealing with fences, working with other farmers to put crops on our farm, or building ponds and waterways.

Owning a farm is an incredibly rewarding experience.  Those rewards can be financial, but they also include the feeling of achievement when you solve a problem creatively and learn first-hand about how we live together with others in our communities.

The Agricultural Law Center is creating this resource to help landowners maximize the rewards of owning farmland and to minimize the challenges, especially as those things relate to Iowa law.  We encourage you to use the book chapters, videos, and accompanying directional documents to help you maximize all of your returns from your piece of Iowa farmland.

 

Center Update Nov. 10, 2017

The Drake University Agricultural Law Center continues our commitment to lead efforts to improve Iowa’s water quality.

In July, the Center hosted “Sustaining Our Iowa Land (SOIL) 2017: Cultivating Your Investment—Landowners and Stewardship.”  The conference included over 120 speakers and land owners from nearly half the counties in Iowa interested in protecting land, caring for soil and water, and developing the value of Iowa farmland.

“We were excited to partner with Iowa leaders to put more conservation on Iowa farms,” said Neil Hamilton, director emeritus of the Drake Agricultural Law Center. “There is growing concern that Iowa’s commitment to protecting soil and water resources has waned. Our goal is to help landowners re-focus their efforts to not only improve their own farms, but to help Iowa again become a leader in protecting our state’s greatest resource.”

“We help landowners develop the natural resource that is their farm,” said Mark Gannon, owner of Farmland Stewardship Solutions. “This conference was a great way for our company to partner with the Drake Agricultural Law Center and other Iowa groups to empower Iowa farmland owners to combine agricultural productivity and environmental stewardship.”

Agricultural Law Center hosted the event in cooperation with Farmland Stewardship Solutions, the Iowa Water Center, Iowa Natural Heritage Foundation, the Leopold Center for Sustainable Agriculture, and The Nature Conservancy.  Videos are available of all of the presentations from the conference.

Hamilton is also working on two related projects.  “Our Water” is a series of short radio clips.  Listeners can hear the first six commentaries from our website.

The second project is “Iowa Landowner’s Legal Guide”  The guide is still in editing but 10 companion videos are available.

The Agricultural Law Center will continue to partner with organizations and funders to advance the role Iowa agriculture must play in cleaning up our state’s water and protecting our state’s soil.