USDA NAD Applies Finality Rule

The National Appeals Division (NAD) of the United States Department of Agriculture has held that the Farm Service Agency’s (FSA) “finality rule” bars FSA from demanding repayment of farm program benefits after 90 days of benefit application, even if the farmer requests a NAD appeal. Case No. 2016E000061. The “finality rule” states that once FSA makes a determination concerning eligiblity for benefits that decision is final and binding after 90 days from the date of application and supporting documentation has been supplied, unless the farmer requests an administrative review. 7 C.F.R § 780. In Case No 2016E000061 FSA demanded repayment of program benefits more than 90 days after eligibility was determined and benefits paid. Its position was that 7 C.F.R. § 780 did not apply because the farmer had appealed to NAD. NAD’s ruling is that appeal to NAD is pursuant to 7 C.F.R § 11, not 7 C.F.R. § 780. Therefore appeal to NAD did not toll the 90 day period for finality and FSA’s decision to the contrary was in error. Lawler & Swanson, P.L.C. represented the farmer in this NAD appeal.

Review: “Map of My Kingdom”

Last Friday, two of our attorneys attended the Ames showing of Mary Swander’s one-person play, “Map of My Kingdom.” The showing was part of the Practical Farmers of Iowa (PFI) Annual Conference held at the Scheman Building on the Iowa State University Campus.

PFI commissioned Swander, Iowa’s third and current poet laureate, “as a way to get people talking about one of the state’s most pressing and often divisive issues.”1

Prior to the performance, Swander told the crowd that she was initially skeptical that there would be enough drama in land transfers for a play, but after research and talking with families, it was apparent that “who will control the farm” provided more than enough intrigue and context for a story that has so much to talk about.

In another introduction, a representative from PFI stated that total attendance in the six plays throughout the state had numbered more than 400 people.

A lawyer/mediator is the hero of the play, of course, as she describes her interactions with clients who have faced difficulty when their family’s “own little while with the land” goes to a new generation.

Along the way, the lawyer recalls poignant memories of a grandparent, college literature classes (featuring the classics of generational real estate transfers, King Lear and A Thousand Acres), and a client’s story of seeing the Pope and the biblical impetus to be stewards of the land.

The play doesn’t provide an update of case law or analysis of the current federal tax code regulations. It aims to dive into the psychology of land ownership and transfer in a way that connects with an audience who must prepare for that inevitable question.

A trailer of the play from is below:

1 Michael Morain, ” ‘Map of My Kingdom’ digs into farmland heir drama,” Des Moines Register (July 11, 2014) .

Firm’s Partners Present at AALA Conference in Albuquerque

Earlier this week, Lawler & Swanson, P.L.C. attorneys attended the American Agricultural Law Association’s Conference in Albuquerque, New Mexico. Both of the partners of the firm, Amy Swanson and Thomas Lawler, both former Presidents of the national association, presented on panels during the conference.

On Tuesday, Amy Swanson provided an update and overview of state estate and inheritance taxes. Iowa currently has an inheritance tax for certain beneficiaries of a deceased, Iowa resident.

Tom Lawler moderated the estate-planning panel, which included Attorneys Sally D. Babbitt of Lasky Fifarek, PC in Lansing, Michigan and Ross Bruch of Saul Ewing, LLP in Philadelphia.

blog 1

In the concluding presentation of the conference, Tom Lawler helped lead a discussion on the ethical question of when a lawyer should disclose information a client has discussed regarding an illegal occurrence in an agricultural setting. Joining Tom was moderator Prof. Leon Geyer of Virginia Tech University and co-panelists Stephen Guardipee of the Charlotte School of Law and John Dillard of Olsson, Frank, Weeda, Terman, Matz, PC of Washington, D.C.

blog 2

Next year’s AALA conference will be held in October in Charleston, South Carolina. We look forward to seeing you there!

USDA NRCS Listening Sessions on Wetlands

On July 28, Lawler & Swanson, PLC attorney Luke Jenson attended the Iowa NRCS Listening Session in Ankeny. The following are modified notes he took at the meeting (the graphics were handouts by the Agency during the session).

Jay Mar, Iowa’s State Conservationist for NRCS, noted the purpose of the session was to focus on two major topics: 1) vetting of off-site procedures for wetland determinations; and 2) mitigation banking for producers whose land contains wetlands. Mr. Mar placed the session in its historical context: In Iowa alone, over 2 million acres of land has been expanded for soybean or corn production since 1995, an increase of nearly 10%.NRCS Graph 1

During this time, the amount of wetland determination requests received by state NRCS offices in the Prairie Pothole Region (which includes portions of Iowa, Minnesota, North Dakota, South Dakota, and Montana) has also significantly increased, and NRCS offices continually find themselves with a growing backlog. For instance, the backlog in South Dakota has been particularly notable, which explains why the South Dakota NRCS Listening Session had over 10 times as many attendants as Iowa.

NRCS Graph 2

NRCS offices in the Prairie Pothole Region received over 3,400 requests from Oct. 1, 2013 to July 1, 2014 alone. This explains why the NRCS is looking at improving efficiency measures for the agency’s future. A big target is on off-site procedures, which allow for a quicker determination of wetland using maps, aerial photographs, and geographic data, without having to personally examine the field in question to see if it indeed contains a wetland.

Paul Flynn, the State Resource Conservationist located in Minnesota, noted that today’s off-site procedures, authorized by 7 CFR 12.30(a)(4) of the Code of Federal Regulations, stem from the late 1980s. State offices have developed a hodge-podge of off-site methods (“Mapping Conventions”), and NRCS officials have started to propose that the states in the Prairie Pothole Region use consistent, if not the same, procedures. By moving toward a consistent regional approach, the NRCS would abandon any of the current state mapping conventions that are in use today. Mr. Flynn went through the current scheme of wetland identifications for the agency, including the use of indicators by the agency to identify a wetland. A more consistent, regional approach to indicators, said Mr. Flynn, would provide some important benefits, including: 1) allowing the Agency to incorporate use of newer and better technology, such as remote sensing technology (e.g., LiDAR); 2) increase the efficient of findings without sacrificing accuracy; 3) reduce the field work associated with wetland determinations and 4) provide quicker results for farmers.

 Much of Mr. Flynn’s presentation was the nuts-and-bolts of current wetland determination practices, and most farmers who have been through a few rounds with the NRCS would be knowledgeable about the process.

Essentially, the practice for each determination is typically: 1) gather off-site references, including the National Wetland Inventory, soil surveys, LiDAR or USGS topographical maps, and aerial photography; 2) create a base map with sampling units, and identify the sampling units within a 30 year period for normalized years; 3) examine the data for surface water, color tone differences, and other wetness signatures; 4) gather information about the potential hydric soil and vegetation of the land; 5) make verifications with the farmers; and finally 6) make evaluation and issue determination.

New procedures are going to be developed internally by the NRCS, but nothing was specifically mentioned at the listening session. The public should expect comments to be presented in the federal register in late September. Following that, there will be a state technical committee meeting to establish any new procedures.

Mr. Flynn and Mr. Mar opened up the session to questions and comments. Several commentators questioned the accuracy of current aerial photography for wetness indicators, as well as the practice of examining the photography. However, Mr. Mar noted the costs of updating the photography as being a significant burden for now.

Another topic of interest was the recent EPA proposal of jurisdictional involvement in wetlands and the security of data held by NRCS offices. A question was asked about whether NRCS could or would share information with the EPA, but NRCS officials adamantly maintained the private data could not be shared between the agencies.

Discussion over new wetland mitigation banking opportunities was of much lesser concern at the session. NRCS was given $10 million to establish more banks, and there is no longer a requirement that USDA be the easement holder for the banks. These new developments have spurred NRCS to seek out possible alternatives, and they are open to suggestions from the public. Specific questions they asked were: 1) should geographic areas be prioritized; 2) how can conservation partners and organizations be involved; and 3) what should a USDA conservation compliance mitigation banking program look like?

Some suggestions included using the money for more compliance officers, ending acre-for-acre mitigation, focus more on functions and values rather than acreage goals, be geographically limited in scope.

We will make a note for when the comments are posted in the federal register, supposedly happening this month.

Center for Ag Law and Tax Conference – Day 2

In continuation of our coverage of the Center for Agricultural Law and Taxation’s (“CALT”) Seminars on Ag Law and Estate Planning, here are some of the big topics discussed on the second day:

  • Prof. Roger McEowen started the group off with a review of some of the major changes made with the American Taxpayer Relief Act (“ATRA”) of 2012. The Act provided some certainty and permanence of key provisions, like the estate tax exemption of at least $5 million in a transfer of an estate’s assets. Additionally, the exemption is now indexed to account for yearly inflation. ATRA also continued the unification of the estate and gift tax rates and exemption amounts. Finally, portability was continued, which allows a widow or widower to use their deceased spouse’s unused estate tax exemption.
  • The Bar Association’s IRS insider, Kristy Maitre, discussed several procedural items of note for tax preparers to focus on for the upcoming season.
  • Judge Elizabeth Crewson Paris of the U.S. Tax Court spoke about the history, purpose, and practices of the U.S. Tax Court. There are currently 17 tax judges (and 11 retired judges on recall) who hear and decide disputes taxpayers have with IRS notices of deficiency or determination. Each year, thousands of cases are filed in hopes of the court agreeing with their take opposing some IRS action.
  • Attorney Kyle Irvin of Sioux City gave a presentation on several issues a fiduciary (i.e., a person who has a special duty of trust and responsibility to another person) can face in carrying out their duties. In trust situations, a fiduciary (“trustee”) has several very important duties, including making a sufficient, accurate accounting of all the trust’s assets. If you are the trustee of someone’s trust, it is strongly recommended you keep some sort of updated, detailed spreadsheet recording all of the deposits, withdraws, purchases, and sales of the trust property, money, and investments.
  • Attorney David Repp of Des Moines discussed the recent case of Baur v. Baur Farms, a recent decision from the Iowa Supreme Court. The case involved a farm family that set up a corporation. One of the relatives, a minority shareholder in the farm corporation, sued the majority shareholder and manager. The Supreme Court determined that although the majority shareholder didn’t commit abuse, waste, mismanagement, or engage in self-dealing, the minority shareholder was still owed satisfaction of his ‘reasonable expectations’ from the majority shareholders. These reasonable expectations include sharing “proportionally in a corporation’s gains,” which can apply to distributions and the minority’s demand to sell shares back to the company for fair value. Using a reasonable expectations standards could allow a majority shareholder who was acting in good faith to be found by a court as acting oppressively. The ramifications of the holding and standard for Iowa business law will be played out in the future, but it seems safe to say that the traditional rule of the court deferring to a business’ own judgment has been reduced in some measure and, as Mr. Repp put it, “minority shareholders have gained significant bargaining power in negotiating their exit.”
  • Des Moines attorney Margaret van Houten discussed the chilling and tragic case of Iowa v. Rodney Lee Bean, which came out of an appellate court in Iowa this month. Mr. Bean was the power of attorney for an elderly couple in Washington County, Iowa. Some of the terrible acts or failures Mr. Bean did in this capacity included shutting up the elderly woman into his home, neglecting to get her medical attention and medicine for her health problems and broken bones (we can only guess as to how she got those), and stealing her money. Mr. Bean was convicted of involuntary manslaughter, second-degree theft, neglect of a dependent person, and dependent adult abuse. Financial, mental, and physical abuse of elders is much too common, and community agencies and the law are doing new undertakings to catch up and prevent these types of situations. We strongly encourage you to alert the Department of Human Services, the county attorney’s office, or law enforcement agencies if you know or have good suspicion to believe anyone, but particularly the more vulnerable citizens of our communities, is being abused or taken advantage of by another.
  • On that note, Prof. McEowen and Ms. Maitre came back on to finish with a survey of ethics for Iowa attorneys doing estate and tax planning for clients. Those areas of law are highly complex and, unlike some areas of law, the statutes and case law (and even just clients’ positions) continually change. It is crucial that attorneys keep themselves updated and aware of the recent developments in these fields, particularly.

It was another great year for the CALT conference, and we’re glad we went along. A hat tip goes out to each of the presenters and the hosts. Have a good weekend!

Center for Ag Law and Tax Conference – Day 1

This week, two of our staff attended the annual Center for Agricultural Law and Taxation’s (“CALT”) Seminars on Ag Law and Estate Planning. Here are some of the big topics addressed on the first day:

  • Professor Roger McEowen began the morning by discussing some of the recent notable case law across the country and legislative enactments in Iowa. Some of the highlights included wrongdoing by township trustees in a fence line clearing agreement between neighbors (Kilroy, et al., v. Peters in Ohio); the severe consequences in failing to complete a diligent search of title for mineral rights in land being sold ‘as is’ to a buyer who wants those minerals (Argo Holdings, LLC v. Renick in Kansas); takings and money exactions (Koontz v. St. John’s River from Florida); and several cases dealing with crop insurance issues took center stage. New Iowa law SF 316 eliminated the exception to the statutory written notice requirement for the termination of farm tenancies where less than 40 acres is leased. So, always give a written notice now, no matter how small the farmland is you are dealing with.
  • Utah attorney Phillip Nelsen spoke about the abilities property owners have in protecting themselves, their property, and their animals. Mr. Nelsen said that of all his talks around the country, more farmers in Iowa than anywhere else have questions regarding the use of spring guns or traps on their land. Iowa law simply does not allow these to be used in protecting mere property. Mr. Nelsen also discussed the status of gun trusts in the wake of a new executive order requiring background checks and registration for beneficiaries. Read about the executive order here.
  • Kansas attorney Karen Mellvain described her experiences in dealing with the Risk Management Agency in crop insurance cases. She reported that one issue often appealed is when a farmer does not pay his or her premium due to a disagreement over previous payments (or lack of). But, even if a farmer’s excuse or protest is for very good reasons, failure to pay for the coverage shuts off any equitable relief under the RMA. Therefore, a farmer should protect his or her interests and pay the upcoming premium in order to get coverage before you lose out. Continue to protest, but do not neglect purchasing for the upcoming season. Also, if you do have a claim relating to a loss, be sure you are proactive, taking lots of pictures and documenting evidence of your compliance and of the disaster, and within 72 hours of the loss, you should have your notice to your provider in writing. An oral notice after the 1st hour, even if it’s later supplemented by a written notice 73 hours afterward, will do you no good.
  • The afternoon session started with Prof. Jesse J. Richardson of West Virginia University College of Law discussing recent federal cases involving the Environmental Protection Agency (Alt and Rose Acre Farms). A number of issues are left unresolved from these cases, and they may need to be addressed by the Supreme Court in a later term. Prof. Richardson was followed by Christina L. Gruenhagen of the Iowa Farm Bureau, who notified the group of a new EPA Work Plan Agreement between the Iowa Department of Natural Resources and EPA Region 7. You can find that agreement here. Ms. Gruenhagen also discussed the various ways to prepare for a DNR siting inspection.
  • Finally, attorney Tim Gartin of Ames led two engaging seminars to close out the day. In the first, he discussed the various ways family law and judgments can present themselves in title opinion issues and real estate transactions. One good discussion revolved around the Iowa homestead exemption and the recently revised Sec. 624.23(2). The last seminar was about ethics, a topic that Iowa requires their licensed attorneys to continually review. Mr. Gartin’s session focused on many practical issues, including the conflicts of interest an attorney has in dual representation of the buyer and seller in a real estate transaction.

Clarification of Prevented Planting Standards for Our Area

In late August, the Department of Agriculture announced a statement that clarified acreage eligibility for prevented planting for the 2014 and succeeding crop years in the Prairie Pothole National Priority Area, which includes Butler County (as well as Grundy, Floyd, Mitchell, and almost every county in Iowa west of them).

Prevented planting, as many of our readers will know, is an extra insurance option most farmers can purchase that protects them against low yields due to a later than authorized planting (which may have been caused by frost, wet conditions, or other natural effects). The Farm Service Agency estimates that over 7.7 million acres in the United States were prevented planting land in 2013, with Iowa having over 613K in corn and 106K in soybean acres. However, further estimates for at least one state indicate this estimate was much lower than reality. It won’t be until December when we hear the final estimate numbers.

Prevented planting has several limitations, and one of them was the restriction that in order for a plot of land to qualify, it had to be “physically available for planting.” The regulations state that acreage is “not considered physically available for planting” if the acreage “has any other condition, as determined by [Risk Management Agency], that would prevent the proper and timely planting of the crop when weather and other conditions are normal for the area in which the acreage is located.” [Emphasis added].

But after persuasion from Senators John Hoeven and Heidi Heitkamp and Congressman Kevin Cramer, all from North Dakota, the ‘normal’ weather condition provision was eliminated due to its very subjective nature. Risk Management Agency Administer Brandon Willis stated, “The goal is to make Federal crop insurance policy more objective and to provide clarity for the producers facing prevented planting losses.”

This doesn’t mean that just any land is eligible, though. If the land is a ‘problem spot’ that is consistently hard to farm, it can’t qualify for prevented planting. In 2011, the Agency implemented a ‘1 in 4’ requirement, so that eligibility required farming the land in at least one of the prior four years. Some of the latest reports on the new changes made it appear that the ‘1 in 4’ requirement itself was a new provision. We didn’t think so, and after contacting John Shea at RMA, he confirmed with us that the ‘1 in 4’ has indeed been in place for a couple of years now. The new addition, however, is that in order to get out of the ‘1 in 4 problem spot,’ —back into eligibility—a farmer must plant and harvest a crop (cover crops don’t count) two years in a row on that land.

Readers, if you have any other issues with prevented planting or farm regulation compliance, we’d like to hear about them and build a dialogue focused on helping our farming clients and community. Drop a comment or send an email anytime.