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Sygneta claims are being paid.  The claims administrator mailed the first round of checks on April 7th

1) This is not the full payout. These checks are expected to be about 60-65% of the final payout. Funds have been set aside for pending claims appeals, attorney’s fees, and administration costs. Once all work is completed and all appeals final, the remaining funds in those accounts will be disbursed, pro-rata, to the clients. We have no idea what that amount will be.

2) Whether or not the operator planted Syngenta seed DOES impact the payout. Operators will receive significantly less than the neighbor if they checked “yes” in that box because those planted Syngenta seeds, will get less money. They signed a stewardship agreement that waived rights to recover.

3) The total paid out has NOTHING to do with which law firm you used. No law firm has access to the data. The court let the lawyers take it to trial and push the issue maximize the recovery and then removed the lawyers from the total paid out. That action is still under appeal but will not impact payment to the clients. Only the claims administrator and the Court are involved in the calculation of payouts.   Lawyers do not know the exact numbers used to calculate payments. Only the claims administration firm has access to final totals. There is no final per bushel pay-out amount until there are final checks. (We do know that they used a $0.12/bushel baseline for this check.) This is a preliminary estimate and is not a final number. It also does not mean anyone actually received 12 cents for any bushel of production. Each compensable year has a percentage recovery rate so it’s not a straight percentage of production. The maximum possible recovery under a 12 cent/bushel calculation is less than 4 cents/bushel since the maximum percentage annual basis is 33% for 2014.)  Attorneys have no way of keeping the claims administrator accountable and can only take them at their word. The attorneys don’t have access to the data.

4) Regardless of what happens with the appeals, clients will NOT be required to pay any of the money received to attorneys. Attorney’s fees are being handled by the court.   Clients will NOT under ANY circumstances, be required to compensate us from the money they just received. If you hear of any lawyer or firm requesting clients to compensate them directly, please let me know. That would be in direct violation of the court’s order.  The attorneys will not be receiving a contingency based fee. Instead, the court will determine what we get paid. As of now, approximately 30% of the original settlement is in a trust fund pending the outcome of the appeals. The attorneys will be paid from that fund, not the client fund.

5) If  an operator down the way, who farms less than you do, claims to have received more money than you, that operator is most likely either not letting truth get in the way of a good story or there is some distinction between your claims (ag, fed-on-farm, Syngenta seed)

6) However, the administrators have made mistakes and typos in the past. If you believe your numbers are wrong based on the claims of other farmers, and you can get a copy of the other party’s determination letter, the attorneys can review the numbers and attempt to determine why there is a discrepancy. The farm operator or the attorney can ask the administrators to confirm the number.

7) If an operator received a determination letter that stated they had “0” bushels compensable and ignored it because they didn’t think the suit would ever get any real money, they  will not get a check.

8) If the operator did not send in a signed W-9, or log-in to the portal and fill out the W-9 form, you will not get a check.

9) If you have not received a check yet, that does not mean you will not get one. If you received a determination letter with compensable production listed, you will receive a check. The claims administrator is printing checks in a rolling fashion. They will not reveal the basis for that or when to expect checks for certain categories of claimant.

10) If the operator did not submit the required claim notification paperwork within the oft-extended deadlines, they will not get a check. Ever. For those who quit responding to calls and letters or believed that they were signed up by virtue of being a farm operator without further action it is too late. 

In brief, taxes are a constant, like death. Failure to plan for either gives a headache to who discovers your lack of planning.

In the past, some farm operators accepted losses and gleefully avoided paying tax and opting instead to pray at the Altar of No tax via the intoxicating Section 179 and Bonus depreciation rules. Subtly slid into the new tax law as a wet blanket over the “fun” of having losses year to year to year.

First, the tax code took away the CCC free pass. Under the old rules, CCC loans made losses limited in deductibility but were allowed to be carried forward and the next year treated like a new loss.

Now losses of all types are now subject to "excess business loss" limitations. Excess business losses are carried forward as part of the taxpayer's net operating loss (NOL) instead of claiming the loss on Schedule F.

Previously, excess farm losses offset farm income without limitation. Because it went on Schedule F, it also offset income subject to self-employment tax, which is a great thing, huge really, wonderful, the very best kind of tax break to paraphrase the executive branch head.

Now, an excess business loss is NOT deducted on the Schedule F and does NOT offset self-employment income. Also, post-2017 NOLs can only offset 80% of pre-NOL taxable income.

Therefore, even if you have a loss in 2019 followed by a profit in 2020 (which happens for example, when you have fat calves that don’t sell in the same calendar year on occasion), you could offset no more than 80% of the 2019 taxable income. Farmers are allowed to carry back farm NOLs two years, giving some flexibility. However, the farm NOL will be limited to $250,000 for single filers and double that for joint filers.

So, what are some strategies? Start by avoiding creating NOLs. If losses are unavoidable, keep business losses less than $250,000/$500,000

Also:

  1. Stop prepaying expenses.
  2. Hold off equipment purchases.
  3. Don't elect to expense equipment purchases under Section 179 or bonus depreciation.
  4. Sell assets you do not need to generate profits.
  5. Elect out of deferred payment contracts.
  6. Depreciate instead of deduction of repair costs.
  7. Depreciate fertilizer and lime costs over their useful life instead of taking them as a current year expense.

Barb Wire was said to tame the wild west and end the free range. It was a technological break through that rearranged the way ag was conducted in large stretches of the United States. Barb wire is not alone in sweeping changes to ag. The moldboard plow, the Power Take Off, hydraulics, year-round cabs and GPS all have made dramatic changes to how ag operations perform.

Rural broadband will likely join the above list. The question is, when and will it come quick enough to benefit current operations. The USDA predicts a truly connected rural America could lead to an additional $50 million dollars per year for US Ag.

Broadband is defined as at least 25 megs per second download and 3 Megs upload. While only 1.5% of urban America does not have access to broadband, 24% of rural areas don’t have access to fixed broadband. Making that number worse, some studies say that the true number is nearly 50%. Microsoft says 162.8 Million people don’t have access to broadband and broadband doesn’t solve in field access problems.

A companion service, wireless 5G is a cornucopia of different tech platforms and process that work together to get greater bandwidth to a greater number of handheld and other devices. In addition to cell phones and handheld devices that we are familiar with, 5G will support base station antennas that will connect devices directly, using more of the radio spectrum. Mesh networks are also incorporated which will help data flow from one device to another that works well for devices with steady power and are always on. Field sensors and devices that stay asleep don’t perform well in the mesh. It looks like 5G will be a better boon for urban areas over rural applications.

How did we get there? It used to be acceptable that an internet company could report a census block had access to broadband service if they could show one home in given block had service. In the rural spots, those blocks are up to 250 square miles. One wealthy neighbor who has to have Japanese amine delivered to their door could skew the reporting.

What are the steps that the law is taking to support this growth potential? The FCC has advanced over $20 million in funding for rural broad band connectivity. Specifically, the Rural Digital Opportunity fund is designed to put internet infrastructure in 45 states and over 700,000 homes.

The impact on ag is not only in being able to stream movies like the urban areas and check the markets, but connectivity in the fields is a key component of artificial intelligence applications like automated operations. This is because the intelligence network relies upon cloud-based data and mainframes. Losing service because of connectivity is a dangerous proposition that artificial intelligence operators can’t risk.

As law makers allocate dollars to breach the digital divide, the type of purchase is as important to success of the ag operation as choosing between high tensile, three barb or five barb wire.

Skull Sweat

I recently read about a person's estate plan with the following elements. 

  1. Remove my head from my body.
  2. Have it dipped in a substance to preserve the skull
  3. Take the remains of my body and have them carbon cooked and compressed into two blue diamonds to be inserted into the skull.
  4. Place the skull in our living room so that I can watch my descendants grow and prosper.

Setting aside whether that type of post death body sculpting is legal or moral, the plan has a flaw. It fails to account for the changing in tastes , goals and desires.  While the spouse might, and I do mean might, agree with the plan, each succeeding generation has an increasing chance of not agreeing with the plan. This could result in a garage sale find that is straight out of a grade b horror flick.

What is the connection to Ag law?  Far too many senior generation have their own version of a bejeweled skull in a non existent, incomplete, ill advised or overly complex estate plan. Many of these skulls are unintentional.  Do you have a skull in your plan? When was the last time you considered the plan. Many times, its is the "D" events in life that should trigger a review of your plan, those relying upon it, those who benefit from it, and your goals and current status. What are D Events?

  1. Death of someone in the household or operation.
  2. Disassociation that is being fired or terminated from a job, a someone no longer being a part of your operation or life or a beneficiary's disassociation that changes their potential consumption rate of their inheritance. 
  3. Divorce. Ex spouses are by law, removed from their former spouse's estate plan automatically, but not so for others who were leaving things to the former  Plus, divorces generally result in upheaval of capital and in the dust, things life insurance policies that junior has been paying on senior may no longer cash flow with our the former Mrs. Junior.
  4. Disability.  Modern medicine is keeping folks alive longer, that's great. However, some times those extra laps are not taken with full productivity. This can lead to a drain on capital assets. When the diagnosis hits, the plan needs to be reviewed to adjust to the new reality facing individuals.
  5. Da Passage of time. Okay that is  a stretch, but time does not heal all estate plans. Many estate plans still are floating around that were based on an estate tax exemption of $600,000 per person. The current amount is $11.5 million per person. Many folks who had perfectly fine circa 1986 plans have unnecessary trusts (not to mention that  those Atari playing kids have traded Air Jordan high tops for sensible footwear and don't need a restriction on their access to capital) and real estate titling schemes.

Take the time to invest in some skull sweat now and review your plan so that your beneficiaries don't have your own version of blue synthetic diamonds staring at them on the mantle.

Other Ag News of Interest

China continues to have massive swine heard reductions due to disease. While the initial impact for US Pork is a postive b/c the demand cannot be met, it remains to be seen if this latest outbreak is China's housecleaning and upgrading phase where inefficient operators using older methods such as feeding table scraps to hogs will be pushed out and in thier place, modern feeding facilities will return.

Iowa Federal court put halt "ag-gag" law

A lawsuit filed by advocacy groups claims that the law passed to punish those who lie to obtain access to animal facilities.  The claim is the law threatens animal welfare and food safety. This is Iowa’s second attempt at the law as the first one was struck down in 2012.

Animal Advocacy

Florida is considering a provision to appoint attorneys to represent animals. This would potentially allow any “concerned party” to file on behalf of the animal. While this sounds innocent enough on first blush, it is an open door to animal activism groups that seek to end livestock production as we know it.  It isn’t just livestock.
Consider the 2020 legislative proposals floating around in Florida. They include banning the declawing of cats, requiring each county to have a pet friendly emergency shelter and prohibiting the leasing of certain animals. Stewardship of animals is important and essential.

Don’t cry for me, Sandra…

Sandra, an orangutan,” who had lived at the Buenos Aires Zoo for over 20 years, in 2015 was deemed “a non-human person, subject of rights and consequent obligations towards her,’ by an Argentine court.  The court also ruled that the Buenos Aires government had to guarantee Sandra adequate conditions of her habitat and the activities necessary to preserve her cognitive abilities. It was recently moved to a Florida facility. No word on whether the foreign court’s determination will be given any weight by the US court system.

 
Monday, May 16, 2022
  • Patrick B. Dillon
  • Jill Dillon
Dillon Law PC
Patrick B. Dillon enjoys finding solutions to legal issues and catching problems for clients. Pat practices in the Sumner office regularly represents clients in district, associate district and magistrate courts for agricultural, real estate, criminal and collection issues. He drafts wills and trusts, creates estate plans and helps clients through the probate process.
Dillon Law PC
Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill is the assistant Fayette County Prosecutor and a certified family law mediator. Jill still has ties to her family farm operation which includes a dairy herd. Jill Dillon focuses on bankruptcy, adoptions, and mediations.

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