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Laws are designed to generate revenue of the crown, provide for the common good, and make us behave or not behave in certain matters. In the end, that is what government is supposed to do.Recently, the Iowa statehouse has been busy deciding how they want the rest of us to behave.

Probate costs:
Last year, proposed legislation was suggested to address the inconsistency among judicial districts of assessing court costs on probate assets. The way the matter lies now, depending on what part of Iowa you die in, some assets are charged a probate fee and the same assets in a different part of the state is not  Additionally, the bill addressed the taxation of costs on assets that require no judicial administration, such as POD accounts, joint property, etc.  Because a bill that might stop the state from getting its paws on your funds when you are dead isn't popular in all circles (to the tune over $12 million in funds), it has died prior to the funnel date.  However, this year, a bill was introduced that would rectify the inconsistent treatment of Iowan's dying on or after January 1, 2017.   Unless you know you are going to live until 1 Jan 2017, this short changes you. However, all legislation is deal making, and a mostly fair solution is better than a truly fair solution that never sees the light of day. This mostly fair bill is in the Ways and Means committee on both sides of the legislature.

Communicate with your local State Representatives and Senators  and additionally to communicate with all members of the House and Senate Ways and Means Committee urging them to approve and pass HSB 645 and SSB 3174.

Members of the Senate Ways & Means subcommittee for SSB 3174  are:
 
Rob Hogg  (This email address is being protected from spambots. You need JavaScript enabled to view it.)
Bill Anderson (This email address is being protected from spambots. You need JavaScript enabled to view it.)
Matt McCoy (This email address is being protected from spambots. You need JavaScript enabled to view it.)
 
Members of the House Ways & Means subcommittee for HSB 645 are:
 
Chip Baltimore  ((This email address is being protected from spambots. You need JavaScript enabled to view it.)
Dawn Pettengill (This email address is being protected from spambots. You need JavaScript enabled to view it.)
Todd Prichard (This email address is being protected from spambots. You need JavaScript enabled to view it.)
 
 
Land ownership THE STATE WANTs IN ON YOUR FAMILY DIPSUTE

Representative Bill Dix introduced a bill that would require people who inherit land jointly from their parents to be forced to offer their parcel for sale to the co tenant prior to offering it to a 3d party. The bill then went on to establish what and how a fair price would be determined.  Luckily, this bill died. It is offensive to me that the state can interfere with how a person decides to value and sell their property.  Especially when the bill could be applied to people who inherited it from their parents that had NO IDEA that the state would ever set a method on how their property would bevalued.

In estate planning, lots of times, brothers and sisters end up in co ownership of property. Being forced into business with your sibling is a nightmare for some and a welcome co partner for others. Regardless, that is a property right that having the state stick their nose into is , at most charitiably put, none of their business. The law already has a relief provision for co-owners that don't  want to be co-owners, it is call partition and it seems to work just fine.

Tax Relief Guess what the law will be before we pass it and you might win or you might not. Nothing like changing the tax law for 2015 in the last weeks of March 2016, yet that is exactly what the legislature did. While the federal congress acted slowly in making the accelerated expense deduction rules permanently at the higher amount that it had been annually authorizing for the last several years before the end of 2015, Iowa did not. Iowa debated and him hawed around until Mid-March to retroactively move to allow the larger deduction amount on the state return. March is after the federal deadline to file for farmers who want to avoid underpayment penalties. As a result, farmers who gambled that Iowa would eventually allow more than the $25,000 limit were forced to chose between filing federally but waiting to file Iowa (because Iowa did pass an extension 2 days before its 1 March deadline), filing Iowa using the lower amount and amending later or filing Iowa with the lower amount and carrying two sets of depreciation schedules into tax year 2016, one for Federal purposes with an expensed out item and another for State purposes with the item still having a cost basis to deduct over the next years.

The result of that dithering is extra payment to the farm tax preparer. Many tax professionals invested client's time and money to determine what the best course of action might be for their clients. With the looming low prices and trending lower farm commodity prices, perhaps having a deduction in the years to come will not be such a bad thing. But as a policy tool, this is the worst type of law, as it doesn't even trigger behaviors (like buy more equipment to deduct) because the law is passed retroactively and is only good for 2015. 2016 looks to be more similar shenanigans with no one really knowing what the legislature wants to see happen from a policy standpoint.

Thanks to Todd Janzen, @janzenlaw,  for pointing out these data related issues in ag:

Feel Free to Hack your Tractor John Deere's claim to  US Copyright Office cl:  aiming that it licenses tractor  software to farmers caused WIRED magazine claim that John Deere owns your tractor.  The US Copyright Office  decided that farmers should be able to repair and modify their tractor's software, in spite of copyright protection.  SO WIRED got it wrong along with John Deere.

On the bigger issue of ag data ownership:

Companies are forming now to advise landowners on the best possible rental rates for their investment based on yield, soil and other data. It is commonly referred to as Ag Data.  Having access to that data will be the difference between a company that provides value and one that only provides snake oil and herbal based remedies.The concept of ag data "ownership" is not recognized by United States law.  Farmers like to say "I own my ag data."  Ag technology companies like to say "the farmer owns their data." And you need a release to get it.  And the industry representatives like to say "the farmer should down their data."  But the reality is that "ownership" is a legal principle that must be recognized by courts or a law, and that has not yet happened in the United States for ag data.

Ownership-the right of possession, use, control, and to exclude others of the same-has long been classified different ways in the United States depending on what type of property is being "owned."  The courts recognize   three forms of property.

Real Property.  As much as I don' t like anything English, the  Courts in England granted an owner of real property a number of rights, such as the right to exclude others, and the right grant others a lesser estate (such as tenancy) in land. That is where the term landlord comes from, though I am on a mission to replace it with landowner.

Personal Property. Personal property can be more easily transferred or shared than real property.  Things like cars, horses, cattle and paper are personal property. So might be a chicken shed on skids. Should a shed stay when a lease ends or should the tenant be allowed to take it with him? The answer depends on whether it is "real" or "personal" property. Personal property is generally movable while real property is not.

Some of the major ag issues in Iowa were not resolved.

Clean Water or WOTUS rule is facing several challenges by farm and industry groups and environmental groups. No stake holder appears to be happy with the EPA's proposed interpretation and rules. Those rules are on hold while the litigation take place. It is likely a dispute that will fall at the feet of the United States Supreme Court before it is all said and done.

Iowa Water Works.  Not to be left out of the conversation, the Des Moines Waterworks sued upper Iowa Counties alleging nitrate discharges are damaging the Des Moines Water Works ability to supply clean water. The parties are waiting on a ruling from a Polk County Judge regarding portions of the case.

Dakota Pipeline: The crude oil pipeline that is proposed to cut through the state of Iowa needs court authority to get the last 25% of the land it needs to complete its project. It is asking the court to force the sale of those last parcels through a process called eminent domain. Iowa does not have much case law on the value to the public of a private oil line so this court ruling will not likely be the end of the matter.

Rock Island Clean Line:  This is  a proposal for a an energy line that cuts through Iowa. Like the oil line above, it needs help from the courts to take the land it needs to complete the project. Infact, last count it would appear greater than 80% of the land required has not be voluntarily purchased or obtained.

While death is the ultimate tax dodge, Congress recently provided some long term fixes to some rather helpful provisions of the tax code that quite frankly, a lot of businesses are hooked on using like crack cocaine. That of course, is exactly what Congress intended. After all, once they have you hooked, you are more likely to behave as intended.
Section 179 Deduction- The Good Crack

Enhanced "Section 179" deduction, or expense method depreciation is something that most business love. It allows items that would normally be required to be deducted slowly over many years, to be treated like a purchase of a bag feed that is consumed in a short amount of time.   Now  under I.R.C. § 179, the section allows farmers and  businesses to deduct $500,000  of certain business property or equipment during the year in which the property was placed into service.  It used to be $25,000. That's a big jump.  Future amounts will be indexed for inflation. True, last year the Congress did the same thing, but this time, it is scheduled to last for a couple of years, which will allow for greater planning and less made dashes to the equipment dealer on 28 DEC.

Farmer can use §179 deduction to purchase machinery and equipment, office equipment, livestock, grain bins, and single purpose agricultural structures such as hog barns or under roof calving barns. The deduction applies to purchases of new or used equipment. To use deduction for the 2015 tax year, the purchase must have been placed in service in 2015 - ready for use .

Other items to induce action on your part.

The new bill also  extends several frequently renewed credits for individuals. These include the enhanced child tax credit ($1,000 per qualifying child), the enhanced earned income tax credit, and the enhanced American Opportunity Tax Credit ($2,500 for four years of college expenses). Congress has also made permanent a provision granting teachers a $250 deduction( indexed for inflation) for supplies purchased for their K-12 classrooms.    Now you can also elect to claim state and local sales tax instead of state and local income tax as an itemized deduction. Although this provision generally benefits those taxpayers from states without a state or local income tax (We are looking at you Washington State), it can also benefit taxpayers who make a large purchase in a given tax year.

Also charitable giving is getting some love. Tax payers over70.5 years old can  make tax free distributions from their IRAs to a qualified charity. Up $100,000 per taxpayer (per spouse for married taxpayers that file as married filing jointly) .

Some things to remember: First, permanent means until Congress decides to mess with the code again. Second, all tax provisions are designed to induce or prevent behaviors. Look again at the provisions discussed above. They might as well be titled "Buy more stuff provision," "The have more children act", "the go to school act", "Teachers  please keep buying supplies yourself instead of asking for a raise measure"  and "you saved too much so share it with a charity provision."

Friday, November 15, 2019
  • 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 Dillon focuses on family law, estate planning and IRS matters. Jill is a University of Northern Iowa undergraduate (Political Science Cum Laude) and a Drake University Law School graduate. Jill spent extensive time advocating for low income tax payers in front of the IRS and the State of Iowa Department of Revenue while at Drake.

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