Iowa on Stage for more than the Big Dance Last month

taxing authority,

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Thats no farm… its HOBBY

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Those who are just beginning the farm operation or those who are slowly withdrawing from it would do well to familiarize themselves with the Internal Revenue Code § 183 “Activities Not Engaged in for Profit”, occasionally referred  The “Horse Shelter” or Hobby Loss Rules.

This code section is designed to prevent tax payers from claiming business losses (and thereby reducing income available for taxation) on activities that the tax payer primarily engages in for recreation, entertainment and personal enjoyment rather than a legitimate business purpose. Specifically, horse farms and cattle operations of small sizes are eyed with greater scrutiny.

The IRS has historically found this a difficult area to litigate in, but has developed training manuals and policies to help examiners who may have no knowledge of farm operations, in order to ensure compliance with the Internal Revenue Code.  A review of the training manual shows the IRS attempts to familiarize its agents with the world of competitive show animals, but also the distinction between registered herds of cattle and commercial herds of cattle. The manual advises examiners to consider calculating the volume of feed purchased versus animals sold to ensure no under reporting of income, such as cash sales.

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Iowa on Stage for more than the Big Dance Last month

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Iowa on the National Stage for more than the Big Dance.

If it was a $50 fine to murder someone, we wouldn’t have a population problem anywhere. This phrase sums up why people follow the law. Either they fear the punishment (life in prison appears to be a higher deterrent) or they think the law is a good idea to begin with(most folks just wouldn’t). If the cost of non compliance is low, even a toddler knows that paying the piper is worth the fun or risk of non compliance. When no one really knows who is supposed to comply, then the rule enforcers are left with no clear line to enforce and anybody who doesn’t really want to expend effort to do anything doesn’t have to.

This principle is playing out in a case of national importance filed right here in Iowa. Currently, Iowa has a voluntary nutrient reduction system designed to combat the ever growing nitrate level in our drinking water. However, the laws on the books are unclear on who is on the hook for making sure the water stays clean. The Des Moines Board of Water Works Trustees (DMWW) has about 500,000 customers that it owes a duty to provide clean water to. It is spending a lot of money attempting to do so. Not satisfied with the lack of progress on the matter, they filed a federal Clean Water Act (CWA) lawsuit against the supervisors and drainage districts of three counties. The lawsuit alleges that the county supervisors, as trustees for the drainage districts, are operating the drainage districts in an “unlawful and antisocial” manner that is contrary to the “public health and welfare.” The DMWW seeks a court order to cease “all discharges of nitrate that are not authorized by an NPDES or state operating permit.” They specifically targeted counties that had data to support their concerns about nitrate infiltration.

What DMWW really wants is change and since they aren’t getting their way through cooperation, they are seeking it through judges rulings. Its goal is to force national and state agencies change regulations and positions they have had for years. If successful, this case could impact the entire nation industry of agriculture. Farmers will feel the impact if they have to apply for discharge permits. It could ad some depth to the current voluntary nutrient reduction strategy. If state and local governments are mandated to take actions, perhaps funding will be available to farmers to implement buffer strips and other reduction stratagems that they will be compelled to complete if DMWW gets their way. Of course, those funds have to come from somewhere, schools, roads, bridges or tax payers wallets are all candidates I would suppose.

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