Adam Belz reported recently at the Minneapolis Star Tribune Online that, “Farmers in Minnesota and across the country are watching closely as a battle over a key agricultural pesticide plays out in court.

“A panel of judges in the Ninth Circuit Court of Appeals in August ordered the Environmental Protection Agency to ban the pesticide chlorpyrifos because of studies that show its residue on food can cause brain damage in children.

“Farm groups say the ruling would ‘wreak havoc’ on American agriculture, arguing there are no good alternatives to the pesticide for many crops.”

Mr. Belz explained that, “The dilemma for farmers is compounded because soybean aphids have developed resistance to a class of pesticides called pyrethroids. Meanwhile, another type of pesticides that still work on soybean aphids, neonicotinoids, is a danger to bees.”

“Minnesota farmers watch a pesticide battle play out in courts,” by Adam Belz. Minneapolis Star Tribune (November 17, 2018).

The Star Tribune article noted that, “In the last two years of the Obama administration, it appeared the EPA was on course to ban the chemical, but in 2017, then-EPA Administrator Scott Pruitt denied the petition. His order said that chlorpyrifos needs further study and said the agency would need ‘greater certainty as to whether the potential exists for adverse neurodevelopmental effects to occur from current human exposure to chlorpyrifos.’

“The Ninth Circuit stepped in this past August, ruling that ‘there was no justification for the EPA’s decision in its 2017 order to maintain a tolerance for chlorpyrifos in the face of scientific evidence that its residue on food causes neurodevelopmental damage to children.’

“The EPA is now asking the court to rehear the case, and the appellate court has not decided whether to do so.”

Rachel Rice reported today at the St. Louis Post-Dispatch Online that, “A New Madrid County man accused of using the weedkiller dicamba on his cotton and soybean crops outside of Environmental Protection Agency guidelines likely caused significant damage to neighboring crops, the U.S. Department of Justice announced Tuesday.

DTN Special Correspondent Elizabeth Williams reported today that, “Tax treatment of equipment trade-ins got a tune-up in 2017’s tax reform legislation. Experts say provisions restricting like-kind exchanges for machinery are offset by more generous rules on depreciation, resulting in little change to federal tax returns.

“The complication: many states didn’t follow suit, especially on like-kind exchanges, which are also known as 1031 exchanges and allow taxpayers to trade equivalent properties without a taxable event taking place.

“‘In my state, Minnesota, if the legislature does not fix the 1031 issue we may have farmers owing more to the state than to the IRS,’ said Rod Mauszycki, principal with CliftonLarsonAllen in Minneapolis, and DTN/The Progressive Farmer’s tax columnist. ‘Although I’m confident that a fix will be adopted, it might not be quick enough. As a result, we may have to delay filing the 2018 tax returns.'”

The DTN item noted that, “Without 1031 exchanges, the tax treatment of trade-ins becomes more complicated. It’s just one way changes to the tax code are forcing farmers to change their mindset.”

Ms. Williams pointed out that, “The amount of equipment and software that can be depreciated in a given year has been increased from $500,000 in 2017 to $1 million in 2018. The phase out for the $1-million availability begins after equipment purchases exceed $2.5 million in a given year. However, beginning Sept. 28, 2017, until the end of 2022, 100% bonus depreciation applies to almost all purchases of farm property, including used property. The bonus depreciation phases out beginning in 2023.

“Additionally, new farm equipment can now be depreciated over five years rather than the seven years previously allowed. However, used farm equipment depreciation continues with a seven-year life.

“Because Congress eliminated like-kind exchanges for equipment — it kept the provision for real estate transactions — equipment trades will now be considered as two transactions for tax purposes.”

A recent update from Iowa State University (ISU) Extension by Kristine A. Tidgren indicated that, “As tough times continue in the farm sector, more farmers are calling it quits. In particular, many operators who do not own ground and are dependent upon renting the land of others are struggling to hold on. Many are selling farm assets and securing full-time off-farm employment to make ends meet. It’s a quiet exodus, but it comes with hidden danger.

“Liquidating assets without a careful plan can generate tax consequences that will impair any hope for a fresh start down the road. As farmers weigh these tough decisions, it is imperative that they seek good counsel regarding their options. Although cash flow is tight, good advice is worth the investment.”

The ISU update explained that, “It is important to remember that depreciated assets, when sold, generate ordinary income tax liability. Depreciation is intended to allow farmers to write off the cost of a business asset over its useful life.”

Ms. Tidgren stated that, “If the owner sells the asset while it still has value, IRC § 1245 steps in to ‘recapture‘ ordinary income tax on the difference between the current basis of the asset and the sales price. The current basis is equal to the original cost, less any depreciation or expensing taken. In many cases, the basis may be zero. In other words, the sale of $100,000 of fully depreciated machinery will result in $100,000 of ordinary income, which is subject to income tax, but not self-employment tax.”

The ISU article also pointed out that, “A farmer enrolled in an [Affordable Care Act] insurance policy, relying on advanced premium tax credits to pay an affordable monthly premium, must realize that if year-end income exceeds 400 percent of the federal poverty limit, he or she may face a hefty tax bill. If the farmer enrolled in insurance expecting taxable income of $45,000, but ends the year with $49,000 in income, the advanced premium tax credit that must be repaid can climb into the thousands. Many who receive the advance premium tax credit do not understand the associated risks.”

Ms. Tidgren added: “These are just several of many traps for the unwary when navigating financial distress. The word of caution for financially distressed farmers is don’t let bad circumstances become worse. Consult with an attorney or tax advisor experienced in these matters before engaging in self-help measures, such as selling farm assets. The advice will be worth the cost.”

DTN Ag Policy Editor Chris Clayton reported yesterday that, “A year into his second stint as EPA’s Region 7 administrator, Jim Gulliford said he remains committed to compliance over enforcement in working with agriculture and other industries in the four-state region, which includes Iowa, Kansas, Missouri and Nebraska.

“Gulliford visited with DTN last week at EPA’s regional office in Lenexa, just after EPA Acting Administrator Andrew Wheeler had signed a proposed rule in the office seeking to amend the Emergency Planning and Community Right to Know Act to exempt animal livestock emissions from reporting requirements.

“Gulliford summed up the rationale for the proposal: ‘It just confuses them when they are getting reports of emissions,’ he said. ‘Generally when they receive reports of emissions, it’s a key or an indicator they need to respond to something — that there has been an accident, there’s been a release, just generally some kind of concern from human health impacts and the environment. That’s just not the case with these livestock operations.”

The DTN article stated that, “The National Pork Producers Council praised the proposal, citing the rule fits with legislation passed earlier this year by Congress, the Fair Agricultural Reporting Method, or FARM Act. The law exempts livestock farmers from emission requirements under the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which also is commonly referred to as the ‘Superfund Law.’

“The pork industry wants regulations that are practical and effective, but applying CERCLA and EPCRA to livestock farms would be neither, said Jim Heimerl, president of NPPC and an Ohio farmer. ‘Pork producers are very strong stewards of the environment and have taken many actions over the years to protect it,’ he said.

“Still, the proposal drew criticism from environmental groups over the impact on the health of rural Americans. Food and Water Watch and the Center for Biological Diversity were among groups critical of the rule.”

Mr. Clayton added: “Agriculture is the largest economic function in Region 7, by far, which puts the farmers in contact with water resources and air quality, Gulliford said. Still, if there are compliance problems with regulations, EPA’s goal is to get the industry, including agriculture, in compliance as quickly as possible.”

DTN writer Emily Unglesbee reported yesterday that, “Just how complex will dicamba use be in 2019?

“So complex that the three new dicamba labels released by EPA last week are each around 40 pages long and accompanied by nearly 200 pages of documents detailing the herbicides’ registration requirements and their potential impacts on the general population, farmers and endangered species.

“States are working overtime to interpret the new XtendiMax, Engenia and FeXapan labels and struggling to take the proper first steps to prepare for 2019.”

The DTN article stated that, “Indiana’s pesticide regulators decided to drop all state-mandated dicamba training for its applicators in an effort to cut down on the state dollars and resources devoted to dicamba. Illinois agencies are knocking on EPA’s door, asking for clarification on the new applicator requirements, which could mean up to 5,000 applicators in the state are not qualified to apply these herbicides in 2019. And the Arkansas State Plant Board has voted to consider allowing dicamba use in 2019 with a June 15 cut-off.

“All are driven by a ticking clock — states have only a few short months to prepare thousands of applicators and farmers for the 2019 spray season — and the promise of a heavy workload ahead.”

Ms. Unglesbee added that, “For more information on the new dicamba labels and registration, see the EPA website here: https://www.epa.gov/ingredients-used-pesticide-products/registration-dicamba-use-dicamba-tolerant-crops