Some Thoughts As We Begin the New Year

As 2014 quickly fades into the rear-view mirror, now is a good time to reflect.  The past year saw a number of changes to the agricultural landscape for beginning farmers.  In no particular order:

  •  The Farm Bill passed early in the year with a number of provisions aimed at beginning farmers.  From increased lending limits on microloans to increased cost-sharing for EQIP contracts and revival of the Conservation Reserve Program’s Transition Incentive Program, beginning farmers have some new resources at their disposal.  As we enter 2015, and before the crop year begins, now is a good time to research how many of the updates in the Farm Bill can help with your operation.
  • The Nebraska Department of Agriculture launched new websites for the Nebraska Beginning Farmer Tax Credit.  The NextGen website contains all the information and forms you need to apply for the Nebraska Beginning Farmer Tax Credit.  The website also lists upcoming workshops and clinics for young and transitioning farmers and ranchers.
  • The 2014 crop year was one in which some beginning farmers and ranchers faced financial headwinds.  The 2015 crop year may intensify those headwinds.  However, one-on-one clinics to discuss financial concerns are available throughout the year.
  • New crop insurance products are rolling out, including changes in the Noninsured Crop Disaster Assistance Program.  These products will assist beginning farmers weather the headwinds identified above.  These products also address how beginning farmers are farming in today.
  • And last but certainly not least, ARC and PLC are coming down the pike.  ARC and PLC replace direct payments.  Now is the time to begin considering what product to enroll in for the best potential benefit to your operation.

The upcoming year has the potential to change your operation, in both positive and negative respects.  If you ever want to take some time to discuss your operation, your options, and what programs are available, feel free to contact us.

New Urban Ag Program in Omaha

The Nebraska College of Technical Agriculture, University of Nebraska Lincoln Extension, and the Omaha Home for Boys announced a new program Thursday for budding urban agriculture entrepreneurs.

At the Omaha Home for Boys Cooper Memorial Farm, participants in the new Urban Agricultural Education program can learn about successful careers in local food production.

Classes begin on January 3, 2015 at the Douglas-Sarpy County Extension Office and January 17, 2015 at the Omaha Home for Boys woodshop at OHB’s main campus.

Class participants range from high school ages to adults.  Thus, the program targets youth, 4-H members, college students, and the greater Omaha area of individuals in various stages of their careers and business operations.  High school age students associated with the Omaha Home for Boys day program may be some of the first participants.

The long-term goal of the program is to increase the number of agricultural entrepreneurs and help participants achieve farm ownership.

Further information on the program can be found at or call 1-800-3CURTIS.

NAP Insurance Program Changes

The Farm Service Administration (FSA) recently announced changes to the Noninsured Crop Disaster Assistance Program (NAP).  But before discussing those changes, lets first discuss what NAP is.

Simply, NAP provides an insurance option for farmers who grow crops that are not eligible for crop insurance.  In fact, if a farmer can obtain crop insurance, including the Risk Management Agency’s multi-peril crop insurance (MPCI), NAP is unavailable.  NAP only covers those crops that are non-insurable and is intended to help farmers farm another year in the event of a catastrophic event.

So what are the changes?

Coverage Levels:

Previously, NAP would cover only 50% of a crop and then pay out up to 55% of the crop’s value.  Now, NAP includes a buy-up provision to cover up to 65% of a crop and pay out up to 100% of the crop’s value.

The 50% coverage cost remains at $250.  Any coverage beyond 50% requires the farmer to pay an additional formula-based premium, or 5.25 times the level of coverage.  The premium is capped at $6,562.00 and it applies towards an individual or entity’s $125,000 NAP payment limitation.

Beginning, Socially Disadvantaged, and Limited Resource Farmers:

First, the $250 service fee is waived for beginning and socially disadvantaged farmers.  This is an expansion of the fee waiver; previously, it applied only to limited resource farmers.  If a beginning farmer has paid the service fee for the 2015 crop year, a refund will be issued.

Additionally, beginning, socially disadvantaged, and limited resource farmers are now eligible for a 50% premium reduction when purchasing buy-up coverage.

Organic and direct market prices:

The state FSA office can provide farmers with the option of insuring crops at the organic market price, rather than conventional or direct-to-consumer price.  However, sufficient data must be available for FSA to establish those separate price points.

Other issues of potential interest:

The NAP changes include a sodsaver provision that is relevant to Nebraska farmers.  If NAP coverage is sought for newly broken cropland, the farmer must pay 200% of the normal premium, not to exceed $6,562.00.

Tenure, Ownership, and Transition of Agricultural Land survey

If you are farmland owner, you may soon receive the Tenure, Ownership, and Transition of Agricultural Land (“TOTAL”) survey from the USDA.

TOTAL is, per the USDA, like the landowner version of the Census of Agriculture.  It will cover land ownership income, debt, assets, demographic, and other landlord characteristics, as well as information on those renting the land.

The survey results will be released in August 2015.  The results will allow both landowners and tenants to negotiate fair rental prices as well as gain a deeper understanding of the market and its trends.

If you receive a survey, please take the time to fill it out.  Information such as this is important for all individuals interested in agriculture.  So let your voice be heard!

2015 Unified Credit and Annual Gift Tax Limits Raised

The IRS recently released the 2015 tax year exclusion amounts for the unified credit (or basic exclusion) and the annual gift tax exclusion.

For the 2015 tax year, the unified credit exclusion is $5.43 million per taxpayer.  The annual gift tax exclusion remains at $14,000.

The unified credit is the combination of the lifetime gift tax exclusion and estate tax exclusion.  If your lifetime gifts and taxable estate exceed $5.43 million in 2015, you will then owe up to 40% tax to the federal government.

A good overview of the implications of the unified credit and annual gift tax exclusion is here.

Portability Deadline Upcoming

As you may or may not know, the IRS is permitting tax filers to elect portability for the estate of taxpayers who passed away in the previous three years (or 2011, 2012, and 2013).  Typically, a portability election would only be available with a properly and timely filed federal estate tax return.

The deadline to make the portability election is December 31, 2014.

As a quick reminder, portability allows a surviving spouse to elect to use any unused portion of the deceased spouse’s estate tax exemption.  As a result, a married couple may exempt upwards of $10 million in assets regardless of which spouse passes first.

Can I Break My Lease?

A question we’ve received more frequently the past few months is, “I am concerned about my lease payments and it would be beneficial for me if I could somehow get out of my lease.  Is it possible to break my lease?”

Short answer? You may break your lease but you will still owe the amounts remaining.

Long answer? It depends.

The first step is determining why you want to break the lease.  Is it the rental amount?  The term, or length of time, of the lease?  Is it an issue about when rent is due?  Is the issue with the lease at all or is there some other issue causing cash flow problems (such as marketing contracts)?

Pinpointing the issue(s) will allow you to focus your efforts upon: (1) entering into a discussion with your landlord about potential amendments or changes to your lease; and/or (2) reconfiguring your operation to solve the other underlying issue you have identified.

If you wish to approach your landlord, first review your lease (if it is written).  Ensure that amendments to the lease are permitted, likely with the consent of both parties.  Also approach your landlord with a concrete action plan about what amendment(s) the lease you require and why.  Consider outside-the-box ideas, such as a balloon payment at the end of the lease or flexible lease payment provisions.

But if you feel you must break your lease, and the landlord is not open to amending the lease, what can you do?  First, is it possible to find another person to take over the lease?  This is called an assignment of the lease.  Read your lease carefully to determine if an assignment is permitted; it may not.  However, if assignment is permitted, you can assign your lease to another person so that person may take over the obligations under the lease you cannot meet.

Second, attempt to every extent possible to meet as much as possible the obligation.  This means that if you can pay 50% of the rent payment due, do so.  If you are required to fix the fences, do so to the extent possible.   In short, demonstrate a good faith effort to comply with the obligations of the lease.

Third, understand that the lease is a legal obligation.  Absent a legal reason to declare the lease unenforceable, the lease is a contract.  A landlord may utilize a lien or file a lawsuit seeking past due rent and/or other damages.  You may be required to enlist the services of an attorney if you wish to dispute the lien or lawsuit.

The takeaway?  To the greatest extent possible, try to find a solution with your landlord before you must miss a rental payment or are unable to meet an obligation under the lease.  The key, as always, is proactive communication between the tenant and landlord.  The landlord has an interest in finding and maintaining a good tenant; try to be that tenant.