2014 Farm Leases: Cash Rent & Hybrid Agreements

--> Now is the time dictated by Iowa law to begin negotiating crop land leases for 2015 or at least notify your tenant/landlord, as the case may be, if you wish to change any of the terms in your current lease. (Remember that mutual consent is required if you want to make changes in the middle of a multi-year lease.)
--> If you wish to terminate a cropland or pasture lease ending March 1, 2015, and have not already done so, you must serve notice in the manner set out in Iowa Code §562.7 on or before September 1, 2014. This statute does not apply to custom farming arrangements, but by tradition, many farm operators have come to expect notice by September 1.
--> Basing cropland rent on the current CSR2 (“corn suitability rating” or in some regions “crop suitability rating”) of the soil in question is the most accurate and fair way to arrive at a comparable rent [See Computing a Cropland Cash Rental Rate: http://www.extension.iastate.edu/Publications/FM1801.pdf]. In concert with the slight decline in farm land values and the dramatic drop in grain prices, cash rental rates have remained steady or dropped during the current year. Below is a table of farmland values and cash rents from last year's ISU surveys in counties for which I prepare farm land leases:

--> The table above is based upon averages from sometimes limited survey results, but it does give a general idea of what the market for Iowa farm land looks like. The leases I have prepared so far this year continue to fall in the $2.50 to $3/CSR point range, with the higher quality land falling at the higher end of that range. There continues to be interest in deviating from the traditional cash rent model. By using a formula, tenants and landlords can avoid the often stressful exercise of negotiating a new rental rate every few years in order to keep up with changing economic circumstances. Flex lease formulas can also allow landlords to participate in windfalls during good years and tenants to reduce risk in bad, although current crop insurance revenue products go a long way in protecting farm operators from price and production risk. If you would like more information, I encourage you to contact your local ISU extension office.
--> Water quality issues and increased scrutiny of farm nutrient runoff is currently the prime topic of interest on the political front.
--> Please contact my office if you have questions. Good luck with your negotiations!

©2014

Tax Time 2013

_____Now is the time to take stock of 2013, at least financially, by gathering your income and deduction records in preparation for filing your annual tax returns. The primary changes in tax law this year are the new taxes designed to help fund the Affordable Care Act. If you owe either of these taxes, congratulations—it means you are in the top 10% of income earners in the United States of America. If you have earned income in excess of $200,000 as a single person or over $250,000 as a couple filing jointly, you will pay an additional 0.9% tax on the excess toward the medicare system (single payer health care coverage for the elderly and disabled). If you have adjusted gross income in excess of those thresholds, you will pay an additional 3.8% tax on the smaller of your net investment income or the excess of your adjusted gross income above those levels. In this area, that tax will apply primarily to individuals who sold farmland and realized a large capital gain. Speaking of capital gains, the maximum tax rate on capital gains increased from 15% to 20% for 2013, but that is still just a hair over half of the maximum income tax rate on earned income, which is still 39.6%.

_____In the depreciation arena, for 2013, you can still expense up to $500,000 on up to $2,000,000 of eligible purchases, but this year (2014) you can only expense up to $25,000 on up to $200,000 of eligible purchases (IRC §179).

_____As was the case last year, you must have a contemporaneous written receipt for donations totaling over $250 to a particular charity. Also, I cannot prepare your tax return if you hold any assets outside of the United States. Identity theft continues to be a problem. Please do not send any documents by e-mail that contain social security numbers or bank account numbers, unless they are password protected. I am in the process of setting up a secure online drop box and will send you details if you e-mail me.

_____IRS requires mileage logs for vehicles with business use; standard mileage rates for 2013 are:

###############Federal *******Iowa
Business: . . . . . . . . . . 56.5¢/mi. . . . 56.5¢/mi.

Medical & moving: . . . 24¢/mi. . . . . 24¢/mi.

Charitable: . . . . . . . . . 14¢/mi. . . . . 39¢/mi.

_____You are required to send a Form 1099 to any individual, partnership or LLC that you paid $600.00 or more for services, rent or interest. Payments to cooperatives, banks and other corporate entities are excluded. Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3. If you would like us to prepare these forms, you will need to provide us with the information before January 25, 2014.

_____If you have questions on any of the above or other tax matters feel free to call, e-mail, or stop in. When you have your records ready you may let us know and we will set up an appointment that is convenient for you. Evening or Saturday appointments can be arranged.

_____Best Wishes for the New Year!

Pursuant to U.S. Treasury Regulations, you are hereby advised that any federal tax advice included in this communication is not intended or written to be used, and cannot be used, to avoid any U.S. federal tax penalties or to promote, market, or recommend to another party any transaction or matter. For further information, see IRS Circular 230.

Iowa Business Property Tax Credit

Throughout this year’s overhaul of Iowa’s property tax system, Iowa Senate Democrats were committed to ensuring Iowa small businesses got a fairer shake by bringing their rates closer to the lower rates paid by residential real estate owners. The business property tax credit applies to property taxes due and payable on commercial real estate starting on or after July 1, 2014. When the credit is fully phased in, the tax burden on the first $145,000 of the assessed value of the commercial property of a particular business will be equal to the tax burden imposed on residential property in Iowa. This is intended to significantly reduce the property tax burden upon small businesses.

To receive the credit, property owners must file a claim on forms provided by the applicable city or county assessor. Credits for the fiscal year beginning July 1, 2014 will be based upon the assessed value of properties as of January 1, 2013. These claims will be due January 15, 2014. For subsequent years, claims must be filed with the applicable city or county assessor by the March 15 immediately preceding the fiscal year during which taxes for the credit being claimed are due and payable.

Farm real estate owners continue to pay the lowest property tax rates in the state.

2013 Farm Links

U.S. Drought Monitor: U of Nebraska Drought Mitigation Center
U.S. Weekly Precipitation: Data collected by Intellicast
U.S.D.A. Price Reports: Weekly Price & Production
Daily Cash Grain Bids: Heartland Cooperative locations
Flint Hills Resources Menlo Corn Bid
ISU Extension Publications: ISU Ag Decision Maker
NRCS Soil Maps: Web Soil Survey

Iowa Supreme Court Disclaimer

The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements, certification, specialization or self-proclaimed expertise. A description or indication of limitation of practice does not mean that any agency or board has certified such lawyers as specialist or expert in an indicated field of law practice nor does it mean that such lawyer is necessarily any more expert or competent than any other lawyer. All potential clients are urged to make their own independent investigation and evaluation of any lawyer being considered. These disclosures are required by the Supreme Court of Iowa.

2013 Farm land leases; Cash Rent & Hybrid Leases

Now is the time dictated by Iowa law to begin negotiating crop land leases for 2014 or at least notify your tenant/landlord, as the case may be, if you wish to change any of the terms in your current lease. (Remember that mutual consent is required if you want to make changes in the middle of a multi-year lease.)

If you wish to terminate a cropland lease ending March 1, 2014, and have not already done so, you must serve notice in the manner set out in Iowa Code §562.7 on or before September 1, 2013. This statute does not apply to forage land leases (pasture and hay) or custom farming arrangements, but by tradition, many farm operators have come to expect notice by September 1.

Basing cropland rent on the CSR (“corn suitability rating” or in some regions “crop suitability rating”) of the soil in question is the most accurate and fair way to arrive at a comparable rent [See Computing a Cropland Cash Rental Rate: http://www.extension.iastate.edu/Publications/FM1801.pdf]. As Hertz Farm Management, Inc., has noted, cash rental rates have tended to lag behind the run up in farm land prices [http://www.hfmgt.com/newsletter/pdf/2013summer.pdf]. Below is a table of farmland values and cash rents from last year's ISU surveys in counties for which I prepare farm land leases:

Hybrid Leases

There is considerable interest in deviating from the traditional cash rent model. By using a formula, tenants and landlords can avoid the often stressful exercise of negotiating a new rental rate every few years in order to keep up with changing economic circumstances. Flex lease formulas can also allow landlords to participate in windfalls during good years and tenants to reduce risk in bad, although current crop insurance revenue products go a long way in protecting farm operators from price and production risk.

There is also considerable interest in addressing soil conservation issues; including terms regarding cover crops; and leased hunting.

Please contact my office if you have questions. Good luck with your negotiations!

©2013

New Intern: Nicolas Aguero

Academic path

Institut d’Etudes Politiques, Lille, France

Universidad de Salamanca Salamanca, Spain

@ 2012-2013: 3rd year, Political Science, degree in politic science and law, Salamanca (Spain) Campus. @ 2011-2012: 2nd year, Political Science, degree politic science and law, at Lille Campus (France) @ 2010-2011: 1st year, Political Science, degree in politic science and law, at Lille campus (France).

Lycée International Saint-Germain-en-Laye, France

2009-2010: Terminale ES (equivalent to US 12th grade, Economy and Social studies option), Graduated with Mention: Bien. Graduated with OIB (international option) in Spanish.

2008-2009: Première ES (equivalent to US 11 th grade, Economy and Social studies option)

Parkway South High School Manchester, Missouri, USA 2007-2008: junior, US 11th grade

Lycée International Saint-Germain-en-Laye, France 2006-2007: Seconde (equivalent to US 10 th grade)

Foreign languages English: bilingual, TOEFL iBT approved early 2010 Spanish: mother tongue level. Spanish Selectividad and International graduation in Spanish (OIB) obtained in 2010. French: mother tongue level.

Internships

2013, June and July, internship at the GRECO (group of states against corruption) at the Council of Europe in Strasbourg 2012, August and September, internship at the European Commission Representation (ECR) in Malta 2012, June and July, Internship at the Argentinean Embassy in Paris, Economic Cooperation department 2011, August: Internship at European External Action Service (EEAS) in Costa Rica 2011, June and July, working for the Chief of Staff, at Major of Vernouillet service 2007: High School orientation internship: Legal Affairs department of Unisys France, producing a report on the Legal Affairs duties in corporations

High School and College exchange

July 2012: One week in Poland with the Weimar Triangle, sponsored by the Nord-Pas-De-Calais Region 2007-2008: One year in the United States living with host American family at attending local High School. The exchange was organized by the AFS – Vivre Sans Frontières NGO

Volunteer action 2012-2014 MUN association at Universidad de Salamanca, Munusal. Munusal: Conference organized at the Universidad de Salamanca by the students association 2010-2012 MUN association at Science Po Lille, since 2010 Munusal. Salamanca conference, April 2013 PMUN. Paris Conference, February 2012 NMUN. Europe Conference organization in Lille with the Regional Council of the Nord-Pas-De-Calais, January 2012 NMUN.NY. Conference in New York, April 2011. Distinguished Award 2011-2012 manager and player of the soccer team of Science Po Lille. 2012-2013 Co-manager and player of the of the a student soccer team at University of Salamanca