Category: Ag Law

The one-year anniversary date of the current highly pathogenic avian influenza (HPAI) outbreak passed in February 2023 and much of the U.S. agricultural industry hardly noticed. Animal health professionals certainly did as the wild fowl migration which they identified as the trigger of the diseases’ spread was rapidly approaching.  According to USDA’s database of HPAI 2022/2023 Confirmed Detections, January 2023 saw three scattered detections in commercial broilers or turkeys (Iowa, Tennessee and California), and two Kansas gamebird operations. The 2023 Spring months passed and by May 2023, commercial flock detections were zero and have remained so. The current outbreak seems to be at an end for the commercial poultry sector. 

All indications are that the USDA Animal and Plant Health Inspection Service’s (APHIS) HPAI Response Plan, otherwise simply known as “The Red Book,” and all the other USDA policy and guidance documents available to explain how and what USDA does in the event of an HPAI outbreak, served its function exceedingly well in explaining, coordinating and structuring USDA’s activities. For those entities who owned birds euthanized or eggs destroyed in the disease response activities, perhaps the most important USDA activity is that of indemnity (compensation for destroyed property) and compensation (reimbursement for services provided in the virus elimination process on the affected premises). 

This outbreak brought to the surface two key limitations of the current indemnification and compensation process: (1) contract growers without an ownership interest in the birds or eggs destroyed are not eligible despite a complete loss of revenue until production can resume after quarantine restrictions are lifted; and (2) ancillary business operations, e.g. breeders supplying chicks and poults, are not eligible for any compensation due to lost revenue from the cessation of production at infected or other premises under quarantine restrictions. This limitation is induced by the concentric circles of quarantine restrictions that stop product movement not only to infected premises but also to any poultry operation within the entire quarantined control zone imposed around an infected premise, i.e. the  “induced impact” of lost revenue from an infection. 

Relief in one state highly impacted by this HPAI outbreak, Pennsylvania (31 commercial flocks and 4.6 million birds euthanized), came in the form of an appropriation by the Pennsylvania General Assembly (Act 54 of 2022) of $25 million dollars for the “Highly Pathogenic Avian Influenza Recovery Reimbursement Grant” program. Administered by the Pennsylvania Department of Agriculture, it is intended to “provide reimbursement to farms, integrators, and allied industries directly impacted by HPAI. This covers those who incurred demonstrable financial losses due to inclusion in a control or quarantine zone.”  

The program has been the subject to four completed rounds of funding conducted between September 2022 and June 2023, with a fifth round of applications being accepted until October 5, 2023. Losses compensable have included loss of income, payroll costs, costs related to the continuation of group health care benefits and health insurance premiums, mortgage interest payments, rent payments, utility payments, and working capital for the purpose of covering costs of re-opening farming operations after being fully or partially closed due to the state or federally mandated quarantine period. 

A federal bill attempting to address the same gap on a nationwide level, called the Healthy Poultry Assistance and Indemnification Act of 2023, has been introduced as S. 2235 by Senator Chris Coons (Del.).  It is presently in the Senate Committee on Agriculture, Nutrition, and Forestry.  

Time will tell if other states may begin to address this gap or whether a federal solution may be successfully implemented. 

Duer, Brook, and Paul Goeringer. “HPAI in 2023: “Induced” Losses Leave a Gap in the Federal Indemnity Scheme.” Southern Ag Today 3(36.5). September 8, 2023. Permalink

What happened to all the Black Farmers? As the 2023 Farm Bill approaches, this question has been asked a lot, and it should be since Black farmers have declined by more than 96 percent since 1920, with there being 926,000 Black-operated farms in that very year.

In order to understand why this has happened, the first step may be analyzing how exactly Black farmers finance their farm operations. This question is imperative when determining why there has been a drastic decline in Black farmers. To understand how Black farmers are funding their farm operations and the barriers to obtaining capital, the Policy Center set out to gather this information by bringing together 1890 Land-Grant Institutions in the nine states with the highest concentration of Black farmers to conduct in-depth research on these issues. 

Each state participating in this project was asked to survey at least 100 Black farmers. The survey found that the top method for funding their farms was personal cash followed by ownership. This confirmed that Black farmers are not accessing loans to build their farm business. Access to capital for black farmers is a serious issue and the results showed that effective access to capital for black farmers is very limited. Consequently, black farmers applied for few loans and obtained a very low share of their operational capital from external sources. 

There are many factors and complex interactions that add to this issue. Some levels of discrimination existed, as mentioned by some farmers in their response, but the fundamental causes of the issue go far beyond just discrimination. USDA has created new programming and initiatives but has not included actions to assist the Black farmer in catching up to farmers who have always received help, have a complete understanding, and thrive. 

Things, such as a simplification of the application process, reduction of the down payment/credit needed, and help with the application process and getting farm numbers could increase the number of farmers applying for and receiving funding are things that can create changes for Black farmers, but there are clear systemic changes that needs to take place as well. 

To access the full study, contact Dr. Kara Woods, research analyst at the Socially Disadvantaged Farmers and Ranchers Policy Research Center at Alcorn State University, at kawoods@alcorn.edu. 

In Ideker Farms, Inc. v. US, after years of litigation, farmers prevailed in their claims that the U.S. Army Corps of Engineers’ (Corps) recurring flooding of their land was a compensable regulatory taking.  Specifically, the U.S. Court of Appeals for the Federal Circuit decided that recurring flooding was a “permanent flowage easement,” and the farmers deserved compensation for lower land values and some crop losses.

Beginning in 1944, federal law authorized dams to be constructed on the Missouri River (River) and opened the former floodplain to agriculture.  However, by the 1980s, flood control led to habitat impacts, the listing of several endangered species, subsequent lawsuits, and a new 2004 Corps management plan.  In effect, the Corps: (1) elevated fish and wildlife conservation to be on par with flood control objectives; and (2) allowed periodic flooding, starting in 2007.  

By 2014, hundreds of farmers adjacent to the River sued, alleging the flooding was a regulatory taking under the Fifth Amendment of the U.S. Constitution.  The Fifth Amendment provides that no private property will be taken for public use without just compensation.  

The court held that the farmers’ land-value “baseline” was the period of flood control (from the 1940s to 2004) rather than when floods were common (pre-1940). This determination meant farmers could be compensated for the investments they made while protected from flooding.  A pre-1940 baseline would have meant minimal farmer losses.  

Relatedly, the court held “a reasonable property owner” would expect flood-control goals from the 1940s Laws to continue.  Thus, new expectations from the 2004 management plan were caused by Congress’ “separate, intervening obligations” from the Endangered Species Act.  This means farmers did not have unreasonable expectations for continued flood control.  The court agreed with the lower court that the flooding was a permanent flowage easement that created a compensable taking.  The court disagreed with the lower court that crops and other personal property destroyed by the flooding were compensable.  For mature crops, farmers would be limited to the market value of the crop.  For immature crops, the farmer would be limited to the probable yield of the crop at harvest had the crop not been destroyed.  This decision potentially creates more avenues for the protection of property rights in flood control damage cases.  Time will tell how the Federal Court of Claims and U.S. Court of Appeals for the Federal Circuit will utilize this decision in future cases.  

Sources: Ideker Farms, Inc. v. US., 71 F.4^th 964 (Fed. Cir. 2023).

Duke, Joshua M., and Paul Goeringer. “Farmers Win Regulatory Takings Case for Managed-Flooding Impacts.” Southern Ag Today 3(32.5). August 11, 2023. Permalink

Whether your operation emphasizes the agricultural aspect or the tourism aspect of agritourism matters in several legal issues. This article briefly describes some of the pitfalls of having the tourism aspects dominate the agricultural aspects. However, except for federal income taxation, these issues differ from state to state. In addition, this article cannot begin to explore the nuance of these issues. Therefore, this article intends to alert the reader to these issues. You should consult with your attorney and tax advisor for advice.

Agritourism Generally

One definition of agritourism defines the term as “a form of commercial enterprise that links agricultural production and/or processing with tourism to attract visitors to a farm, ranch, or other agricultural business for purposes of entertaining and/or educating visitors and generating income for the farm, ranch, or business owner.”^[1] Like most definitions of agritourism, this definition connects the tourism activity to a farm, ranch or agricultural business. This connection proves particularly important in zoning

Zoning

In general, local governments are free to define agritourism in zoning ordinances differently than any state definitions. Theoretically, every local government could define agritourism differently from any other local government for zoning purposes. However, most zoning definitions share some common elements.

In zoning terminology, the connection between tourism and agriculture makes agritourism activity an accessory use on the land. The agricultural use is the property’s principal use, or primary use. Accessory uses are uses that are subordinate and customarily incidental to the principal use. 

A use is subordinate where the use does not dominate the parcel. Courts look at how much land area is encompassed by each use, how many employees are engaged in each use, and revenue generated by each use. The agricultural (or principal use in this case) should dominate the parcel of land.

Customarily incidental means that the accessory use is an activity that one would consider a normal part of or related to the primary use. For example, a pick-your-own operation is customarily incidental to an apple orchard. A corn maze may be customarily incidental to an operation that grows hay. A bouncy house does not appear to be customarily incidental to any farming operation. 

Exemptions from Zoning

Some states exempt agritourism from zoning regulations. To qualify, the activity must meet similar requirements to the accessory use definition. For example, a North Carolina court^[2] identified three main factors to determine whether an activity is agritourism and, therefore, exempt under North Carolina law. First, the agritourism activity derives some value from or requires the farm or natural setting. Second, the legal risk factor should align with that of the farm use, and third, the agritourism use does not require much in the way of artificial structures or alterations to the land.

Agritourism Liability Acts

Many Agritourism Liability Acts similarly define agritourism as “an activity carried out on a farm or ranch.”^[3] Without the principal use of the farm or ranch, the liability protection may be lost.

Use Value Assessment for Real Property Tax Purposes

Use value assessment for real property tax purposes also depends upon the agricultural use of the land. When income from non-agricultural uses exceeds income from agricultural uses, use value assessment may be denied.^[4]

Federal Income Tax

Persons engaged in “farming” report farm income on the Schedule F for federal income tax purposes. Farm income is treated differently in many ways than other business income to the benefit of the farmer. However, most “agritourism” income does not likely qualify as “farm income.” If the agritourism income is more than “incidental” (which is difficult to define), the agritourism income should be segregated and reported separately on Schedule C.^[5]

Conclusions

Agritourism provides producers with the opportunity to generate additional income to supplement income from production activities. However, with additional income and success with agritourism activities come the potential for loss of the preferential treatment of agricultural in several legal settings. Operators should be careful to consider these consequences when planning agritourism activities.  

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^[1] National Agricultural Law Center, Agritourism, https://nationalaglawcenter.org/research-by-topic/agritourism-2/

^[2] Jeffries et al v. Harnett County, 259 N.C. App. 473 (2018), cert. denied 826 S.E.2d 710 (2019). See https://canons.sog.unc.edu/2022/07/what-the-heck-is-agritourism/ for a more in depth discussion of the case.

^[3] See, e.g., Virginia Code § 3.2-6400.

^[4] See, e.g., Settimi v. Irby, 2022 WL 292317 (Supr. Ct. of W.Va.).

^[5] Email correspondence with Kristine A. Tidgren, Iowa State University, February 5, 2023. For more information on farm income generally, see https://www.calt.iastate.edu/article/reporting-farm-income-overview

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Richardson, Jesse J. “Is Your Operation AGRItourism or AgriTOURISM?” Southern Ag Today 3(31.5). August 4, 2023. Permalink

On May 25, 2023, the United States Supreme Court released its highly-anticipated opinion in Sackett v. EPA, a lawsuit concerning the scope of wetlands jurisdiction under the Clean Water Act (“CWA”). This decision from the Court intends to clarify when a wetland may be considered a water of the United States or WOTUS. Only those waters identified as a WOTUS receive CWA protection.

Prior to Sackett, the Environmental Protection Agency (“EPA”) interpreted WOTUS according to the Supreme Court’s 2006 decision, Rapanos v. U.S, which also considered the scope of wetlands jurisdiction. Instead of issuing a majority opinion in Rapanos, the Court issued both a plurality opinion – an opinion that the largest number of Justices signed onto, but not enough to result in a majority –  and a concurring opinion written by Justice Kennedy who agreed in the outcome of the case, but not the legal reasoning. In the plurality opinion, the justices concluded that only those wetlands that share a “continuous surface connection” with relatively permanent bodies of water should be considered WOTUS. The concurrence concluded that wetland jurisdiction should be determined based on whether the wetland possessed a “significant nexus” to a recognized WOTUS. A significant nexus exists when a wetland “significantly affect[s] the chemical, physical, and biological integrity of other covered waters[.]”

Following Rapanos, EPA engaged in several rulemaking attempts to define WOTUS, including the most recent rule finalized earlier this year that interpreted WOTUS to include wetlands that meet either test. However, many felt that the “significant nexus” test created uncertainty for regulated parties. The plaintiffs in Sackett asked the Supreme Court to formally adopt the “continuous surface connection” test, arguing that the plurality’s test was both a more accurate interpretation of the CWA and provided greater clarity for landowners. The Court agreed with the plaintiffs and decided to officially overturn the “significant nexus” test and confirm that only those wetlands that share a continuous surface water connection with relatively permanent bodies of water could fall under the definition of WOTUS and receive full CWA protection. To learn more about the Court’s decision, click here.

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Rollins, Brigit. “U.S. Supreme Court Issues Important Clean Water Act Ruling.” Southern Ag Today 3(26.5). June 30, 2023. Permalink

Photo by Cam Green: https://www.pexels.com/photo/aerial-view-of-wetland-near-a-river-10144176/