Category: Ag Law

Succession can be a very sensitive topic for farmers to discuss.  Some farmers want their children to take over the farm and operate it in the same manner.  Other farmers, either due to a lack of interested children or due to skyrocketing land prices, would rather sell the whole farm for a non-agricultural use such as neighborhood development.  Regardless of anyone’s farm succession plan, everyone has at least one similar goal: minimize (or, ideally, eliminate) their estate tax burden.  

Tool #1: Estate Tax Exemption

            Generally speaking, an individual’s taxable estate includes all assets owned by that individual at the time of death, including assets owned through an LLC that the individual owns or through a revocable trust in which the individual is a beneficiary.  So, if a farmer establishes a revocable trust that owned the LLC that owns the farm (a common probate avoidance-liability protection strategy), the farmer’s estate would still be deemed to own the farm, including its land (measured at fair market value), equipment, livestock, buildings, and so forth.

            Unlike the other tools which will necessitate an attorney, the estate tax exemption is something that every taxpayer automatically utilizes at death.  The estate tax exemption in 2025 is $13.99 million for individuals and $27.98 million for married couples.  In other words, if an individual were to pass away in 2025 with less than $13.99 million in their estate, that individual’s estate would not be responsible for paying estate taxes.  While Congress may change the law for 2026 and beyond, the estate tax exemption for 2026 is set to revert to pre-2017 Tax Cuts and Jobs Act levels, putting the individual exemption at approximately $7 million and the married exemption at approximately $14 million.  

Even at these lower amounts, most farmers have nothing to worry about.  Still, some farmers place estate taxes as their primary concern when conducting succession planning, so hopefully this first tool alleviates those worries.  

Tool #2: Family LLCs

            The estate tax exemption is reduced by any reportable gifts made during the decedent’s lifetime.  In 2025, a donor must report to the IRS any gifts to individuals that are worth more than $19,000 and gifts to married couples that are worth more than $38,000.  As such, a farmer can gift shares of their farm LLC to their children that are under the gift tax reporting thresholds over a period of time, ideally decades, to reduce their taxable estate once the farmer does pass away.

            A few aspects of family LLCs are noteworthy.  First, the farmer should be gifting shares of the farm LLC that lack voting rights, which the IRS will view as less valuable than normal LLC shares, thereby allowing the farmer to gift a higher percentage of the LLC each year without exceeding annual gift tax limits.  Second, farmers with children who are married can conduct this strategy more efficiently than farmers with children who are not married.  Moreover, the children who receive shares are not necessarily obligated to retain the shares – the children can sell the shares, including amongst themselves.  

Tool #3: Internal Revenue Code 2032A 

            At its core, IRC 2032A allows for an additional estate tax exemption of up to $1.42 million in 2025 (i.e., thus increasing an individual’s estate tax exemption to $15.41 million and a married couple’s estate tax exemption to $29.4 million).  Concisely, there are both pre-death and post-death requirements that must be met for the IRC 2032A increase to be utilized.  The State of Washington Department of Revenue has a very readable frequently asked questions page on IRC 2032A which more comprehensively details the requirements.  

            With respect to just the high points, the decedent must have been farming the land for five of the last eight years of his or her life.  Specifically, the decedent must have been providing ‘material participation’ on the farm, not just leasing land to third parties.  The land and equipment used on the farm must also constitute significant percentages of the farmer’s estate.  After death, the decedent’s ‘qualified heir’ (usually a child) must continue farming the land for the next ten years.  Like the decedent, the qualified heir must materially participate on the farm – not just lease it out to a third party.  If the qualified heir ceases farming operations at any point during those ten years, the qualified heir will be personally liable for the estate tax burden and must pay it within six months of the deviation.  

Tool #4: Irrevocable Life Insurance Trusts (ILIT)

            For high-net-worth farmers who will not avoid the estate tax through the above tools, an irrevocable life insurance trust (ILIT) is an option.  While both assets in a revocable trust and some life insurance policies are included in a decedent’s estate, assets placed in an irrevocable trust more than three years before death are not included in the estate.  For an ILIT, a farmer would set up an irrevocable trust, purchase a life insurance policy, and place that policy within the trust.  When the farmer dies, the ILIT would receive life insurance proceeds that were excluded from the estate and distribute them to the surviving spouse or children in order to pay the estate taxes and otherwise provide liquidity to the farm.

            ILITs can be very expensive, however.  It will cost several thousand dollars for the initial document drafting to be done, and then anywhere from a few hundred dollars to tens of thousands of dollars for the annual life insurance premiums.  In short, farmers who will never approach the estate tax exemption levels should not invest in ILITs.

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Brown, Nicholas. “Four Ways for Farmers to Avoid Estate Taxes in 2025.“ Southern Ag Today 5(14.5). April 4, 2025. Permalink

As we continue to see rural landowners offered renewable energy leases, it’s important to remember the phases these agreements often include and what may happen during each phase.  If you are presented with a lease agreement for a renewable energy project and are considering it, talk with an attorney with experience in the area before signing.  In many cases, you can go to your state bar association’s website and look for members in your area and talk with them to better understand their experience with these agreements.  At the same time, you can reach out to groups like the American Agricultural Law Association to see if any of their members may have experience in your area.  Working with an attorney early on can help ensure you get a fair deal that protects your interests.

Wind and solar energy agreements usually have three stages: an easement period, an option period, and a lease period. In the first stage, the easement period, the landowner allows the developer to study the land to see if it’s good for a wind or solar project. The developer may survey the land, place sensors to measure wind and sunlight and study the impact on the environment and wildlife. They will also check if the land is suitable for construction. This stage can last anywhere from one to three years. During this time, the landowner can still use the land if they don’t interfere with the developer’s equipment on the property during the surveying.  At the same time, the landowner will continue to receive rental payments.

During the second phase, called the option to lease, the developer works on getting permits and funding for the project. For example, in Maryland, they need approval from the Public Service Commission and other permits to start construction. Other states may need different permits from local governments and approval to connect to the power grid. This phase usually lasts two to five years. The developer is not required to proceed with the project during this time. The landowner can still use the land as usual and will also receive rental payments for the land during this phase.

The third and final phase is the lease. In this phase, solar panels or wind turbines are installed, and the landowner starts receiving lease payments. This phase includes building, operating, possible renewal, and eventually removing the equipment. All told this phase of the agreement may run for 30 or more years with renewals included.  The landowner will have limits on how they can use the land to avoid interfering with the project.

This agreement could end early in the first phase if the surveys show the property is unsuitable for renewable energy development.  It could also end in the second phase if the permitting is not approved.  As mentioned earlier, it’s important to always talk with an attorney and have the agreement reviewed before signing it.

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Goeringer, Paul. “Understanding Renewable Energy Agreements: Easement, Option, and Lease Phases Explained.” Southern Ag Today 5(13.5). March 28, 2025. Permalink

The Corporate Transparency Act (CTA) is a federal law aimed at combating financial crimes like money laundering and tax evasion. Under the CTA, most corporations, limited liability companies (LLCs), and similar entities were required to disclose their “beneficial owners”—individuals who own or control at least 25% of the business or exercise significant decision-making authority.  

Numerous court actions were filed challenging the requirement.  The rulings since that time have gone back and forth, with a series of injunctions from some courts prohibiting the enforcement of the law while other courts allowing it.  After the most recent injunction was lifted, the Department of Treasury announced a mid-March, 2025 deadline for compliance.  

However, on March 2, 2025, the Department of Treasury announced that it would no longer be enforcing any penalties or fines associated with the beneficial ownership reporting requirements.  Further, the Department will “be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.”  As of today, March 4, 2025, entities are not required to disclose their beneficial owners or comply with the existing CTA regulations.    

Background on CTA & Reporting Requirements  

On January 1, 2024, the CTA’s rules went into effect. Entities created before that date were given until January 1, 2025 to comply, while companies formed during 2024 were given 90 days to report the beneficial ownership information.

CTA regulations for reporting entities required they:

1. Identify Beneficial Owners: Determine who qualifies as a beneficial owner within your company. Consider factors like ownership percentage and decision-making power.
2. Collect Required Information: Gather key details about each beneficial owner, including their full legal name, date of birth, residential address, and an identification number (e.g., from a passport or driver’s license), as well as a scan or picture of that identifying document.
3. Submit Information to FinCEN: File the information securely with the Financial Crimes Enforcement Network (FinCEN) through its online reporting system. Detailed instructions are available on the FinCEN website.

Noncompliance had significant consequences, including fines of up to $10,000 and/or imprisonment for up to 2 years. CTA requirements were separate from and in addition to any corporate paperwork that is filed with a state agency. It is an additional, and new, federal requirement.  Entities also had an ongoing requirement to update the report if information changes. 

Highlights of previous legal challenges:

As noted, several court actions were filed in 2024 challenging the new requirement.  For example, a federal district court in Alabama ruled early in 2024 that the CTA was unconstitutional. Plaintiffs in that case were granted summary judgement, and CTA enforcement was suspended only for the named plaintiffs and members of the National Small Business Association.  

However, rulings with larger effect came about at the end of 2024.  One of those began on December 3^rd, 2024 when Judge Amos Mazzant, a federal judge in Texas, issued a nationwide injunction. This injunction paused the reporting deadlines and prevents enforcement of the regulations. The ruling in Texas Top Cop Shop, Inc. v. Garland was in response to a request for a preliminary injunction, where the court found that the plaintiffs demonstrated a substantial likelihood of success on the merits of their claims. It was not a final determination of the case itself. The case was appealed, and the 5^th Circuit Court of Appeals was asked two things: to decide based on the merits of the case, and to decide whether the injunction was issued appropriately.  And this is where the road zigzagged!  

On December 23^rd, the 3-judge panel (the “motion” panel) responsible for considering the injunction decided that it was not issued appropriately and suspended enforcement of the injunction, reinstating the reporting requirements.  Then, on December 27^th, a 3-judge panel responsible for deciding the merits of the case (the “merits” panel) overturned the motion panel and reinstated the injunction.  The foundation of the ruling, according to the court, was “to preserve the constitutional status quo while the merits panel considers the parties weighty substantive arguments”.  Arguments for the appeal have been scheduled for April 1st in New Orleans. 

The government chose to appeal the ruling of the merits panel to the United States Supreme Court (“SCOTUS”), arguing that the injunction should be lifted.  On January 23, 2025, SCOTUS issued a ruling on the government’s “application for stay,” agreeing that the injunction should be lifted (and reporting requirements reinstated) until the litigation ends.  

In the meantime, another district court judge had considered the issue.  In that case, plaintiffs Samantha Smith and Robert Means challenged the constitutionality of CTA.  On January 7^th, Federal District Court Judge Jeremy Kernodle agreed with their contentions for the purposes of a preliminary ruling, which acted as a second nationwide stay. 

This was only a temporary hold however, because in light of the SCOTUS ruling Judge Kernodle lifted the stay on February 17^th.  While this effectively re-imposed CTA requirements, the Department of Treasury soon announced that it would no longer enforce the regulations.  

What’s next?

The Department of Treasury has announced that it will be issuing an interim final rule to narrow the scope of the rule.  It expects to have that rule completed and issued by March 21^st, 2025. 

Further, there is also movement in Congress that may affect the future of the CTA.  On February 10, the House of Representatives unanimously passed H.R. 736, which would modify the CTA by extending the filing deadline until January 1, 2026.  That proposal has now moved to the Senate for consideration.  A companion bill, S. 505, is also being considered in the Senate.  Both the House and Senate versions would postpone the deadline, but leave the reporting requirements intact. 

 Other legislation, introduced together as H.R. 125 and S. 100, the “Repealing Big Brother Overreach Act,” would repeal the CTA entirely.  They are under committee consideration in their respective chambers. 

Changes could be made based on further developments in this court case (or others), changes in the regulations or guidance or even further Congressional action.  Because of that, it is important to stay aware of future developments.  

If you have additional questions, please reach out to a legal or financial professional.

Information on finding an attorney in your area is available here. Further, the FinCEN website

provides additional resources and information to clarify requirements and future changes.

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Rumley, Elizabeth. “Corporate Transparency Act Deadline Upcoming.” Southern Ag Today 4(48.5). November 29, 2024. Permalink

Johnson County, Texas, recently requested federal disaster relief over PFAS contamination from biosolid applications on farmland, adding perhaps another theory of redress for such contamination of soils and water. PFAS, which stands for per- and polyfluoroalkyl substances, are man-made chemicals applied in various consumer and industrial uses. PFAS do not easily degrade in the environment and are often referred to as “forever chemicals.” While scientists are early in understanding PFAS’ full range of health and environmental effects, studies indicate links to adverse health outcomes, including cancer and liver and thyroid functioning. PFAS have been released across the county in the air, into water, and onto land. The federal disaster request supplements Johnson County residents’ 2024 federal environmental lawsuitagainst the Environmental Protection Agency (EPA) and state tort claim against a fertilizer manufacturer.
 
Biosolid applications – the disposal of the solid-waste remnants of treated wastewater – have been regulated since 1987 under the Clean Water Act §405(d) (CWA), whereby states may permit application and dispersal in a manner that is “a local determination.”  The majority of states have biosolid application permitting programs, though Maine banned biosolid applications statewide due to concerns over PFAS contamination. In the South, Texas has introduced PFAS standards for biosolids, whereas Oklahoma and Mississippi have introduced legislation to ban biosolid applications outright. 
 
The Texas farmers’ federal lawsuit alleges EPA’s failure to identify and regulate various PFAS compounds under authority and mandate of the CWA and the Administrative Procedures Act. They complain the EPA failed to add PFAS as toxic substances in the biennial review mandated in the 1987 amendments. The EPA responds that listing of toxic pollutants is discretionary. The CWA requires the EPA to make toxic listings “on the basis of available information,” and plaintiffs cite a sizable body of research in their complaint. In the months before the federal lawsuit, the EPA listed PFAS as toxic substances under other federal statutes, including the Safe Drinking Water Act, the Comprehensive Environmental Response Cleanup and Liability Act, and the Toxic Substances Control Act. 
 
The state tort case – Farmer v. Synagro – seeks compensation from the manufacturer of a biosolid-based fertilizer that plaintiffs claim damaged their properties and farm operations. Such common law actions normally couple federal citizen suits. The legal theories in Farmer v. Synagro are strict liability (for producing and marketing an “unreasonably dangerous” product), negligence (foreseeable harm from unreasonable risk), and private nuisance (for unreasonable interference with use and enjoyment of their land). Death of farm animals and diminution in property value are among plaintiffs’ allegations of damages. Defenses to liability in these cases vary by state and may emerge relative to risk assumption and presumptions against negligence that applicators might invoke, considering the applications were regulated and permitted. Legal theories concerning recovery for damage from biosolid applications are also being tested in litigation in Maine, Massachusetts, Wisconsin, and elsewhere.

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Brannon, Andrew. “Addressing PFAS Biosolid Contamination on Farmland.” Southern Ag Today 5(9.5). February 28, 2025. Permalink

Unmanned Aerial Vehicles (UAVs), often referred to as drones, create cheaper and more efficient ways to gather agronomic data and to apply pesticides to crops.  This new technology shows a great deal of promise for agriculture, but it also creates privacy concerns for neighboring landowners.  What are the legal aspects of privacy, and what can a worried landowner do about strange UAVs flying over their property?

Privacy

Privacy concerns from aerial surveillance are nothing new.  We have case law about aerial surveillance from law enforcement going back more than fifty years (click here for one example). A simplified explanation of this concept can be illustrated through examples using traditional aircraft. In the case referenced above, law enforcement was tipped off that an individual was growing marijuana on their property, so they flew a helicopter twenty feet off of the ground to capture images of the plants.  In this case, the court held that law enforcement violated the “serenity and privacy of the backyard[,]” and this constituted a search without a valid warrant. In another example, you have an individual flying over your property in an aircraft at an altitude of 500 feet and taking pictures of your property with a powerful camera. This example likely does not constitute a violation of someone’s right to privacy. What is the takeaway from these examples? Someone can violate your right to privacy, and potentially even commit trespass, by flying too low over your property, but your rights are greatly diminished when the aerial surveillance is conducted at higher altitudes.

What about UAVs? Recreational UAVs typically operate in Class G airspace which is 400 feet and below.  There are other restrictions such as flying around airports, military installations and prisons, but we will use 400 feet for the sake of simplicity. This puts UAVs in a gray area.  One question that we are struggling with legally is how low is too low? This question may end up being moot because of rapidly advancing technology.  The laws surrounding aerial privacy have changed in recent years (to see a compilation of state UAV laws click here), but technology is evolving even quicker.  UAVs have not changed the laws surrounding privacy, but they have made it much cheaper and easier to conduct aerial surveillance.  For the price of operating a helicopter for one day, an individual can buy a UAV equipped with an excellent camera and use it for weeks on end. Many early cases about aerial surveillance were against law enforcement because only the government was able to afford it. Modern UAVs and mass production have placed this technology in the hands of the general public.

Can I Shoot Down a UAV?

A common question we have received with the proliferation of UAVs is whether a landowner can shoot down a UAV that is flying low over their property. The answer is an emphatic “No!” The Federal Aviation Administration (FAA) is in charge of regulating aircraft and the airspace where they operate. UAVs are classified as aircraft by the FAA (unmanned, but still aircraft), and under federal law, 18 U.S.C.A. § 32, it is a felony to “damage, destroy, disable, or wreck any aircraft,” and the potential punishment is up to twenty years in federal prison. What can a landowner legally do about a UAV flying over their property?  The answer is very little in most cases. You can report suspicious UAV activity to the FAA. UAVs are required to display their registration numbers on the outside of the aircraft (14 CFR Section 48.205(c)). For low flying UAVs it should be possible to capture an image of this registration number to go with your complaint.  Other actions, such as capturing images through windows of residences, may also open avenues for local law enforcement to become involved. Documenting and reporting remain the safest legal way to deal with problematic UAVs around your property.

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Rumley, Rusty. “Drones Flying over my Property: What can I do?” Southern Ag Today 5(8.5). February 21, 2025. Permalink