Utilizing Ag Legal Counsel and Planning Ahead for Positive Impacts on Farm and Ranch Revenue

Listen to KC Sheperd talk with Roger McEowen about the importance of staying ahead and utilizing ag tax law counsel.

At the National Association of Farm Broadcasters convention in Kansas City, Farm Director, KC Sheperd, got the chance to visit with Roger McEowen. McEowen is a professor of agricultural law and taxation at Washburn University School of Law in Topeka, Kansas. Sheperd talks with McEowen about why it is critical for producers to be knowledgeable about tax law to help them stay ahead.

“One slight mistake can be pretty costly, and it can affect the profitability of the farm or ranch pretty quickly,” McEowen.

For example, McEowen said, if a producer is not reporting income in the right year, they can suffer from IRS penalties for not reporting properly and under-reporting income. Not deferring crop insurance proceeds properly, McEowen said, is another big issue.

“One of the big issues right now has to do with deferability of certain types of USDA indemnity payments- the Emergency Relief Program payments,” McEowen said. “That seems to create a whole bunch of confusion in producer’s minds right now.”

Getting into an issue with the IRS, McEowen said, should be avoided at all costs, because it is extremely time-consuming and expensive. Producers have a lot to juggle such as keeping track of ERP payments, crop insurance depreciation, and more, McEowen said, so having a good tax counsel would be a valuable asset.

Rules for ag tax and ag law are different for farmers and ranchers, McEowen said, so finding a tax professional who knows the rules is critical.

For 2023, McEowen said one big issue is the U.S. Supreme Court defining what a wetland is for the Clean Water Act. California’s Proposition 12, he said, will also be a case to watch as it can impact all of agriculture.

Proposition 12 is a worrisome subject for producers because if one state is allowed to regulate what happens in another state, there may be no end in sight.

McEowen’s biggest piece of advice for producers, he said, is that it is good to have legal and tax counsel at your disposal.

“Stay in contact with them regularly,” McEowen said. “The laws change frequently, particularly on the tax side of things. Those rules change all the time. You want to be doing some pre-planning for the next year.”

Planning ahead for the next year and considering factors such as the current economic situation, McEowen said, will directly impact the profitability of the farm or ranch.

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