Source: https://www.calt.iastate.edu/newsletter/2018-february
Timestamp: 2019-04-18 22:25:03+00:00

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March 1 is tomorrow, which means that income tax returns for farmers who do not pay estimated taxes are due. It also means that a new crop year begins in Iowa. Farm landlords have 20 days to file a UCC-1 to perfect their landlord's lien on the tenant's crops. For more information, please see page seven of our publication, Iowa Farm Leases: A Legal Review.
On February 12, 2018, the Iowa Supreme Court heard oral arguments in a case that will shape Iowa nuisance law, as it applies to animal feeding operations.The Court will again analyze Iowa Code § 657.11, which was enacted in 1995 to protect agricultural producers “who manage their operations according to state and federal requirements from the costs of defending nuisance suits.” This will be the third time Iowa’s highest court has assessed the constitutionality of a statute protecting agricultural producers from nuisance lawsuits.
On February 23, 2018, the Iowa Supreme Court vacated a court of appeals decision from last September and ruled that a postmortem family settlement agreement could not allow a taxpayer to avoid state inheritance tax. The ruling upheld the Iowa Department of Revenue's denial of a taxpayer's claim for a refund. The Court declined to craft a test for determining when a settlement agreement can contol inheritance tax consequences. Instead, the Court stated, "Estate planning should precede the testator's death." Justice Mansfield dissented. The case is Nance v. Iowa Dept of Revenue, No. 16-1974 (Iowa February 23, 2018).
The Tax Cuts and Jobs Act has significantly changed the tax landscape for agricultural producers. We’ve detailed a number of the changes, many of them positive, in prior articles. In light of the federal changes, Iowa must now decide how to respond. As Iowa lawmakers turn their attention to tax reform, we review several key IRC § 179 issues with great impact to Iowa agriculture and suggest they warrant attention, especially a glitch in the law that can deny owners of certain entities cost recovery altogether.
Section 179 has long been an important tool for farmers. It helps them with ever-difficult cash flow struggles, lowers their marginal effective tax rate, and eliminates burdensome recordkeeping requirements associated with depreciation. Between 2012 and 2016, farmers claimed 53% to 73% of the IRC § 179 claimed by Iowa taxpayers. Nearly half of the farmers who claimed IRC § 179 had less than $350,000 in gross cash farm income. They were the principal operators of their farms.
Historically, Iowa has not coupled with federal bonus depreciation provisions, but has conformed to federal IRC § 179 provisions. Last year, in light of serious budget concerns, the Iowa Legislature decided not to couple with many federal tax extender provisions, including the increased IRC § 179 made permanent by the 2015 PATH Act. Consequently, during the 2017 filing season (2016 tax year), taxpayers and their preparers for the first time battled with a $500,000 federal IRC § 179 deduction and a corresponding $25,000 Iowa § 179 deduction. And, the federal threshold (or level at which the expense deduction begins to phase out), was $2,010,000, while the Iowa threshold remained at $200,000. This led some Iowa farmers to face significantly higher Iowa tax liability than federal tax liability.
The Tax Cuts and Jobs Act (TCJA) made significant changes impacting the depreciation and expensing of vehicles used in a trade or business. In this post, we review the current law.
2017 Limits for "Passenger Automobiles"
IRC §280F(a) imposes dollar limitations on the depreciation and IRC § 179 expensing deductions that can be taken for passenger automobiles. This limitation is often referred to as the “luxury automobile depreciation limitation,” even though it applies to vehicles not commonly considered “luxury automobiles.” Passenger automobiles, by definition, weigh 6,000 pounds gross vehicle weight or less. Cars, trucks and vans falling within these weight limits are subject to the 280F limitation. SUVs are treated as trucks for the purpose of applying the limitation. The 280F limitation is indexed for inflation, and IRS has traditionally applied a different inflation adjustment for cars than for those vehicles on a truck chassis, including light-duty trucks and vans. Consequently, two tables have emerged for the IRC §280F(a) limitation. IRS Rev. Proc. 2017-29 set the 2017 limits as follows.
The Iowa Court of Appeals recently found that Fayette County improperly granted permits to a wind energy group to build three wind turbines on agricultural land. This opinion leaves in effect a district court order that directed the group to remove the turbines.
A Fayette County couple granted easements to several wind development companies to construct three wind turbines on their farmland. The wind group applied to the Fayette County Board of Adjustment (Board) for special use permits to construct the turbines, and the Board denied the application.
President Trump signed the Bipartisan Budget Act of 2018 into law on February 9. The Act, which was passed to fund the federal government and avoid another shutdown, includes a number of changes to the Internal Revenue Code. Many of these changes retroactively extend--generally for one year--tax provisions which had expired at the end of 2016. Because this Act significantly impacts many 2017 returns, IRS has announced that it was reviewing the legislation and would provide additional information as quickly as possible. Not in the Act was any change to the qualified cooperative dividend deduction implemented by the new tax law. Although earlier reports had suggested that a "fix" would be inserted into the budget bill, it now appears that lawmakers continue to work toward crafting an appropriate solution to the controversial problem, perhaps by March 23. We will continue to keep you posted on that issue.
As of now, IRS can process three key extender benefits, the excusion from income for the discharge of qualified principal residence indebtedness, the mortgage insurance premium deduction, and the deduction for qualified tuition and related expenses.
Looking for a Handy Reference Guide?
Kristy has updated the Summary of Tax Rates and Tables for the 2018 tax year. You can access it here.

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