by: Chris Zoller, Extension Educator, ANR, Tuscarawas County; Peggy Kirk Hall, Director, OSU Agricultural & Resource Law Program & David Marrison, Extension Educator, ANR, Ashtabula County
A renewed interest in oil and gas leasing in Ohio has the potential to provide landowners with substantial new revenue. Landowners who receive income from oil and gas lease bonus payments and royalty payments must understand the tax implications. Oil and gas income is subject to both federal and state income tax and must be reported appropriately. While a landowner can’t avoid paying taxes on oil and gas revenues, the landowner can use strategies to manage income taxes. This fact sheet reviews how to report oil and gas revenues and summarizes examples of tax management strategies for landowners.
Click here to access the Oil & Gas Tax Fact Sheet
By David Marrison, Associate Professor
Could the Federal government be following Ohio’s lead in eliminating the Federal Estate Tax or is this “Election Year” posturing?
The federal estate tax is currently set at 35% on estates over $5.12 million. If nothing is changed on January 1, 2013 the estate tax exemption will drop from $5.12 million to $1 million and the estate tax rate will jump from 35% to 55%. In his 2013 budget proposal, President Obama is supporting a $3.5 million estate tax exemption and 45% estate tax rate.
At the close of March 2012, Senator John Thune, Republican from South Dakota introduced the Death Tax Repeal Permanency Act S. 2242, which would permanently abolish the federal estate tax. This act would repeal the federal estate tax, repeal the federal generation-skipping transfer tax and lock in a $5 million lifetime gift tax exemption and 35% gift tax rate The Senate bill mirrors House Resolution 1259 which was introduced by House Representative Kevin Brady, a Republican from Texas.
Many farm organizations have been advocating the repeal of the Federal Estate Tax due to its effect of these businesses being able to be transferred to the next generation. National Cattlemen’s Beef Association President J.D. Alexander stated in a recent press release, “The death tax is detrimental to the farmers and ranchers who live off the land and run asset-rich, cash poor family-owned small businesses.”
According to a study by Douglas Holtz-Eakin... Read More »
by: Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics & Dianne Shoemaker, OSU Extension Field Specialist, Dairy Production Economics
Budgeting helps guide you through your decision making process as you attempt to commit resources to the most profitable enterprises on the farm. Crops or Livestock? Corn, Soybeans, Wheat, Hay? We can begin to answer these questions with well thought out budgets that include all revenue and costs. Without some form of budgeting and some method to track your enterprises’ progress you’ll have difficulty determining your most profitable enterprise(s) and if you’ve met your goals for the farm. Budgeting is often described as “penciling it out” before committing resources to a plan. Ohio State University Extension has had a long history of developing “Enterprise Budgets” that can be used as a starting point for producers in their budgeting process.
Newly updated Enterprise Budgets for 2012 have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics. Updated Enterprise Budgets can be viewed and downloaded from the following website: http://aede.osu.edu/programs/farmmanagement/budgets Enterprise Budget projections updated so far for 2012 include: Corn-Conservation Tillage; Soybeans-No-Till (Roundup Ready); Wheat-Conservation Tillage, (Grain & Straw), Corn Silage, Alfalfa H... Read More »
By David L. Marrison, Associate Professor
At the end of 2010, President Obama signed “The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.” Most will remember that this bill extended many of the Bush era tax cuts. What many do not remember is that this legislation also made some significant changes to our federal estate tax laws. And quite frankly, this is the one area that concerns me the most when I think of the future of many of our farms across Ohio.
The estates of every U.S. citizen are subject to the federal estate tax upon their death. However, a certain potion is exempt from the tax. In 2012, this exemption is $5.12 million. Therefore, in 2012 if the value of the net estate - meaning the gross estate reduced by allowable estate tax credits and deductions - does not exceed $5.12 million, then the estate will pass to the heirs free from federal estate taxes. Any amount above $5.12 million is subject to a 35% tax. The increase to a $5 million exemption was a welcomed relief as individuals developed their estate plans.
The increase to the $5 million exemption is short lived as the increase only applies to 2011-2012. Congress must revisit the estate tax laws before the end of 2012, otherwise we will revert to pre 2001 exemption levels. This means that on January 1, 2013, the federal estate tax exemption will drop all the way down to $1 million and the estate tax rate will jump up to 55% (Ouch). This could affect hundre... Read More »
by: Barry Ward, OSU Extension, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics
Ohio cropland varies significantly in its production capabilities and cropland values and cash rents vary widely throughout the state. Generally speaking, western Ohio cropland values and cash rents differ substantially from eastern Ohio cropland values and cash rents. This is due to a number of factors including land productivity and potential crop return, the variability of those crop returns, field size, field shape, drainage, population, ease of access, market access, local market price, potential for wildlife damage, and competition for rented cropland in a region. This fact sheet is a summary of data collected for western Ohio cropland values and cash rents.
Click here for the Western Ohio Cropland Values and Cash Rents Fact sheet 2011-12
Ohio cropland values and cash rental rates are projected to increase in 2012. According to the Western Ohio Cropland Values and Cash Rents Survey, bare cropland values are expected to increase from 7.3% to 9.1% in 2012 depending on the region and land class. Cash rents are expected to increase from 5.7% to 11.5% depending on the region and land class.
The “Western Ohio Cropland Values and Cash Rents” study was conducted surveying professionals knowledgeable about Ohio’s cropland markets. Surveyed groups include farm managers, rural appraisers, agricultural lenders, OSU Extension e... Read More »
Carl Zulauf, Professor,
Department of Agricultural, Environmental and Development Economics
The Ohio State University
This article was reprinted with permission from the March/April 2012 issue of U.S. Canola Digest magazine (www.uscanola.com).
Background: A draft farm bill was written for potential submission to the Budget Reduction Super Committee as part of the ongoing debate over the federal budget deficit. The Super Committee process failed to reach consensus and the draft farm bill has never been officially released to the public. The farm bill now reverts to its normal process, but with at least broad outlines of a draft bill negotiated between several members of the House and Senate farm bill leadership. This paper provides a brief summary of widely-reported parts of the existing farm bill draft. The summary focuses on broad themes. The paper then briefly addresses implications of a return to the normal process and selected questions and issues.
Summary of Draft Farm Bill
It is widely-reported that the draft bill reduced spending on the farm safety net by $23 billion over 10 years, relative to baseline spending. The safety net includes farm programs and crop insurance. Savings largely came from eliminating the direct payment program.
A revised revenue shallow loss program was adopted in place of the ACRE program. Farms continue to have the choice of either a shallow loss revenue program or a price support program. The marketing loan program... Read More »
By: Chris Bruynis, Assistant Professor & Extension Educator
The agricultural industry is one of the most dangerous occupations in the United States due to a broad range of risks associated with the occupation. Risks include road travel of slow, large equipment; many moving parts and wheels; a broad range of pesticides and fertilizers that have safety requirements associated with their use; and long hours associated with spring field operations.
Research from the National Safety Council indicates that 700 farmers and ranchers die in work-related accidents annually. Additionally, agricultural industry statistics also indicate that another 120,000 agricultural workers suffer disabling injuries from work related accidents. With proper safety measures in place and followed, many of the deaths and accidents could be prevented.
Dee Jepsen, OSU Specialist reminds us what is required and recommended for agricultural equipment while traveling on public roads:
At all times, an Slow Moving Vehicle (SMV) emblem is required
Headlights and taillights are required 30 minutes after sunrise and 30 minutes before sunset
Headlights and taillights are required during day hours if inclement weather conditions exist, including fog and rain
Additional extremity lighting is required on dual-wheeled tractors
Amber flashers and turn signals are recommended at all times
Ideally towed implements should have their own reflectors, lights, and an SMV emblem. However law requires t... Read More »
By David Marrison, OSU Extension Extension Educator & Associate Professor
Landowners across Ohio may be surprised to learn the bonus lease and royalty dollars received for their Marcellus Shale Leases will be subject to the Ohio commercial activity tax (CAT) if payments of over $150,000 are received. The CAT was enacted in House Bill 66, which was passed by the 126th General Assembly. The CAT is an annual tax imposed on the privilege of doing business in Ohio, measured by taxable gross receipts from most business activities.
Most receipts generated in the ordinary course of business are included in a taxpayer’s CAT base. This tax applies to all types of businesses: e.g., retailers, service providers (such as lawyers, accountants, and doctors), manufacturers, and other types of businesses. The CAT applies to all entities regardless of form, (e.g., sole proprietorships, partnerships, LLCs, and all types of corporations). The tax does have limited exclusions for certain types of businesses, such as financial institutions, dealers in intangibles, insurance companies and some public utilities if those businesses pay specific other Ohio taxes. This tax has been in existence since 2005.
A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax, which requires such person to register with the Department of Taxation as a taxpayer. The term “gross receipts” is broadly defined to include most business types of receipts from the... Read More »
Information presented above and where trade names are used, they are supplied with the understanding that no discrimination is intended and no endorsement by Ohio State University Extension is implied.
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Keith L. Smith, Ph.D., Associate Vice President for Agricultural Administration and Director, Ohio State University Extension TDD No. 800-589-8292 ( Ohio only) or 614-292-1868