Category: Industry

Safety Snapshot: 2017

by Allison Cloo

What does safety look like? It’s more than just bright vests, protective gear, and endless paperwork. Safety looks like a team of people, both on and off the farm, who cultivate an entire culture of preparedness, accountability, and support. That includes a number of programs available through Oregon Aglink and its partners that put innovative safety resources in your hands.

There are people for whom safety is a vocation. You might get your workers’ comp insurance and even a member discount from a company like SAIF, where professionals like Pat Morrill and Chuck Easterly are also happy to tell you about the annual seminars held in 16 cities around Oregon with both English and Spanish. You might also seek out the services of a safety consultant like Kirk Lloyd of Risk Management Resources, who helps farms create safety plans, run meetings, and respond to accidents when they do happen. In partnership with Oregon Aglink, he also contributes to a growing video library on safety topics.

For others, safety means some extra steps that are worth the effort. There’s Jake Barge at Papé Machinery, whose company does more than sell you machinery—it helps keep you safe on the road with a sign and bumper sticker campaign encouraging other drivers to be cautious. Aglink member Brenda Frketich and others like her are participating in an OSHA-approved pilot program of local “pods” where farmers work together to operate at their safest and most efficient.

And of course there are the people at the center of it all who rely on farm safety: you, your employees, and all the family members who hope to see you and your workers get home at the end of each day.

Balancing Lives and Livelihoods

“Ag isn’t sustainable without a healthy workforce of farm families and their employees” says Lloyd, but beyond the financial bottom line, “getting people home in one piece every night is the most important thing to me.”

In farming, where paperwork can seem to pile up endlessly, it can be hard to reconcile the regulations with the flesh and blood people they’re supposed to protect on an everyday basis. Lloyd is there to help bridge that gap. He admits that “safety and compliance have become very different things,” so while meeting expectations on a checklist might save you on fines, it’s only part of a bigger safety strategy.

“Many of the biggest safety challenges we face in agriculture are not regulated at all, or the rules don’t fully address the problem, so I also put a lot of effort into teaching employers, managers, and workers about these gaps and developing “best practices” to minimize the risk of injury.”

Regular safety meetings and certifications for workers have to compete with busy farms and packed schedules. That’s where Aglink projects like short safety videos, available in both English and Spanish, make material more accessible for farm teams. After OSHA made the first video possible with a grant, a partnership with SAIF and Kirk Lloyd has produced an additional three available on YouTube and DVD. Along with the annual seminars put on by SAIF around the state, these videos are a way to spark important thinking and conversations around the farm.

After all, good safety practices like using the right equipment and taking time for checks have to compete with the alluring numbers of efficiency: high output with the least time and energy spent. Additionally, a lot of farming involves monotonous and large-scale work that can create a false sense of security. However, Chuck Easterly, Loss Control Manager at SAIF, says it best: “When safety cultures are strong, workers are protected and operations are performed effectively [and] efficiently.”

And what is a strong “safety culture”? Watching out for one’s own actions and looking out for each other’s well-being on top of that. Not risking your own life or someone else’s, especially when some lives are endangered as workers on the farm may try to help each other in an emergency situation and the tragedy only compounds. Safety culture is all about the big-picture “why” of safety and not just the “what” of individual regulations and minimum compliance to avoid fines or legal expenses.

Innovating at the Local Level

 In 2014, to help small and mid-sized farms achieve these broader safety goals, Aglink executive director Geoff Horning worked with Lloyd and a safety committee of member farms to create an innovative new program. With OSHA’s approval, local “pods” of farms diverge from the typical schedule of a monthly safety meeting on their own farm to a quarterly schedule where farms work together to achieve that strong safety culture.

Since the pilot year, two pods have emerged, one with three farms and the other with five. Each quarter, a farm will have at least one safety meeting with as many of its own staff and workers as available. The other two meetings that quarter, which under typical OSHA practice would include only that farm, are replaced by one “pod” meeting, where members of the owner and labor management teams from each farm meet to talk about their recent and upcoming safety concerns, and a safety inspection carried out by a representative from Risk Management Resources and one or more Aglink staff members. Behind the scenes, Aglink takes care of all the meeting minutes, inspection notes, and other paperwork involved in the program.

Brenda Frketich, an Aglink member participating in the program, sees her local “pod” as an important part of the safety routine at Kirsch Family Farm. “Having safety as an on-going conversation in the culture of your farming business does a lot to remind people [of how to protect themselves] from the big risks,” she says, like driving defensively on the road or using earplugs with a chainsaw, but it also “brings up situational reminders throughout the year. Sometimes when you are only doing a job one time in a number of years it is easy to forget the best way to go about being safe on the job.” Where one small farm might not be thinking about that task this season, another member of their pod might have it on the top of their to-do list. As a pod, they work through those risks and strategies.

According to Kirk Lloyd, the pod program “introduces a power dynamic of farmer-to-farmer support, encouragement, and accountability.” When it operates alongside the top-down administration of OSHA, it represents some of the best of the cooperative and practical aspects of agriculture in Oregon.

Aglink hopes to expand the program over time with more staff and funding, especially since the regional model would serve the needs of producers across the state. In the meantime, however, executive Geoff Horning is proud of the programs and partnerships that continue to thrive and serve the safety needs of the farming and ranching community in Oregon.

“Providing safety resources for our members may not be the core part of our mission,” says Horning. “But at the end of the day none of it matters if we don’t do everything we can to make sure our members and their employees go home safely to their families every night.”

Aglink would like to thank the different organizations and individuals who contributed to this article. For more information about these programs, check aglink.org or contact our staff at info@aglink.org.

Reap What You Sow: Tax Planning Opportunities

Curtis has been helping his clients with strategic tax planning, compliance and consulting services for more than 10 years.

As we look back at the last calendar year, it’s a good time to sharpen your pencil and consider some tax strategies that may help minimize your tax liabilities. Here are three areas that every agribusiness should be aware of when working with their tax advisor:

Transition of Family LLCs: In order to minimize estate taxes, farmers often transfer their land and real property into family-owned LLCs. Minority interests may be granted in these LLCs to their heirs at discounted values due to lack of control. These discounts can be up to 50% of the fair value of the LLC interest and help reduce the estate tax impact of the gift. However, if proposed changes to the IRS Code are enacted, this tax planning tool will go away.  To date, it’s not certain what the final effective date will be for these changes, if they are enacted into law.  Therefore, if you have a family owned LLC and have not evaluated the impact of these potential changes on your estate and business transition planning, we recommend that you contact your CPA or attorney immediately to evaluate the appropriate course of action for your personal situation.

Eric provides his clients assurance services which includes audit, reviews and compilations and specializes in financial consulting and employee benefit plan audits.

New Repair Regulations: IRS regulations now allow businesses to expense asset purchases of $2,500 or less, per unit (up from $500 or less). This increase alleviates the time and effort required to track, capitalize, and depreciate relatively minor purchases. It also provides an incentive to make year-end purchases as they can be expensed against income for the current year, even if they were only placed in service for a day.  Businesses should create or update their written capitalization policies to document their chosen dollar threshold to be applied consistently to all asset purchases to take advantage of this strategy.

Expanded Bonus Deprecation on Trees and Fruit Bearing Plants: A tax savings opportunity is available to those who haven’t elected out of UNICAP (i.e., the IRS rules for capitalization of inventory for cash basis tax payers). These businesses can plant trees and plants bearing fruits and nuts now and take bonus depreciation. Under the old rules, agribusinesses would have to wait until the tree or plant become commercially productive to claim the depreciation expense. This potential tax savings should be considered when you are deciding when to plant any new fields.  The available bonus depreciation is 50% in 2016, 50% in 2017, 40% in 2018, and 30% in 2019.

Don’t Forget

Here are some additional reminders for you to review with your tax advisor:

Entity Structure Planning: The PATH Act of 2015 made permanent the five year waiting period for built-in gains associated with C-Corporations that have converted to S-Corporations.  If you have been considering converting to an S-Corporation because of the tax advantages now may be the right time to convert to an S-Corporation.

Tax Filing Deadlines:  This new tax year brings a few adjusted deadlines for businesses that you should be aware of as you gather documents in preparation for your 2016 returns.  Partnership returns are now due by March 15th (previously April 15th) and C-Corporation returns are now due by April 15th (previously March 15th).

Oregon Pass-Through Tax Rate: Effective last year, Oregon taxpayers may apply a lower tax rate on active pass through income that they receive from an S-Corporation or Partnership (other than a single-member LLC). However, there is an election that must be made on the Oregon business tax return to take advantage of the reduced rate.   You should work closely with your tax advisor to ensure this election was made correctly – the tax impact for many could be as much as 2%.  If you have questions on taking this election, you may contact one of our team members at agribusiness@aldrichadvisors.com.  Unfortunately, once the initial filing deadline has past a missed election cannot be corrected with an amended return.

Many of these tax saving strategies may seem daunting, however, when you are working with your team of experts they can be easily implemented to help you reap what you sow and keep more of your hard earned dollars.

Planning Ahead

Our knowledge of the entire agri-business supply chain from grower to processor to retailer allows us to help our clients achieve their goals. Please contact either of us at Aldrich Advisors (formerly AKT) at 503-620-4489 if you’d like to review these opportunities or discuss other options for tax savings.

Tis the Season to Start Tax Planning

By Curtis Sawyer, CPA and Eric Groves, CPA

As another year draws near to a close, we reflect on things that transpired in 2015 as we begin to plan for a full and prosperous new year. An important element of planning is a forward look at the coming tax season. To jumpstart a conversation with your tax professionals, here is a brief look at a few opportunities for tax savings.

Income Averaging for Federal Returns

Federal statutes allow farmers to spread a portion of their current year farming income equally over the three previous tax years. This treatment can make sense for any of the following reasons:

  • Your current year taxable income places you in a higher marginal tax bracket than prior years. Income earned at the higher rate can be applied retroactively to prior years with lower rates.
  • The farm income averaging election has not been utilized in earlier years. The IRS will let you amend prior years’ filings to capture those benefits.
  • Starting in 2013, high-income farmers saw an increase from 35 percent to 39.6 percent in the top tier of federal taxes. By averaging income back to 2012, you can take advantage of a 35 percent marginal rate on some of your earnings.
  • You anticipate higher income or higher tax rates in the future. Applying income averaging for 2012-2015 sets you up for profitable use of this treatment in future years.

IRS Schedule J captures the farm income averaging calculation. Your tax professionals can help you assess the benefits and provide the proper reporting.

Favorable Tax Treatment for Oregon Farmers

In a special election at the close of its 2013 session, the Oregon legislature granted a tax break for individuals who receive flow-through income from an active trade or business. Such flow-through income typically originates from an S-corporation or a multi-member limited liability company (LLC).

 

Amount of Pass-Through Income New Applicable Tax Rate Old Rate
Less than $250,000 7.00% 9.00%
$250,001 – $500,000 7.20%
$500,001 – $1,000,000 7.60%
$1,000,001 – $2,500,000 8.00%
$2,500,001 to $5,000,000 9.00%
More than $5,000,000 9.90% 9.90%

 

If your Oregon-based farm has already been organized as an S-corporation or a multi-member LLC, then you’ll enjoy lower Oregon tax rates in 2015. If not, you should consider whether the tax benefits offset the incremental effort to restructure your business. Your tax professionals can provide estimates of savings as well as ballpark figures for one-time and recurring costs.

Net Investment Income Tax

In the wake of the Affordable Care Act, Congress authorized the imposition of a 3.8 percent net investment income tax on individuals with significant modified adjusted gross income (AGI). In particular, once a married couple filing jointly reports AGI in excess of $250,000, a 3.8 percent incremental tax applies to all passive income beyond that threshold. Individuals cross the mark at $200,000.

If you are active in your farm business, there are two sources of investment income that can bypass this incremental tax. If you or an LLC in which you hold an interest owns the land and buildings on which the farm operates, then your “self-rental” income will not be subject to the 3.8 percent tax. In like fashion, if you serve as the farm’s creditor, then the interest income earned through this arrangement is not subject to the 3.8 percent tax. In both cases, the word ACTIVE plays a significant role in determining tax treatment. Your tax professionals can review the qualifications and help you assemble appropriate documentation to support your case. At a minimum, the following actions should be taken:

  • Prepare and execute an appropriate rental agreement between the property owner(s) and the farming business. Make sure that all rents align with fair market values.
  • Prepare and execute lending agreements to address monies loaned by individuals to the farming business. Use interest rates consistent with other creditors in the marketplace based on the type of loan, the duration, and risk assessment.
  • Where possible, incorporate a description of the role the property owner (or lender) plays in the ongoing management of the farm. This documentation strengthens the case for “active” participation.

Planning Ahead

We’ve highlighted just a few of the items that should be on your radar as you sit at the planning table with your tax professionals. Please contact us at (503)-620-4489 if you’d like to review these opportunities or discuss other options for tax savings.

 

Sawyer, Curtis 2015 Curtis Sawyer, CPA, has been providing tax compliance, planning and consulting services to his clients for nearly 10 years. He works closely with businesses across several industries with an emphasis on agriculture, farming, cooperatives, manufacturing and their owners. He also presents on topics including regulatory reform, the Affordable Care Acts, and tax savings strategies such as IC-DISCs.

 

AKT Lake Oswego Eric Groves, CPA, provides assurance services including audits, reviews and compilations to agriculture and farming, food processing, and manufacturing companies to help them achieve their goals. He also specializes in financial consulting and employee benefit plan audits for the firm.

 

 

© 2017

Theme by Anders NorenUp ↑