Policies in Motion

These Policy Discussion Guides were researched and written by NFBFs Governmental Relations
Department and the American Farm Bureau. They are designed to assist Farm Bureau members
in state and national policy development and in writing policy resolutions.
NOTE: County Farm Bureau policy resolutions must be postmarked by Friday, October 31, 2014.
Mail to: Governmental Relations Department, Nebraska Farm Bureau Federation, P.O. Box 80299, Lincoln, NE 68501
Other important policy development dates:
Nov. 13, 2014 NFBF Policy Issues Forum Kearney Holiday Inn
Dec. 7-9, 2014 NFBF Annual Meeting and Convention Younes Conference Center
Jan. 11-14, 2014 AFBF Annual Meeting and Convention San Diego, CA.
2014 NFBF Policy Development Guides
WATER STORAGE
Issue
One way to mitigate the effects of drought
on all aspects of society is to increase water
reserves through water development projects.
Yet construction of new reservoirs or other
storage and delivery systems is diffcult, if
not impossible, to move through the various
regulatory, legal and resource acquisition
hoops.
In light of growing competition for water
available for agricultural use, investments in
water infrastructure will be key to ensuring
the sustainability of future water supplies.
Competition ranges from increasing
demand from municipal and industrial water
users, to government wildlife mitigation
and land-use restrictions resulting from
implementation/enforcement of environmental
law requirements. Drought conditions can
further exacerbate water availability issues,
creating uncertainty for farmers and ranchers
dependent on stable water supplies for ag
production.
Recent droughts have increased public
awareness and federal policymakers focus
on faws in todays water storage and delivery
systems.
Background
Drought has afficted portions of North
America for thousands of years. Droughts in the
1930s (Dust Bowl) and 1950s were particularly
severe and widespread. In 1934, 65 percent
of the contiguous United States was affected
by severe to extreme drought, resulting in
widespread economic disruption and signifcant
displacement of American citizens. From 1950
to 1956, drought plagued the Great Plains and
Southwest. In Texas, rainfall decreased 40
percent between 1949 and 1951 with many crop
yields reduced by 50 percent.
Recent droughts have plagued farmers
and ranchers across the country and have led
to disaster declarations in more than 1,400
counties in 2011, 2,245 counties in 2012, and
nearly 600 counties in 2013. The current mega-
drought affecting the state of California has
been recorded as the states worst since record
keeping began in 1895, with an estimated
800,000 acres of productive farmland projected
to be fallowed this year as a result.
Technological advances in farm equipment,
expansion of the surface transportation system
and the development of modern water storage
projects revolutionized American agriculture.
Increased demands for food, feed and fber
from Americas growing population encouraged
further regional growth in the west, creating new
demands for predictable water supplies.
Americas large-scale water development
projects were frst fostered by the Reclamation
Act of 1902, later developed in the post-
WWII era to create jobs following the Great
Depression and continued into the early
1970s with both state and federal Reclamation
projects, as well as the expansion of existing
facilities. The feasibility of future federal water
development projects declined primarily in
response to several environmental laws being
passed in Congress, including the National
Environmental Policy Act in 1969, the Clean
Water Act in 1972 and the Endangered Species
Act in 1973.
Compliance with federal environmental
regulation, heightened pressures from
competing societal interests stemming
from an often uninformed population and
a growing environment of litigation have
signifcantly slowed the development of new
large-scale federal water storage projects and
modernization of existing infrastructure.
Farm Bureau Policy
Water is one of our most vital resources.
We support the construction of water storage,
funding of water conservation and effciency
programs, the streamlining of permitting
of storage projects and state and federal
cooperation in building multi-use water
systems anywhere feasible, consistent with
state water laws.
More attention should be given to the
long-term effects of such plans, such as the
advantage of building structures of suffcient
strength to take care of likely future agricultural
water needs.
Watershed Programs - We oppose: The
Federal Government changing the historic
priorities and uses of water storage reservoirs.
Depreciation, Expensing and Deductions
We support allowing water storage reservoirs
built for irrigation and the cost of land leveling
for water conservation to be depreciated over
a four-year period.
Questions
1. Understanding current federal
environmental regulations limit develop-
ment opportunities for large scale water
storage projects, does AFBF policy ad-
equately support working for reforms of
laws including the Endangered Species
Act, National Environmental Policy Act,
Clean Air Act and Clean Water Act that
would allow for enhancement of water
storage systems?
2. Are current federal water policies
(conservation/supply) and disaster
assistance policies balanced to achieve
necessary investments in future water
infrastructure projects?
3. Is suffcient data available to esti-
mate future water shortages based on
changes in water supplies, competition
for water resources, and impact of future
drought conditions?
DOWNER ANIMALS
Issue
USDA Food Safety and Inspection Service
(FSIS) regulations require all animals found to
be non-ambulatory at ante-mortem inspection
(or those that become non-ambulatory
after the ante-mortem inspection but before
processing) be condemned. Clearly, animals
downed due to an illness need to be removed
from the processing system. However, there
are cases where animals are non-ambulatory
not because of illness (e.g., a leg fracture
incurred during transport). These non-
ambulatory animals pose no human health
risk; however, FSIS rules treat them the same
as other downer animals.
Background
Strict prohibitions on processing downer
animals were imposed in response to Bovine
Spongiform Encephalopathy (BSE), the frst
U.S. case of which was identifed in December
2003. One of the characteristic symptoms
of BSE in its latter stages is a loss of motor
function and coordination, resulting in a non-
ambulatory condition in affected animals. The
prohibition on the processing of non-ambulatory
animals was thus intended as a straightforward
means of excluding symptomatic BSE-infected
animals from the human food supply. Perhaps
just as importantly, it sent a strong signal to
consumers that an abundance of caution
would be exercised with respect to food safety
procedures pertaining to BSE.
An obvious defciency of the comprehensive
ban on the processing of downer animals is
that animals can become non-ambulatory for
a variety of reasons. Current rules make no
special allowance for this fact. Thus, animals
that pose no risk to human healthsuch
as those that are non-ambulatory due to a
shipping-related injuryare condemned along
with animals that are clearly sick. Given the
publics fear of BSE has subsided dramatically,
it is likely a relaxation of the downer animal rule
would attract little, if any, attention. Animals that
are non-ambulatory due to injury could, with
a change of FSIS rules, be treated differently
from animals that are non-ambulatory due to
illness. It is not clear, however, that such a
change would have a material impact on animal
condemnations or on the current practice
for handling such animals at commercial
processing facilities.
Achange to FSIS rules allowing the slaughter
of animals rendered non-ambulatory by obvious
injury would likely have little impact on current
practice for two reasons. First, the number of
animals so injured is quite small. In the press
release announcing the proposed rule change
on non-ambulatory animals disabled from an
acute injury after ante-mortem inspection, FSIS
said Of the nearly 34 million cattle that were
slaughtered in 2007, less than 1,000 cattle that
were re-inspected were actually approved by
the veterinarian for slaughter. This represents
less than 0.003 percent of cattle slaughtered
annually. The analogous fgures for hogs were
even smaller based on 2002 data. The number
condemned for injury is likely greater now due
to a more stringent defnition of injuries requiring
condemnation, but it must still be a very small
fgure.
The second factor to consider in assessing
the impact of a change in the rules for non-
ambulatory animals is how such a change
would integrate with humane slaughter
regulations. These regulations absolutely
prohibit any dragging of animals that have not
already been stunned according to humane
slaughter rules. Thus, any non-ambulatory
animal accepted for slaughter would have to
be stunned in place on the yard (or on the
truck) before being dragged into the facility and
shackled for processing. This would be a rather
laborious process and not one most commercial
facilities would be willing to undertake due to the
effect it would have on the speed of operations,
not to mention the potential for this activity to be
misconstrued (intentionally or unintentionally) as
animal abuse.
Farm Bureau Policy
The objective of federal and state meat
and poultry inspection programs is to provide
consumers with a supply of wholesome meat
and poultry products.
We support legislation to eliminate
unnecessary inspection.
METHODS OF RELIEVING PROPERTY TAX
Issue
Policy efforts to restrict the amount of
property tax local political subdivisions can
collect are often summarily frustrated when
local spending increases; either voluntarily
or through mandates. Thus, policymakers
contemplating property tax relief options often
claim a proper starting point is to frst get a
handle on local spending prior to addressing
factors that impact the amount of revenue that
can be brought in. One option for reducing
the amount of property tax local entities must
collect is for the State to provide general state
aid, which although already done for schools,
no longer exists for counties and cities.
Another option involves establishing programs
at the state-level that specifcally seek to
mitigate the most costly responsibilities that
drive local spending growth, such as bridges.
A third option, which has gained considerable
traction lately, would be to remove some of
the unfunded mandates handed down from
the state government that require fnancing
through additional property taxes.

Background
Methods for achieving property tax relief can
be grouped into two basic categories. The
frst category includes mechanisms that limit
the amount of revenue that can be generated
through property taxes, such as reducing
taxable valuations, imposing levy limits, or
capping annual valuation growth. Efforts to
implement such changes are often met with
stiff opposition from counties, cities, and school
districts alike, who fear their ability to meet
spending obligations will be compromised.
Alternately, property tax
relief can be achieved
by directly confronting
the spending side of
the equation, or in
other words, reducing
the amount of property
taxes local political
subdivisions need (or
are able) to raise in
the frst place. Austere
options for achieving
this end include
outright cuts to local
budgets, programs,
and services, or
imposing effective
budget growth limits. Predictably, however,
such efforts are also fercely resisted by local
taxing entities, with claims they will be forced
to eliminate or dilute essential services such as
education, roads, sanitation, and the like. Thus,
less severe alternatives for impacting spending
needs might be considered, which reduce
property tax needs either by (1) providing
alternative revenue to offset the property tax ask
(i.e. general state aid), or (2) by shifting some of
the funding responsibilities for local services to
the state without compromising the provision of
those services (i.e. setting up programs to help
fund targeted local needs or removing unfunded
mandates).
Funding from the state to help fnance the
general operating expenditures of local political
subdivision, commonly referred to as state aid,
has long been a direct and palatable options
for attempting to effectuate property tax relief
by offsetting the total amount that must be
collected. Such aid is currently distributed to
school districts through the TEEOSAformula
(community colleges also receive state aid
through a separate formula), constituting the
State of Nebraskas largest budget responsibility
at roughly $1 billion per year. Similarly, one
might contend the Property Tax Credit Program,
which doles out $140 million per year, functions
similarly in that it offsets the total amount of
funding local governments must raise through
property taxes (i.e. the credit that appears
on taxpayers bills). However, similar aid to
counties, cities, and NRDs (which at its peak
totaled only $22 million the property tax
amount that was being offset) was completely
eliminated during the 2011 Legislative Session
due to the budgetary pressures inficted by the
Great Recession. Although a number of bills
have been introduced since then to restore
this aid, the political will to do so has never
existed. Nevertheless, with recent attempts
to reduce the taxable ratio of agricultural land
having been stymied, the restoration of state
aid to counties, cities, and NRDs represents
one way to potentially achieve property tax
relief at those levels of government. However,
absent a complimentary policy adjustment,
such as freezing mill levies for a couple of
years, the additional funding could simply result
in additional spending with minimal property
tax relief. An interim study, LR 573, has been
introduced to further examine this issue.
Asecond option garnering a fair deal of
attention at the State Capitol involves examining
the feasibility of establishing programs at
the state-level to share in the fnancing of
particularly costly county responsibilities. In
particular, rural and urban senators alike have
expressed an interest in devoting some pool of
state funding to assist counties in their bridge
inspection and maintenance duties. Moreover,
the cost of this responsibility will only continue
to grow. An Associated Press study placed
Nebraska second, only behind Iowa, in the
number of bridges that are either structurally
defcient or do not meet federal standards
in some other way. The cost of replacing or
repairing an individual bridge can easily exceed
$1 million, and some counties in Nebraska have
more than 30 bridges requiring urgent attention.
Perhaps more so than any other industry,
agriculture depends upon accommodating,
structurally-sound infrastructure, such as
bridges, to transport supplies and fnal
products to market. Moreover, large agricultural
equipment often takes the greatest toll on
bridges and roads in rural areas. Thus, a state-
sponsored program to assist in the fnancing of
bridge repair and maintenance could present
a double-beneft to agriculture by insuring
the resiliency of our rural bridge system while
not leaning so heavily upon property taxes
to do so. Adownside to consider for such a
program would be a case where the program is
systemically underfunded or much of the money
is immediately funneled to bridge projects in
urban areas. An interim study, LR 528, was
introduced to further study this issue.
Finally, an attack against unfunded mandates
seems to consistently attract support from
local political subdivisions and taxpayers in
Nebraska alike. Unfunded mandates occur
when a superior level of government enacts a
statute or regulation that requires a state or local
government to perform certain actions, with no
money provided for fulflling the requirements.
Medicaid and the Americans with Disabilities
Act, which require state governments to pay
for programs that promote national goals,
are classic examples, yet such delegation
occurs with great frequency from the state to
the local level as well, resulting in additional
property tax pressures. Most recently, the 2013
Legislature passed a bill which places additional
responsibilities relating to the administration of
the states juvenile justice system of the backs
of the counties. Other examples of commonly
cited unfunded mandates in Nebraska include
the prosecution of state crimes, DNAcollection
from felons, county court expenses, bridge
inspection and repair, enhanced 911 service
and care of abandoned and pioneer cemeteries.
Afair amount of time can be devoted to
examining whether unfunded mandates are
simply a necessary evil of a federalist/state-
local governance scheme, and the Nebraska
Legislature plans to seriously do just that
through LR 544 this interim.
Farm Bureau Policy
With respect to the three topics explored
above, current Farm Bureau policy applies as
follows:
1. State Policy Book page 44: State aid to
schools, other local subdivisions and other
programs to provide property tax relief (like the
property tax credit program) must continue to
be a priority within the state budget and the
Legislature should exhaust other avenues for
cuts before cutting these programs.
2. Our policy does not include language
specifc to county bridge funding.
3. State Policy Book page 41: We believe
that the Legislature should remove unfunded
mandates on local governments to reduce
spending and create effciencies and State
Policy Book page 44: When the Legislature
mandates programs at the county or local
level, such programs should be accompanied
by adequate funding and the means to provide
for that additional funding.
EDUCATIONAL TRUST FUND
Issue
At Revenue and Education Committee
interim study hearings last fall, representatives
of larger school districts frst suggested a
comprehensive plan to provide statewide
property tax relief should include the creation
of an educational trust fund (i.e. a rainy day
fund) to smooth state aid funding doled out
through the TEEOSA formula year-to-year.
Subsequently, two bills were introduced to
create such a fund and to appropriate money
to it. Theoretically, money passed through
the TEEOSA formula offsets the amount of
property taxes that must be collected at the
local level to fund K-12 education. However,
given the current structure of the formula,
it is questionable whether modest amounts
of additional funding into the formula would
ever make it to small, rural districts. The
push to create this rainy day fund for the
school fnance formula represents a larger
philosophical divide between those who
feel property tax relief is best accomplished
through additional K-12 state aid funding
versus those who support relief targeted
directly at the taxpayer, such as credits or
taxable valuation reductions.
Background
Each year, the State Legislature appropriates
roughly $1 billion through TEEOSAto assist in
funding K-12 education a general operating
expenditure amount that no longer must be
funded through property taxes. Indeed, a
statutory goal of TEEOSAis to reduce the
reliance on property taxes for the support of
public schools, and although one can question
the appropriate proportion, roughly a third of
the total $3.4 billion amount needed to operate
schools across the state (a combination of state
aid (sales/income tax), local property taxes,
and federal dollars) comes in the form of state
aid. That being said, the amount the TEEOSA
formula estimates should be distributed for
K-12 education and the amount the Legislature
ultimately chooses to distribute, often differ and
can fuctuate notably each year. While politics
certainly play a role, the general economic/
fscal environment (which affects the amount
of sales and income
taxes that are collected)
is an equally large
determinant. Essentially,
an education trust
fund would receive a
dedicated amount of
monies and be used
in years in which the
Legislature determines
additional amounts
are needed to fund
K-12 education due
to shortfalls in general
funds or other reasons.
At public hearings
around the state last fall, this concept was
repeated by a number of representatives from
larger and mid-sized school districts. Farm
Bureau has traditionally supported TEEOSA
funding as a means of providing property tax
relief via K-12 education, which nevertheless
continues to consume 60%of the total
property taxes levied statewide. However, with
agricultural land valuations on the rise (which
equates to greater local capacity to pay for
education in the eyes of the formula), the
number of rural school districts that receive any
meaningful relief through TEEOSAcontinues to
shrink. Of the 249 school districts statewide, 124
primarily small, rural districts no longer receive
any equalization aid whatsoever and only 1.8%
of the total amount paid out through TEEOSA
(yet curiously, they have 15%of the students
statewide). Thus, one might question whether
the notion of property tax relief through TEEOSA
(or through additional funding into a rainy day
fund to smooth TEEOSAfunding year-to-year)
is applicable and/or effective anymore for rural
areas.
During the 2014 session, a Lincoln senator
introduced two bills to create an educational
trust fund; each proposing to appropriate
money to the fund from different sources. The
frst (and more seriously entertained) method
was to place all future sales taxes derived
from internet purchases into the fund (which
would have amounted to an estimated $107
million more available for the formula over the
next two years). As an alternative, Sen. Davis
from Hyannis introduced a separate bill that
dedicated any future internet sales taxes to the
Property Tax Credit Program (a direct credit on
an individuals property tax bill, rather than a
distribution of funds to a tax-levying entity like
a school district). Therefore, the introduction
of these two competing pieces of legislation,
neither of which were successfully advanced,
demonstrates the larger philosophical battle that
has been brewing regarding whether additional
property tax relief should be sought through
more funding for K-12 education versus directed
programs, like property tax credits or reduced
agricultural land valuations.
Farm Bureau Policy
Farm Bureau does not currently have policy
which addresses an educational trust fund.
However, the following policy language bears
relevance:
1. State Policy Book page 44: State aid to
schools, other local subdivisions and other
programs to provide property tax relief (like the
property tax credit program) must continue to
be a priority within the state budget and the
Legislature should exhaust other avenues for
cuts before cutting theseprograms.
2. State Policy Book page 41: In order to
reduce property taxes, we frst and foremost
support means to provide direct property tax
relief to farmers and ranchers. This could
include reductions in the level of agricultural
land values in general or for school tax
purposes or increased appropriations to the
property tax credit program. We also believe
state revenues should be used to reduce
property taxes through lower levy limits,
increased state aid to schools or increases in
state aid to community colleges.
3. State Policy Book page 40: We support
the establishment of a system of taxation on
Internet sales so that sales tax income can
be preserved for the state in which the buyer
resides.
ANIMAL WELFARE
Issue
In 2008, California voters approved a ballot
initiative (Prop 2) requiring veal calves, egg-
laying hens and pregnant pigs in California
may be confned only in ways that allow the
animals to lie down, stand up, fully extend
their limbs and turn around freely. The
California Assembly subsequently passed
a law (AB1437) imposing those same Prop
2 standards on all eggs sold in the state,
including those produced in other states.
During the formation of the new farm bill,
the House Agriculture Committee included
a provision aimed at nullifying the effect
of AB1437 on egg producers outside of
California, as well as the broader issue of
prohibiting one state from imposing production
standards or practices not related to food
safety or animal/plant health. When the
provision was not included in the fnal version
of the farm bill, the Missouri State Attorney
General fled suit against AB1437, alleging it
violated the Interstate Commerce Clause.
The American Farm Bureau Federations
board of directors determined, in separate
considerations, its support of the provision and
the lawsuit. But the board also recognized that
while national policy has several references to
preventing restrictions on interstate commerce,
most are specifc to federal agency actions
relating to transportation, environment, water,
energy and the Endangered Species Act.
There is no specifc policy regarding one
state imposing non-food or
product safety production
practices or standards on
another state.
In addition, there is
no clear policy regarding
support of, or help for,
producers in a state where
these types of anti-
competitive, anti-technology
lifestyle production practice
decisions are forced
on farmers, ranchers
or livestock and poultry
producers.
Background
In general, the U.S. Constitution grants
the federal government exclusive authority to
regulate trade between states. This section of
the Constitution has been interpreted by the
Supreme Court to prohibit states from disrupting
the free fow of commerce by passing laws that
impose undue burdens on economic activity
in other states. The undue burdens can take
the form of laws that protect local economic
interests by discriminating against out-of-state
interests. Or, the laws can directly regulate
conduct that occurs wholly in other states.
However, courts have long held that states
may utilize their police power authority to enact
food, safety and other regulations that further a
public interest, as long as they do not arbitrarily
discriminate against businesses in other states.
Courts have generally accepted the police
power authority of states to restrict trade for
health and public safety reasons. Thus, many
states have regulations regarding animal and
plant health, public health and safety, etc., that
differ from federal rules and standards, or are by
law the purview of state authorities. Examples
include:
* The movement of quarantine of forestry
products, subject to overriding protections in the
Plant Protection Act;
* Livestock movement subject to Federal and
state animal health regulations, including
vaccine requirements, where restrictions and
quarantine are common for disease purposes;
and
* Federal and state food safety laws.
In addition, states are allowed to require
labeling to distinguish product standards and
characteristics, such as organic or free-
range. Over the past several years, a number
of states have adopted unique agricultural
production standards that apply to farmers and
ranchers in their respective state that have no
food safety or public safety basis, but typically
these provisions are applicable to in-state
producers only.
There is no question farmers and ranchers
face business pressures when their states adopt
measures that restrict their production options.
Examples in place or that have been/or are
being debated by state legislatures range from
cage sizes for laying hens and livestock, to use
of biotechnology-derived crop varieties.
In the states where these new provisions
are being imposed or considered, farmers
and ranchers will face higher investment costs
as they are forced to retool their facilities,
and they may be hit with higher operating
costs compared to producers in other states.
Producers in those states are being forced to
essentially eat those costs, move to another
state or cease operating altogether.This would
be a rather laborious process and not one that
most commercial facilities would be willing to
undertake due to the effect it would have on the
speed of operations, not to mention the potential
for this activity to be misconstrued (intentionally
or unintentionally) as animal abuse.
Farm Bureau Policy
No specifc policy exists.
Questions
1. Should Farm Bureau policy speak
directly to the restoration of general
state aid for counties and cities, and
if so, in what dollar amount (historical
levels, historical adjusted for infation,
more?)?
2. Does general state aid to local
political subdivisions, as a stand-alone
policy, result in property tax relief or
simply increased spending?
3. Should we have policy express-
ing the importance of a sound bridge
system to Nebraska agriculture, and if
so, support for programs that help to
alleviate the local cost for bridge repair
and maintenance?
4. Should we have policy expressing
support for state-sponsored programs
that target funding support to other
major funding responsibilities currently
taken on almost exclusively by county
governments?
5. Should our current policy regarding
unfunded mandates be modifed in any
way?
Questions
1. Should AFBF work to modify the
rules associated with non-ambulatory
animals to create a separate class for
animals injured in transit to the process-
ing facility so as to allow for their entry
into the meat processing system?
Questions
1. How should AFBF support pro-
ducer members in a state that approves
legislation or ballot initiatives that would
restrict those producers access to
safe, approved agriculture practices or
technology?
2. How should AFBF support producer
members in states that may be affected
by a particular states enactment of leg-
islation or a ballot initiative that applies
to commodities or agricultural products
sold in that state?
3. Similarly, what should AFBF do to
support or help producers in the impact-
ed state who may be at a competitive
disadvantage to out-of-state producers?
4. Should AFBF have specifc policy
regarding state actions unrelated to
food safety, public safety or animal/plant
health that have the effect of restricting
interstate commerce?
Questions
1. How should we be positioned
regarding the creation of an educational
trust fund? Should it depend on where
the appropriation comes from?
2. Should our policy be modifed
regarding the use of additional state aid
to K-12 education to achieve property
tax relief?
3. Should our policy specify the
way(s) that any future collection of inter-
net sales taxes should be used?
SALES TAX EXEMPTION
Issue
Agricultural machinery and equipment
has long been exempt from sales taxation
in Nebraska, given it constitutes a vital (and
expensive) input into the modern agricultural
production process. However, within the
category of agricultural machinery and
equipment, the Nebraska Department of
Revenue (NDOR) has been granted a fair
amount leeway by the Legislature to interpret
and issue rulings pertaining to which individual
implements fall under this exemption. A
methodology relied upon by the Department in
making such determinations involves analyzing
whether depreciable agricultural machinery
purchased is intended to be used directly in
a commercial agricultural production process
(if so, then the exemption applies). In July
2012, the NDOR released an Information
Guide clarifying the application of this
exemption, and in doing so, reversed previous
interpretations by repealing the exemption
for some contemporary implements, such as
header trailers and seed tenders. Moreover,
this change in policy was made rather
discreetly, thereby leading to confusion and
non-compliance among agricultural producers
and implement dealerships alike.
Background
Agricultural machinery and equipment was
permanently exempted from state sales tax
beginning in 1992, and instead placed on the
personal property tax rolls and assessed at net
book value (prior to this date, this category was
alternately subject to either personal property
tax or sales tax, but never both at the same
time). State statute dictates in order to qualify
for this exemption, the machinery or equipment
must be: (a) depreciable; and (b) used in
commercial agriculture. However, the authority
to further defne and interpret which individual
implements do or do not qualify was vested
with the NDOR. For regulatory purposes, the
Department has chosen to defne qualifying
machinery and equipment as personal property
that is used directly in cultivating or harvesting
a crop, raising or caring for animal life, or
collecting or processing an agricultural product
on the farm or ranch. Under this defnition, the
application of the exemption to conventional
agricultural implements like combines, tractors,
and haying equipment has been unquestioned.
Similarly, the withholding of this exemption
from conventional implements used in the
course of doing business, but which are not
necessarily specifc to the agricultural industry,
such as air compressors, ATVs, or fork lifts, has
never been contested. However, in the case of
newer-model machinery and equipment, the
NDOR must exercise its interpretive powers,
often long after the product has entered the
market and been exempted from sales taxation
out of force of habit. Such was the case when
in July 2012, the Department issued a revised
Information Guide ruling that, among other
items, header trailers and seed tenders did
not qualify for the agricultural machinery and
equipment sales tax exemption, regardless
of whether dealerships had abstained from
collecting such tax previously. In arriving at its
conclusion, the Department determined seed
tenders and header trailers were not integral to
the direct execution of cultivating or harvesting
a crop, despite their role in transporting inputs
that might be consider to be so (i.e. corn heads,
seed corn, etc.). Furthermore, the Department
reasoned since these implements were towed
on public roadways, they should be licensed,
and sales tax is traditionally paid at the time of
licensing other trailers. The upshot, then, was
sales tax would have to start being collected
on a number of implements, including header
trailers and seed tenders, it previously had not
been collected upon. In publicizing this policy
change, the Department simply posted the
revised guidance document on its website;
relying upon those subscribed to its email
updates or devoted visitors to its site to discover
it. Consequently, some dealerships were dealt
a nauseating surprise when auditors discovered
they had not begun collecting these sales taxes,
as were farmers when dealerships came to
them seeking to collect the tax.
Farm Bureau Policy
State policy lays out the following related
position:
1. We oppose any sales tax placed on
business-to-business purchases of goods
and services used as inputs in a production
process. As such, we strongly oppose the
repeal of existing sales tax exemptions used in
the agriculture and manufacturing processes,
and for the sale of commodities produced and
consumed by agriculture and manufacturing.
Issue
Recently, China has rejected a number
of vessels carrying small amounts of a
corn variety approved for marketing here in
the United States, but not in China. China
rejected those shipments, the market reacted
negatively and a number of grain handling
companies have indicated they will no longer
accept that variety at their elevators. The seed
company that developed the technology has
since indicated it will provide its own marketing
channel to countries for new traits (approved
in the United States, but not in China) for the
coming growing year.
Background
Agriculture makes up more than 20 percent
of total U.S. exports to China and is among
the few sectors with a positive trade balance,
making it an important factor in the U.S.-China
trade relationship. For U.S. grain and oilseed
exports-13 percent of total U.S. exports to
China-the timing, predictable implementation
and enforcement of existing Chinese laws and
regulations, with respect to the Genetically
Modifed Organism approval process, are
critically important.
Since the frst biotechnology trait was
commercialized in 1996, U.S. farmers have
rapidly adopted biotechnology. In 2013,
acreage for corn and soybeans planted with
biotechnology traits accounted for roughly
90 percent of total corn and soybean acres.
With 33 percent of U.S. soybean production
exported to China, and the rapid increase
in Chinese demand for U.S. corn and corn
products, regulatory approval for biotechnology
traits directly impacts market access for these
products.
Over the past few years, the regulatory
approval process has become a choke point
in bilateral trade. The process has slowed
considerably with delays occurring throughout
the risk assessment and approval process.
There is concern these delays are not based
on science, but rather are being infuenced by
factors outside the risk assessment process.
Whatever the cause, the impact on the U.S.
value chain is substantial and widespread.
The most public example of the impact
of regulatory delays is the widely reported
disruption in U.S. corn trade with China, dating
to November 2013. China rejected U.S. corn
shipments after the reported detection of the
presence of a biotechnology trait unapproved
in China. The product in question has been
reviewed, approved and commercialized in
the U.S., Argentina, Brazil and Canada, and
approved for import in the European Union,
Japan and Korea.
Beyond trade disruptions, these delays also
have costly impacts that ripple through the
U.S agricultural value chain. For example,
Chinese regulatory delays factor heavily on U.S.
farmers planting decisions, because a company
may opt to delay commercialization of a new
biotechnology seed variety prior to Chinese
authorization or rejection of a crop from a grain
trading company. Delayed access to new
technology limits U.S. competitiveness, reduces
investment in U.S. innovation and erodes patent
life and intellectual property protection for U.S.
biotechnology companies.
One way to deal with the delays these
unsynchronized approvals can create is to ask
the company introducing the trait to establish
these kinds of identity-preserved marketing
chains. While they are not fully tested yet in
the marketplace, it does at least offer some
outlet for these new products while providing
some protection to the rest of the supply chain.
The only other option is to have the developing
company withhold release until all importing
countries have given approval. This would
further limit the amount of time the company
would have patent protection and thereby lower
the incentive for other companies to develop
new traits.
Farm Bureau Policy
We support harmonization of international
standards for biotech, testing and adventitious
presence. The international bodies established
to administer the sanitary and phytosanitary
agreement of the World Trade Organization
should retain the authority to infuence the
regulation of international trade in agricultural
products enhanced through biotechnology.
We support the maintenance of U.S.
export markets by securing foreign regulatory
acceptance of biotech products. Sellers
of agricultural products enhanced through
biotechnology should assume major
responsibility for this acceptance. Extra efforts
should be made to make farmers aware of
markets where the products are not accepted,
by using such methods as color markings on
bags, boxes or bulk delivery systems and/or
seed tags.
We oppose the imposition by foreign
countries of any import restrictions, labeling or
segregation requirements of any agricultural
product enhanced through biotechnology,
once such commodity has been certifed
by the scientifc community as safe and not
signifcantly different from other varieties of
that commodity.
BIOTECHNOLOGY
Questions
1. While promoting that our member-
ship should have access to cutting-edge
technology, should Farm Bureau also
push companies introducing the technol-
ogy to set up marketing channels to
protect the rest of the supply chain when
other countries approval processes are
not in sync with U.S. approvals?
2. What responsibilities should U.S.
farmers have to mitigate risk when it
comes to using traits that are not ap-
proved in certain export markets?
3. What should Farm Bureau do to
ensure that biotechnology approvals are
elevated from technical exchanges to
higher levels within the Chinese govern-
ment and with multiple ministries?
Questions
1. Should our policy include language
that specifcally opposes the recent
changes in NDORs interpretation that
disqualifed header trailers and seed
tenders from the agricultural machinery
and equipment sales tax exemption?
2. Do we support the criteria the
NDOR relies upon to determine whether
a specifc implement qualifes for the
exemption (i.e. used directly, deprecia-
ble, commercial agriculture, cultivating,
harvesting, collecting, or processing)?
3. Similarly, should agricultural ma-
chinery and equipment that is not used
directly in the cultivating, harvesting,
collecting, or processing of an agricul-
tural commodity, but which is neverthe-
less critical to the modern agricultural
production process, be exempted from
sales taxation?
4. Should the NDOR be required to
employ more transparent processes,
such as a public comment period, public
hearing, or targeted newsletter mailing,
whenever it changes an interpretation
as to how a sales tax exemption should
be applied to the purchase of specifc
agricultural items?