Some Farmers Face Federal Reporting Deadline By Jan. 1st

Many farm families may be facing a deadline that they are not even aware of. It is estimated that approximately 230,000 farms are required to file “Benefit Ownership Information (BOI) with the U.S. Department of the Treasury, as part of the Corporate Transparency Act (CTA) that was passed by Congress in 2021. The CTA act was passed to combat money laundering and illegal funding by organized crime. Farmers with certain types of business structures are required to file a BOI by January 1, 2025. Failure to comply with this requirement could result in significant fines and even jail time. As of late October, it was estimated that less than 15 percent of the farm operations that are required to complete a BOI had done so.
 
The Corporate Transparency Act requires any business, including certain types of farm business structures, to list any “beneficial owner” in a company with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The BOI filing requirement now applies to all small businesses of all sizes that have filed an incorporating document with their State government, including S-corporations, limited liability corporations (LLC’s), and partnerships. The new BOI requirement will now include many family farm operations that utilize these type of business structures. A “beneficial owner” includes anyone with significant stake in the company or farm’s business and management, which can include having shares, equity, or having a significant role in management decisions.
 
Based on the 2022 U.S. Census of Agriculture, 85 percent of all farms in the U.S. are operated as “sole proprietorships and would likely be exempt from filing a BOI. However, 12 percent of farm operations of all sizes have business structures that now fall under fall under CTA requirements requiring a BOI filing. Besides farming operations, many other agriculture related businesses such as seed and chemical dealers, feed and supply stores, repair shops, etc., with those type of business structures will also fall under the CTA requirements. As mentioned, failure to comply with the BOI filing requirement can result in fines and felony charges. 
 
Farmers and other small businesses can find out more details on compliance with CTA requirements and can file a BOI online by going U.S. Treasury Department BOI filing website at:  https://www.fincen.gov/boi. A possible resource for more information on the CTA law and BOI requirements is the CPA or tax accountant that prepares the taxes for the farm business each year and is familiar with the farm’s business structure. Another possible resource is the ag lender for the businesses, as many banks and financial institutions are very familiar with FinCEN regulations and BOI requirements.
Finalizing 2024 Farm Machinery Custom Rates
Many farm operators provide some type of custom work or use of farm machinery to other farmers during the growing season, and payment is usually made following the completion of the harvest season. Sometimes, it can be difficult to determine a fair custom rate for certain farming practices, or for the use of various pieces of machinery. This could be the case in a year such as 2024, when the cost of machinery operation for diesel fuel, repairs, and labor may have changed from the beginning of the year until year-end.
 
One of the best resources for average custom rates is the annual “Iowa Farm Custom Rate Survey” that is coordinated and analyzed by Iowa State University. Each year in January, custom operators and farm managers are sampled regarding the expected farm custom rates for various farm operations. The custom rate summary, which is usually released in late February, lists the average custom rate, as well as a range in custom rates, for various tillage, planting, fertilizer and chemical application, grain harvesting, and forage harvesting functions on the farm. The Iowa Custom Rate Survey is probably the most widely used custom rate information that is available in the Upper Midwest. The complete 2024 “Iowa Farm Custom Rate Survey” is available on-line at the following Iowa State University web site: https://www.extension.iastate.edu/agdm/crops/html/a3-10.html
The average custom rates for farm operations in most areas of the Upper Midwest tend to be very close to the average Iowa custom rates. All listed custom rates in the Iowa survey results include fuel and labor, unless listed as rental rates or otherwise specified. These average rates are only meant to be a guide for custom rates, as actual custom rates charged may vary depending on increases in fuel costs, availability of custom operators, timeliness, field size, etc.
 
Based on the Iowa State data, most average custom rates for tillage, planting, and harvest operations in 2024 were fairly steady compared to the rates for similar operations in 2023. The 2024 custom farming rates for corn and soybean production are also expected to remain steady compared to a year earlier, following an increase of nearly 20 percent in the previous five years. The cost for new and used machinery has stabilized in 2024; however, fuel costs, repair costs, labor charges, and interest rates remain quite high. Any changes in these factors during the year may result in custom operators adjusting their final custom rates by year-end.
 
All listed custom rates in the Iowa Survey results include fuel, labor, repairs, depreciation, insurance, and interest, unless listed as rental rates or otherwise specified. The average price for diesel fuel was assumed to be $3.92 per gallon. A fuel price increase of $.50 per gallon would cause most custom rates to increase by approximately five percent. These average or median rates are only meant to be a guide for custom rates, as actual custom rates charged may vary depending on changes in fuel costs, availability of custom operators, timeliness, field size, etc. There are also many other specific situations among farmers and family members that share farm machinery that could lead to adjustments in final custom rates.
 
Custom Farming Agreements
Some farm operators hire custom work for specific farm operations with another farm operator, such as planting or combining, while other operators hire the typical crop field work through a custom farming agreement. The Iowa State Custom Rate Survey includes the average custom farming rates for corn, soybeans, and small grain. Custom farming agreements usually include tillage, planting, basic weed control, harvesting, and delivering grain to a specified location. Usually, any other additional or necessary farm practices that are performed during the year are paid outside of the custom farming agreement. Many farm operators negotiate these types of custom farming arrangements in the Spring of the year, while others wait until harvest is completed.
 
A good custom farming agreement includes a written contract that specifies the typical cropping practices to be performed and the amount of payment per acre to be paid to the custom operator by the landowner, and all other pertinent details for the custom farming arrangement. The average custom farming rates for corn and soybean production for 2024 are listed on the Iowa State Custom Rate Sheet; however, similar to the other custom rates, higher rates may be justified to cover increased costs of fuel, labor, etc. For more details on custom farming agreements, please refer to the Iowa State University “Ag Decision Maker” web site at: https://www.extension.iastate.edu/agdm/crops/html/a3-15.html
 
Calculating Farm Machinery Costs
The University of Minnesota periodically releases a publication titled: “Machinery Cost Estimates”, which was last updated earlier this year. This summary looks at the use-related (operating) cost of farm machinery, as well as the overhead (ownership) costs of the machinery, including fuel, repairs and maintenance, labor, depreciation, interest, insurance, and housing. This publication can help serve as a good guide to estimate the “true cost” of farm machinery ownership. The U of M publication and other resources on farm machinery ownership costs are available at: https://wlazarus.cfans.umn.edu/william-f-lazarus-farm-machinery-management. Another good resource for estimating the costs of farm machinery ownership is a publication from Iowa State University titled: “Estimating Farm Machinery Costs”, which includes a worksheet to calculate farm machinery costs. This publication is available at: https://www.extension.iastate.edu/agdm/crops/html/a3-29.html
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions
Phone - (507) 381-7960; E-mail - [email protected]