Surviving Good Times:
How Temporary Highs Could Lead to Extended Lows You’re a row-crop farmer in the Midwest. Your 2026 opened with market challenges, and they really haven’t eased up; if anything, things got more precarious, with spiking input costs and breakeven commodity prices at planting that dipped in June for corn even more than soybeans. If you held off on selling and were rewarded with being able to move your own corn or soybean pile for a bigger check in the recent price recovery, congratulations! If you ended up with more revenue than immediate expenses took out of that, it’s important to be wise in how you spend it. It’s not an investment if you can’t afford it Farmers are a smart group of businesspeople—but they’re not necessarily immune to what I call a “casino high,” or the feeling of immense relief at getting a sizable win after a demoralizing losing streak. Some may feel so relieved, in fact, that they are considering big-ticket purchases such as equipment or land. And although real estate is often a wise investment, it’s not if it is going to put you far deeper into debt when you are already struggling. If a farmer has been making do with an old piece of equipment, maybe it feels like it makes sense to use some or all of that unallocated income to upgrade to a later model right now. For one, it’s a tax deduction, and you’re worried about income taxes on those corn and bean profits, right? Also, you only need a down payment because you’ve known the banker for 20 years and they’re willing to loan you the rest. But, consider this. Most farmers expense equipment immediately. That saves on taxes now, but it means a bigger tax bill if you sell quickly—as you might have to if buying this equipment pushes you under. Profitability is tied to the management decisions a farmer makes that generates income, whereas money in the bank can ebb and flow. History tells us that commodity price spikes do not happen predictably. Just because you have money in the bank does not automatically mean profitability. In fact, we explained this in a blog post a few years ago, that I encourage any farmer to give a quick read. Adding more to your debt load with a stressed cash flow, that only recently made extra money because of an atypical fall price run-up, is a recipe for disaster. This is especially true if market predictions hold true that the cost of planting inputs, fuel, and cash rent are likely to remain high or even increase going into spring 2027. Know your options If you had already made plans to purchase equipment or land before the recent price increases, and had budgeted accordingly and determined you could afford to do so, that’s a different situation than the point of this article. Here at Ag & Business Legal Strategies, we want to help farmers avoid going deeper into debt. Sometimes that means helping them restructure their debt or file for bankruptcy. Sometimes, though, it means providing advice on operations and finances that may help farmers avoid the stress of making decisions about overwhelming debt. If you are a farmer who expects a windfall because of recent corn or soybean sales, you’ve already budgeted for high 2027 input costs, and you have money left over, you do have options. You could apply that to the principal of a loan and get ahead on paying it off, or you could put it in the bank. You could invest wisely. And yes, you could put a down payment on equipment or land, but only if it makes sense in your cash flow. If you haven’t budgeted or won’t have money left over—hold up before making any large purchases! You’re not prepared to do so, even if neighboring farmland won’t be on the market again for another couple decades. I advise you to consult with a financial advisor before spending, even if you are not in debt. If it’s been a while since you had an enterprise analysis done on your farm, or you’ve never had one, our office provides that service. And for those farmers who are dealing with debt, whether or not they were able to sell high lately, call our office. We can set up an appointment to discuss your situation and review your legal options. Reach out to us sooner than later. Don’t gamble your farm or future on a casino high—remember, you want the farmhouse to win, not the house. (319) 363-1641 At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy. Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow, when it may be too late.
Enterprise Analysis: Not Just an End-of-Year Exercise
Much of the work we do is helping farmers decide how to restructure their debt and whether to file bankruptcy—and if they do file, representing them in navigating their case. We are also committed to assisting farmers and small business owners in examining their operations so that perhaps they won’t reach the point of needing to restructure their debt or file bankruptcy. This is our enterprise analysis service—which, as indicated, is for both farms and businesses, although the vast majority of our clients are farmers. The goal of farm enterprise analysis is to help the producer figure out which flows, or “enterprises,” of their business are or are not pulling their financial weight. Common enterprises on one farm might include two or more of the following: It is also possible to use enterprise analysis to determine whether to continue renting certain farmland, or whether it might be wiser to give up a lease further away for one much closer that might cost more in rent but save on fuel, hauling, and time. For growers in Iowa¹, summer is a prime time to have analysis done for purposes of renting (as the September 1 deadline looms to inform landlords or tenants of non-renewal in March 2027), and also to adequately prepare for input purchasing decisions later in the fall. Right now most of the analyses we perform are for row-crop-heavy farms, but the process is useful for any farm type. How the analysis helps It’s important to assess each individual enterprise to see if it can support itself, but also for the impact it’s having on income for the entire farm. These individual assessments usually provide surprising insights to even the most knowledgeable farmer. Recently we worked with a client to perform an analysis on each of his farm’s six enterprise flows, to help determine which pieces of equipment to keep or sell while writing his Chapter 12 plan of reorganization. We determined how much each piece was used in each enterprise—which included combining, planting, spreading manure, grain storage, spraying, and custom cattle finishing—to assign a percentage of each machine’s use to the enterprise(s) using the equipment. Then we divided the cost of the piece among them accordingly and calculated the income from each enterprise against that and its other costs. In the end, we showed many of these enterprises could not support all the equipment required to conduct that work. This is the type of process that helps a farmer decide if they should continue with a specific enterprise and, if they do, if they really need the equipment. Another good example is a farmer raising corn and soybeans, with some of the corn being used as feed for their livestock. The key question here is: What is the effective price per bushel that the farmer is receiving for what is being fed to livestock, and how does that compare to the market price it would fetch at an elevator? If the price received by walking the grain off the farm is less than the elevator payment, the farmer should ask, “Why am I continuing to feed livestock?” A secondary line of questioning would be: Is this a short-term anomaly or a long-term issue? If it is long-term, can the enterprise be turned to a profit? If not, what are the financial ramifications of ceasing the livestock operation? Would the farming operation be more profitable by either selling the crops at market price or divesting the farm of that livestock? (319) 363-1641 Honesty in outside advice It is not uncommon for farmers we work with to realize during an enterprise analysis that the numbers they’ve been working with aren’t precisely accurate. Good longtime farmers develop gut feelings about their work and the supplies they need—but when margins are as tight as they are right now, every opportunity to trim costs should be considered. We’ve heard everything from, “So I’m really not using this equipment enough to justify having it?” to, “I didn’t realize my yield estimate was that far off my actual average.” Producers confident in their cost versus profitability have been surprised, for instance, to see their actual piglets per sow per year in black-and-white, or more dry days for dairy cows between weaning and estrus than they had been figuring. This is where an outside perspective is so valuable. Farming is a business, but it’s also a calling with much emotion tied up in it—and as such, the people who do it sometimes justify unnecessary expense as a given. We provide an impartial, honest point of view that works in facts and data. It’s good to love your work, but to avoid losing money or the farm, it’s great to know your assets, liabilities, and the profitability of each enterprise on the farm. If your overall income far exceeds your costs and you can afford to keep equipment you’re not adequately using or extra livestock that costs more to feed and medicate than you earn in marketing them, you are unlikely to need our assistance. (However, even in this case, not keeping your eye on costs and profitability could lead to declining net worth and unwise borrowing later on, that could eventually result in financial distress.) If you see reduced return on investment, experience mounting debt, or otherwise feel you could better streamline your farm’s expenses, Ag & Business Legal Strategies can help you pinpoint where to make changes. Call us to find out where you’re really headed—and if it’s a good idea to pivot and change course. (319) 363-1641 At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy. Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow, when it may be too late. ¹Lease termination deadline in Iowa
A Decade of Decisions for Better Debt Management
July 2026 isn’t just a notable birthday for the nation — it also happens to be the 10-year anniversary of when Ag & Business Legal Strategies founder Joe Peiffer opened his own firm specializing in farm and small business debt restructuring, bankruptcy, and related legal representation. And although the decision to leave his previous law firm and strike out on his own was made in relatively short order, coming up with the right name for this new business took more time. On July 1, 2016, Peiffer Law Office, P.C. opened its doors, but in October 2017 it was finally Ag & Business Legal Strategies… or, as a lot of folks refer to it, ABLS. “I worked on figuring out what I wanted my trade name to say,” Peiffer says of the wait. “I wanted people to know more about the firm by its name, as opposed to a person’s name. The ABLS name reflects what we work with here: ag people, business people, and how we help them strategize to figure out their best options, so we can empower them to pursue the best course of action.” If he had to boil down the ABLS mission to an elevator pitch? “We help farmers and small business owners get creditors off their back, preserve their assets, and minimize their taxes.” In 10 years, the mission hasn’t seen any changes, although technology has introduced some into the office. For example, Peiffer is looking into how to safely use artificial intelligence to help the attorneys quickly devise strategies for clients and conduct other research, while also protecting the firm’s and clients’ privacy. With Covid in 2020, ABLS had to learn how to meet with clients and courts at a distance — and keeping these remote options in place even now helps save on some time and travel expenses for both attorneys and clients. Fortunately at the time, ABLS had already switched over to using laptops instead of desktop computers, which made it easy to convert to a remote platform for delivery of legal services. Uncommon solutions A few years into ABLS’s tenure, Peiffer added the tagline: An Uncommon Law Firm. Sure, he wanted something to grab attention and differentiate his firm from others assisting farmers or small businesses. But it was also important that this hook be something true and meaningful. “We spend time learning a person’s business itself, whether it’s a farm or other kind of business,” he explains. “We don’t want to take a case to court until we have a plan of action in place.” As it turns out, each case is unique and there is rarely, if any, opportunity to use the same plan for two different clients. So “uncommon” captures the ABLS approach just about perfectly. An early case for the firm involved a client meeting to discuss options for restructuring farm debt in the millions of dollars. Early on, the farmer admitted to Peiffer he had forged grain contracts before handing them over to his accountant, who then unwittingly relied on those documents in preparing audited financials — which the bank used to decide to extend the farmer’s loan. There was, in fact, no grain to deliver. ABLS brought in an outside attorney to represent the farmer on potential criminal charges so all attorneys could negotiate with the bank to keep him out of prison. There have been many situations in which clients committed major mistakes before consulting with ABLS; not all could be considered criminal. But all must be faced head-on. “The first thing to do is to minimize the creditor’s loss, in order to maximize the client’s chances of staying out of jail where possible,” says Peiffer. “Our strategy is how to put the genie back in the bottle or at least minimize the loss that’s been caused by the mistake.” Debt restructuring and bankruptcy represent the main types of cases ABLS handles. Another significant portion of the caseload is tax planning for farmers looking into succession planning. Peiffer said a common situation is that a farmer transfers their land into a limited liability corporation, or LLC, for tax advantages and corporate liability shield. Unfortunately, when it comes time to bequeath the farm to the next generation, that LLC designation can eliminate the step-up in basis that individuals receive on the assets after death. (319) 363-1641 Advocacy matters too Representing clients is most of what Peiffer has done over the past decade with ABLS, but he’s also kept up with pushing for stronger federal and Iowa state legislation to protect farm and small business debtors — something he’s been passionate about since seeing how the 1980s Farm Crisis left so many producers ruined. These include stronger protections for farmers under Chapter 12, including deprioritizing federal tax liability that used to make it impossible to confirm a Chapter 12 plan of reorganization, as the secured creditor would get all the money while the IRS and state tax authorities had veto power over the confirmation. In many instances, since there was no money to pay the taxes, the farmer’s plan would not be confirmed and the case would be dismissed. He has also helped exempt IRAs from being liquidated to pay debt in bankruptcies. Too, Peiffer spearheaded a change of Iowa law that clarified how information about bankruptcies could be filed with court clerks as a bankruptcy transcript, which incurs a filing fee ($195) instead of paying for certified copies of the bankruptcy filings, then paying a recording fee ($5 a page, for 50 or more pages) so real estate titles can be easily transferred. In many cases, there is land in multiple counties that each require the bankruptcy data to be transferred — his legislative effort has saved many Iowans and their attorneys significant money and time. To do his legislative work, Peiffer has maintained relationships with elected officials in Congress and the state legislature, notably U.S. Senator Chuck Grassley. Just last month Iowa Governor Kim Reynolds signed into law the Uniform Assignment for Benefit
Don’t Wait to See How Harvest Plays Out
By Joseph PeifferFounding Attorney At nearly the halfway mark, 2026 is providing farmers with some of the most challenging economic times they’ve seen in a generation. This is from a combination of lower commodity prices than what they were seeing just a couple or so years ago, to increases in fertilizer, chemical, and other input costs. On the plus side, the One Big Beautiful Bill Act that Congress enacted last year contained safety net mechanisms that increased the statutory reference prices for key crops including corn and soybeans. This means higher ARC and PLC payouts are likely to be triggered. And the USDA is disbursing one-time bridge payments to some growers from a $12 billion fund announced to help offset losses stemming from tariffs President Trump put in place. On the down side, adding to the tariff-related losses and lower commodity prices are 50 percent higher fuel costs and other elevated input expenses because of the Iran war and subsequent difficulty getting products through the Strait of Hormuz. The payments mentioned above are better than nothing, but they’re a bandage — not a solid fix. Farmers would rather have stable, dependable markets for their products, than what they view as handouts. Instead, many are projected to lose money on the corn and soy acres they’ve planted this year. This is leading them to consider hard decisions, which is always better tackled sooner than later. Our office is receiving more calls than at this time last year, from farmers seeking help with debt restructuring or filing for Chapter 12 bankruptcy. I would have expected to hear from more in January or February than since mid-April, but that has not been the case. The first cash rents for the new farmland lease year were due March 1, and if a farmer was going to decide they wanted to trim their expenses or restructure debt for 2026, they had more options in January-February than they now have. Those who were unsure but pressed forward with renting to plant more anyway may have figured they could use their bridge payment to get through this season and then reevaluate after harvest. They were not expecting war nor its effect on expenses. (319) 363-1641 Potential Income Options Farmers who have significant operating capital and/or little to no debt are probably safe to weather 2026 to farm another year. That doesn’t mean they won’t lose money. But what does this year mean for those who don’t have that kind of capital and do have debt? If this is you, what can you do between now and harvest time to protect your financial interests? One of the first steps will be to review planned inputs for this summer. For example: It’s not that growers don’t normally consider this anyway, but 2026 will require even more examination of expenses versus return. If it looks like you’re only going to trade dollars one-for-one, why do it? If you can’t trim expenses enough to meet financial obligations, including loan and other debt payments, you may need to earn more income through an off-farm job, contract work such as harvesting or hauling grain or livestock for others, or finding other ways to add value to your operation. I have a client who has set up a transloading platform at his farm, where he can load crops and other commodities into containers to be shipped for export — this increases the price of his product by 50 cents per bushel. Other exporters have recently begun paying him to use the platform for their products as well. In addition, he recently attracted outside investment into opening a mixing facility to be able to ship specialized product to South Korea — an established mixing facility recently closed, so he took advantage of the brief market vacuum to fill a need. If you are a farmer with sufficient equity and liquidity, and vision, to do something like this right away, it’s certainly something to consider. But if this is not within your means and you don’t have an investor — and it won’t be, for most farmers — perhaps there is another way you can add value to your operation or find a market niche either without such a large investment. What should you be doing? If margins are tight but you are nonetheless making money this year, don’t be afraid to pay the taxes you owe. Borrowing to purchase equipment you don’t need right away, just to claim a large deduction against income and to lower taxes, might hurt you in the long run. The key here is “borrowing” — going into loan debt isn’t necessarily smarter than paying taxes, if you’re going to owe the bank for a while. If you can see that you will struggle this year to make loan payments, talk with your banker now. I can tell you after more than 40 years of this work that the farmer who comes to the bank, acknowledges their problem, and proposes how they can help solve it typically has more luck getting the bank to help them rework the loan than those who put off such a meeting. It’s never great to have the banker come to you after a default, when you had not told them that you would not be able to meet your debt service obligations. Finally, if your financial problems run deeper than one loan, it may be time to analyze operations and think about serious restructuring. Ag & Business Legal Strategies offers enterprise analysis, which reviews your liabilities and assets, revenue and expense streams, and shows you where you are losing and making money so you can decide how to move forward. If after this step you are still unsure how to proceed, our attorneys can help by reviewing options. Whether it is refiguring your operations, or needing to restructure debt or file for bankruptcy, Ag & Business Legal Strategies is dedicated to helping farmers work toward an outcome that is beneficial for their unique situation.
Closing the Loophole on Misapplied Loan Payments
Perhaps you pay for your auto, mortgage, home equity, equipment, and other loans each month through your bank’s online portal or app. In these cases, you select which account is receiving the transfer, and there’s a digital record showing where the payment was applied. Not every farmer does this, as many prefer to mail or hand-deliver payments to their bank or lender. And even tech-savvy producers run into situations where they have no contact with money going directly to their lender—for instance, the proceeds of an auction or sale that are sent directly to the lender. One of our clients was a farmer who sold some equipment at auction. Notably, he still had an active loan with his bank on one piece of equipment, which a family member had helped secure by signing a guaranty that he would assume the debt if the primary debtor—our client—could not pay. Rather than the farmer receiving the sale proceeds and turning them over to the bank, the auctioneer remitted directly to his bank. Instead of applying this payment as expected to the equipment loan, however, the bank put it toward another of our client’s loans. He learned about this a short time later when the family-member guarantor received a letter from the bank advising that a payment had been missed on the still-open equipment loan and that he, the guarantor, was financially responsible. We spoke with the bank and its attorney and, after some discussion, fortunately the bank agreed to reapply the auction proceeds to close out the equipment loan instead, and we did not need to take the matter to court. We were thankful our client had a good outcome, but it wasn’t guaranteed—and the entire problem could have easily been prevented. Be clear about intent To avoid this, we advise clients and auction sellers to write the specific loan number(s) on the payment checks to lenders or note it in correspondence before or with the payment being transmitted to the lender. It’s also a good idea for the client-debtor to contact the bank and explicitly state which loan should receive payment and then follow up to ensure it happened. The fact is, if you have more than one loan with a bank, credit union, or other lending institution and you don’t specify where a payment should be applied, under Iowa law the lender can apply it where the lender prefers. If Grandma signed a guaranty to help you buy a combine but you also have a mortgage only in your name and its payment deadline is looming, the bank may decide to allocate your payment to the mortgage. It is a larger loan, for one; and two, bank officials figure they can always go to your guarantor if further payment doesn’t materialize. They are going to look out for their financial interest first and foremost—especially if you the borrower are having money troubles If you can put your request for allocation of payment in writing, do so. Although oral contracts and instructions have the same weight as written ones, it’s much easier to point to something in writing than to try to resurrect a verbal discussion. If you must make a payment and instructions by phone, get an email address so you can follow up with a note reiterating where you want payment applied, with the loan number. You can also write a restrictive endorsement on a check made out to you, that you’re signing over to the lender. This just means on the endorsement line on the back where you would normally write, “For deposit only,” write, “To be applied to loan #…” and substitute your loan number for the ellipses. It’s a good idea to check if the lender prefers specific wording for this type of endorsement—they should interpret what you write reasonably, but it’s easier for everyone if you use the language that triggers the lender to do what you want. If you write a check for payment instead, include the loan number(s) in the Memo line. Remember: You have the right to direct how payments are applied to your loans. It’s your money, and while the lender might have its own preferences about how to apply payments, you have the right to control how your money is used. If a lender refuses to allocate a payment as you direct, you should seek legal advice if talking with the lender doesn’t resolve the issue. And if you are close to a financial cliff—facing mounting debt, about to fall behind on payments, or experiencing a shortfall of expected income—Ag & Business Legal Strategies can also help with the larger decision about whether to pursue debt restructuring or bankruptcy. Our attorneys can additionally assist with delving into your farm’s financial health with an enterprise analysis. As our Founding Attorney Joe Peiffer often says, a decision to do nothing is a decision to let others decide for you. Don’t wait until things go from bad to worse to seek legal counsel! (319) 393-1641 At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy. Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow, when it may be too late.
Get Up to Speed: Potential Laws for You, Your Farm, Your Business
Call your Iowa State Senator by February 20 The bulk of our work at Ag & Business Legal Strategies is focused on helping farmers navigate complex court processes in bankruptcy, as well as laws and regulations that affect their livelihood. But our attorneys also devote time and expertise to working with state and federal legislators to try improving laws that govern these, as well. Ultimately, lawmakers serve you, the people. So from time to time, we like to update you on pending or potential legislation that could impact your daily life at some point so that you may reach out to your elected representative and share your opinion. File the first two items in this article under “Needs Attention NOW.” Updating for inflation in Iowa Last year we worked with an Iowa state lawmaker on draft legislation to better assist farmers and other small business owners seeking debt solutions by updating Iowa’s exemption laws for inflation. We explained what that means, and how it would help struggling parties protect more of their property, in this article. That legislation was introduced in the Iowa Senate last month and was assigned to a subcommittee of the Judiciary Committee. Not only would it bring up to date long-overlooked indexing, going forward it would require periodic indexing every three years. The subcommittee has recommended that the main Committee vote Senate File 2054 out to the full Senate for debate and consideration. Here is what’s needed: If the Judiciary Committee does not vote on this by February 20, 2026 (later this week, as of this publication), it will become much more difficult to get the bill to the Senate floor for a vote this year—if at all. If you’re in favor of fair protection for debtors while supporting economic recovery in the debt reorganization/bankruptcy process, contact your State Senator TODAY and ask that the Committee vote on S.F. 2054 by February 20. If you don’t know your Senator, find them here. ABCs of business liquidation In addition to farmers, we also advise small business owners. Section 681 of Iowa Code governs assignment for benefit of creditors, commonly referred to in legal circles as ABC. The concept has been around for centuries, crossing from common law of England to the U.S., and allows a failing business to close efficiently and the owner(s) to maintain credibility by liquidating assets to pay its creditors. This process happens largely outside of court supervision, saving court expenses and potential time delays related to oversight. Used efficiently, ABC lets a business owner transfer its assets to a neutral third party, whose job is to sell them and recover the best prices to pay creditors. When the state enacted its current ABC laws in Iowa Code Chapter 681 more than a century ago, it imposed significant court oversight and bonding requirements. The bond requirement has historically proven onerous and expensive, crippling this tool—in fact, the last case we can find using this was in 1949. Because ABC liquidation can be a more affordable alternative to bankruptcy when a business owner is not trying to reorganize to stay in business, we have been working with Iowa legislators to overhaul this state law. Senate File 2213 would do that, repealing Section 681 and replacing it with more modern, uniform language recently drafted and also under consideration in other states. UPDATE: The Governor signed the final bill, SF 2497, into law on June 2, 2026 As with the above-mentioned S.F. 2054, this bill has been recommended by the Judiciary Committee’s subcommittee for passage, so the full Committee can take it up for consideration. It too must be voted on by February 20, or it may be difficult-to-impossible for the full Senate to vote on this year. Contact your State Senator to request a Committee vote before February 20. Protect farmer safety, legal relief Recent approval of the use of dicamba herbicide by the U.S. Environmental Protection Agency (EPA) puts us in mind of an effort from the past two years, in Iowa, to nullify farmers’ rights to sue for relief if harmed by pesticides. In 2024 and 2025, the Iowa Senate voted twice to approve a bill that stated if the EPA approves registration of a pesticide under the federal Insecticide, Fungicide and Rodenticide Act, that “shall be sufficient to satisfy any requirements for a warning or labeling regarding health or safety” for its use. And twice, the Iowa House refused to make it law. Although we are not aware of any effort yet so far this year to revive the bill, it’s never a bad idea to get out ahead of potential action and let your legislators know that you are not in favor of taking away a farmer’s right to sue for injury from something they may be required to handle on a regular basis. Why it matters: Several years ago, Ag & Business Legal Strategies had a client who grew very sick and nearly died when he was mixing a pesticide and some landed on his skin. It turned out that in the 1980s this chemical had contained a “loud” dye so the user could more easily see if it was applied or spilled, and caused it to sting so the user could wash it off promptly. By the early 2000s, however, the dye and warning sting had been eliminated. The Eighth Circuit Court ruled this elimination a design defect that was an exception to how the EPA had registered the pesticide, and the farmer prevailed. EPA registration of a pesticide is predicated on how well it works for your crops, which has nothing to do with how safe it may be to use. Manufacturers and others will argue lawsuits raise the price or make approval a longer process. We ask: At what price do you really need those chemicals if they’re not going to be safe for everyday handling and exposure? Federal bankruptcy goals Next month, Ag & Business Legal Strategies Founding Attorney Joe Peiffer is headed to Washington, D.C.,
Don’t Sleep on These 2025 Farm Income Tax Tips
It might surprise you that there is one step even some seasoned farm income tax filers need reminding of, namely: When preparing your 2025 tax return, make certain you’ve counted all your income in addition to all expenses. Sounds obvious? Read on. In our experience, it’s not difficult for a farmer to remember reporting expenses, since they can reduce income tax liability. People will make an extra effort to search for farm and other business costs they’ve paid since last January 1, to receive the fullest deduction they can claim. But a common error our attorneys have seen over the years is that one or more sources of income were left out of a submitted tax return. Maybe it’s an oversight and not intentional. People make mistakes, and the IRS does have forms for amended returns, and to extend the deadline to file a tax return. The problem with this oversight is if you sign and submit a return that doesn’t include all reportable income, even if you later voluntarily file an amended return, the burden may fall on you to prove you weren’t committing tax fraud. The IRS takes its collections very seriously and may label what you would call an “error” as fraud. For this reason, even if a professional is helping prepare your return this year: Gains – or not – on grains While there are a few types of accounting methods individuals and businesses use to track finances, by far the most common for everyday taxpayers and farmers is cash basis accounting. With few exceptions, income is reportable when salary or payment is received, and expenses, when they are paid. Another method is accrual basis, mostly used by large corporations that are barred from using cash accounting. Under accrual, timing on when to report income and expenses differs from cash basis—one example is that grain from an accrual farm may be taxable inventory as soon as it’s harvested, but for a cash farm, there’s no income until the farmer is paid. If you are using cash basis to keep your books and file taxes, carrying over unsold stored crop into 2026 simply means you’re deferring that income to this tax year instead. It’s only income when you sell it. If you are using accrual, there are tax implications to discuss with your accountant or preparer. Carrying over corn or soybean inventory does impact a cash farmer in other ways: Although a lot of farmers have seen less income, there are some who harvested enough to pay their debts and still have grain in the bin. If they want to benefit a particular charity and empty the bin, they can donate grain directly to their beneficiary of choice. Note: This is not selling the grain and then donating the money for a deduction; it is donating the grain directly, and the elevator or other trustee sells it and disburses the payment to the charity. By doing this, a farmer can still claim eligible input costs for producing that grain but does not pay income taxes on its sale. The disclaimer on this, of course, is that the gift must be made in the reportable tax year—now is too late for 2025, but it’s something to think about before the end of 2026, if you are in this situation. Talk with your tax preparer for details. (319) 363-1641 Notable “et ceteras” In 2017, Congress’s Tax Cuts and Jobs Act made some changes to how equipment trade-ins are reported on income taxes, beginning with the 2018 tax year. Although this is several years old, there are frugal farmers who have not traded in equipment since then, who may have recently done so (or are considering it) and are unaware of these changes. Before 2018, if you traded in fully depreciated used equipment, any trade-in value you received would be applied as your down payment, and the “boot,” on the new item would be the tax basis for the newly acquired piece of equipment. Since 2018, in this same scenario, you are required to report the trade-in value like a cash receipt treated as income—but you can also report the entire new purchase value as the tax basis for the newly acquired equipment, which can then be utilized for a Section 179 deduction. This income can have an effect on income used to determine the cost of Medicare Insurance premiums, so talk with your tax preparer to understand those impacts. This advice is also applicable to everything in this article, so be sure to hire a knowledgeable tax professional who understands farm finances. Another consideration for some farmers is an upcoming change in the alternative minimum tax. The AMT was enacted decades ago by Congress to ensure wealthy individuals and corporations would pay a certain level of tax no matter how many deductions they could claim. Over time, though, more “regular” taxpayers began to fall under this umbrella because of how inflation raised their incomes. Under the 2017 Tax Cuts and Jobs Act, new AMT rules significantly reduced the number of taxpayers affected by it, by raising income exemptions and phase-out thresholds (income level at which one must pay the AMT). However, Congress did not vote to renew the 2017 Act, which means 2025 is the last tax year to which it will apply. Major triggers for AMT include: These triggers will be somewhat lower when filing for the 2026 tax year, in 2027. These are just some considerations to be aware of when prepping your 2025 tax return. We repeat: Be sure to report all your income as well as expenses for the year. Aside from anything else, the 1099s and other income forms you receive are also transmitted to the IRS, which an agent may compare to your signed return. Hire a qualified, trusted tax professional to assist with your return. And if you have any legal questions regarding past or current taxes, or the IRS has contacted you about payments still owed, call Ag & Business
Attorney Joe Peiffer Featured in National Ag Media
Founding Attorney Joseph Peiffer continues to expand his media presence, sharing crucial insights to help farmers and agricultural businesses prepare for the financial challenges ahead. As noted in our previous update, Ag & Business Legal Strategies (ABLS) has been actively featured in agricultural news outlets, offering guidance on debt restructuring, bankruptcy concerns, and long-term financial planning for producers across Iowa, Illinois, and Missouri. Interview with American Farmland Owner’s David Price Joe recently joined American Farmland Owner’s host David Price for a timely conversation about the difficult financial decisions many farmers may face in the coming year. The interview explores rising operational costs, tightening credit, and strategies producers can use to stay ahead of potential financial strain. Watch the full interview and read the complete article here. Joe Peiffer Featured on RFD-TV News Joe was also featured on RFD-TV News, where he discussed key considerations surrounding 2026 operating lines of credit. During the segment, he highlighted the initial steps farmers should take now to strengthen their financial position for next year—along with practical tips to improve approval odds with their lenders. View Joe’s full RFD-TV appearance and article at RFDTV.com. More Media Coverage Coming Soon Stay tuned for additional news features and interviews from Joe Peiffer and the ABLS team. We remain committed to advocating for farmers, empowering them with the knowledge and strategies they need to navigate uncertain financial seasons. If you or someone you know is facing financial pressures—or simply wants to build a proactive plan—contact Ag & Business Legal Strategies today. Our team can help you understand your options and create a clear path forward. (319) 363-1641
Our Strategies in the Headlines
By Joseph Peiffer, Founding Attorney Nearly 10 years ago, after 30 years of rural-focused practice with other firms, I founded Ag & Business Legal Strategies as a practice focused on advocating for the legal and financial interests of Iowa, Illinois, and now Missouri farmers and other small business owners facing debt restructuring or bankruptcy. This year, in the wake of more mainstream news focus on the farm economy, we at ABLS have seen a sharp increase in our efforts to provide news media with information and analysis about farm bankruptcy, financial planning, and more. Associate Attorney Austin Peiffer and I have provided multiple interviews over the past several months both to agricultural media—geared to a farmer and agribusiness audience—and to general news media that are trying to help the non-farming public understand more about agriculture. Here is a sampling of the 2025 news coverage featuring ABLS insights: We have more notable interviews to come, all with an eye toward keeping the public, as well as the farming and agribusiness communities, informed of financial and related legal factors affecting agriculture’s bottom line and future plans. If you are dealing with worry or uncertainty about debt, your financial health, or legal issues related to these, don’t wait to act—reach out for a discussion and plan of action NOW. Help yourself with the holiday gift of peace of mind! (319) 363-1641 At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy. Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow, when it may be too late.
10 Common Mistakes Made by the Financially Desperate — and Why They’re Bad
Earlier this month, we spoke with Brownfield Ag News¹ to encourage farmers to confirm their records are all in order when reaching out to their banks for 2026 operating lines of credit as well as to make informed financial choices for their operations. Although a farmer should keep their balance sheet and cash-flow records updated throughout the year, people do get distracted and busy. If you have not updated these records in a while, don’t put it off longer — pick a time in the next week to sit down and, in the words of Nike, just do it. Our attorneys assist a lot of farmers, so over many years we tend to see a number of the same errors in judgment from new clients. If you are deep in debt or otherwise feeling financially desperate, it is easy to fall into a trap of “surely I can get around the problem by doing this” or “I’ll just do this temporarily, and then I’ll fix it” without realizing your shortcut or “fix” may, in fact, not be legal. These are among the issues we see time and again, not in order of frequency: Of course, the main problem our attorneys see—the one behind all these mistakes—is a farmer not seeking assistance early enough to avoid these or other problems. We’ve said it before, but it bears repeating: While Ag & Business Legal Strategies is certainly qualified and willing to help farmers in legal trouble, we’d rather prevent it in the first place. We have farm experience; we are related to and friends with farmers; and we want every farmer to succeed. The best way for you, the farmer, to keep doing that is to call us for advice as soon as you realize you have a problem, rather than waiting until it has reached (or passed!) a critical tipping point. (319) 363-1641 At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy. Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow, when it may be too late. ¹Brownfield Ag News, “Farmers Should Review Farm Financials Ahead of 2026 Loan Renewal Season.” Nov. 11, 2025.
Don’t Fear the Creditor
Normally, here is where you might find an analogy comparing troubles in farming with some other life situation. And while that is a useful writing tool, the fact is that an analogy doesn’t always capture the real things we need to explain. And reality is that we are seeing a noticeable uptick in financial distress for farmers this year — not just in our own practice, but in farming overall. Corn and soybean prices are still down significantly from their 10-year high earlier this decade. Meanwhile, input costs for crop growers have not decreased at the same rate. Livestock overall is doing better in 2025, especially beef, but there are producers from these sectors also in the middle of bankruptcy proceedings. Stay on top of financial shifts If you planned to harvest corn at 200 bushels/acre and sell for $5/bushel, but you’re seeing only 180 bpa at $4.20, this is of course going to change your plans for the year. Continuing to hope things will improve as you harvest this month is a wonderful thing, but it will not make up lost income. That’s why you need to update your projections and plans as circumstances change. If projections show revenue will be short, there are decisions to make. Do you have enough in savings to pay creditors such as the bank, a landlord, laborers, suppliers, et cetera? If not, can you tap an additional income stream? Maybe you can sell your harvesting services to other growers in the area. And if you do this in Iowa, be sure to perfect a harvester’s lien with the state no later than 10 days after finishing the work, to ensure you are a priority to be paid timely, even if the farmer for whom you’re harvesting gets crossways with their bank). Or maybe you can pick up extra money hauling grain or livestock, driving a truck, packing silage, assisting with farm chores, or doing other temporary labor? Finding additional sources of income will protect the equity you’ve worked so hard to build over the years. If you’re still struggling to meet your obligations, you may be tempted to finance this short-term debt by rolling it into next year’s operating loan or tapping your land’s equity. But remember, these incur additional interest — like rolling a snowball uphill. At some point that debt snowball grows so large that it will roll back over you. Or, let’s say you’ve learned that you can sell grain for more than what you contracted with another party when you grew it. Or, you’re a month behind on rent and the landlord is pressuring you to pay when you also owe the bank a payment — the bank that holds collateral over your grain. These are both situations in which you may be tempted to seek a short-term solution to pay your most pressing debts, at the risk of legal action and penalties. When your farm production is some creditor’s collateral, you need to be very careful and seek sound legal advice. Don’t underestimate negotiation If you took out a bank loan or operating line of credit, that lender usually takes a security interest in every bushel, bale, hundredweight of milk, or animal you produce, meaning it has first dibs if you do not repay the loan on time. There are exceptions, such as if someone has an aforementioned harvester’s lien for doing work on your land or your landlord perfected a landlord’s lien with the state. We wrote about the pitfalls of selling collateral in a “rob Peter to pay Paul” debt-payoff scenario last fall, but it bears repeating: When your farm product is also collateral, you cannot unilaterally decide how to dispose of it or spend the proceeds. In addition to banks, harvesters, and landlords, certain vendors may also hold statutory liens on your crop or livestock. Here at Ag & Business Legal Strategies, we’ve handled many cases in which a farmer liquidated the collateral they had pledged to others as collateral, then needed our assistance when consequences inevitably happened. One farmer sold his grain under another family member’s name so he could use the proceeds to pay off creditors other than the one that had a security interest in the grain. Now he might not be able to discharge his debt to that creditor in a bankruptcy. Even more seriously, both he and the family member could be indicted for defrauding a financial institution — a federal felony — and possibly serve time in a federal penitentiary. In another case, the farmer sealed grain with the government’s Commodity Credit Corporation (CCC). Instead of delivering that grain to an elevator and repaying the sealed loan, he sold it elsewhere to pay bills. Not only did he have to repay the CCC, he also paid a fine and was barred from applying for another CCC sealed grain loan for two years. Yet another farmer created a limited liability corporation to sell his grain and tried to argue since that corporation didn’t owe any debts, it was free to sell the products. In all three of these cases, the collateral holders demanded their share; in fact, even after filing for bankruptcy, the third farmer will owe a six-figure debt that the bankruptcy court cannot discharge. Prepare, don’t react Our attorneys are certainly capable of providing representation for these kinds of cases — but we would rather help producers on the front end avoid fines, judgments, and possibly even jail time. If it seems to be difficult to pay your bank or other creditors in full this season, Ag & Business Legal Strategies can assist in reviewing your options and finding the best solution that does not risk jail time or non-discharged debts if a bankruptcy is necessary. If you have a close relationship with your bank and know you’ll be receiving later income — for example, crop-loss insurance — and you can convince your loan officer to wait, that’s great! If not, we can reach out to your
Bankruptcy Can Be A Vital Tool
Last week, in an article by Joe Mahon of the Federal Reserve Bank of Minneapolis, attorney Joe Peiffer shared valuable insight into the financial state of Iowa farmers. He also highlighted some potentially troubling issues on the horizon. The main concern Joe raised involves farmers’ borrowing habits. He explained, “…so what they’re doing is that they’re borrowing money on the land,” and as a result, “…increase the amount of payments we’re going to have to make next year.” Refinancing like this does kick the can down the road, but only pushes off addressing the underlying issues farmers face. Pressure is building for these farmers, and the situation may eventually reach a breaking point. Fortunately for them, farmers can currently restructure their debt thanks to the value of their land. Land is a finite resource and will likely retain its value. However, other factors—like declining soil quality—could put that lifeline at risk. It’s wise to have a backup plan. This “ace up your sleeve” could help farmers avoid disaster and start climbing out of debt. While some may shy away from it due to societal stigma, bankruptcy—especially Chapter 12—can be a powerful tool when used properly. For more details on Chapter 12 bankruptcy, check out our previous blog posts: Chapter 12: The Farmer’s Ally in Debt Recovery and Chapter 12 Bankruptcy: Is it Right for Me? or call us to discuss your situation at (319) 363-1641.
The Urgency for Risk Management
Earlier this week, attorney Austin J. Peiffer spoke with Erin Anderson from Brownfield Ag News. Their conversation focused on the urgency of risk management, especially as farm bankruptcies continue to rise. As we noted in our blog When it Comes to Farm Debt – Fish or Cut Bait, the data is clear. The Administrative Office of U.S. Courts reported 181 Chapter 12 bankruptcies filed in the first six months of this year. That’s a 57% increase compared to the same period last year. In all of last year, only 216 cases were filed. The trend is climbing—and experts expect even more filings in the year ahead. These numbers matter. They’re a warning sign. As a farmer or business owner, you can’t control the market. But you can control your own financial preparedness. That starts with being organized, covering all your bases, and doing more than just the basics. In the interview, Austin put it plainly: “If all you’re doing is updating your balance sheet at the end of the year, you’re operating in the dark for the year. If you’re funding your farm by rolling debt onto land or equipment, you might not see year after year your farm is losing money.” The message is simple: be prepared. You might be asking yourself: If so, you’re not alone. Many of our clients come to us with the same concerns. And that’s where Ag & Business Legal Strategies comes in. We’ve helped farmers and business owners manage risk, reorganize debt, and plan ahead—so they can keep farming and running their operations. Don’t wait. Reach out today. We’re here to help.
When it Comes to Farm Debt – Fish or Cut Bait
Of all the services we provide for farmers here at Ag & Business Legal Strategies, maybe the most important comes first: Helping you honestly assess your situation. Earlier this month several articles and editorials came out of a meeting Arkansas farmers had with their Congressional delegation, requesting federal assistance to save their farms. This is far from the first news of the year indicating rising financial troubles for farmers stemming from several contributing factors: continuing low commodity prices, tariffs and other trade challenges impacting global demand for U.S. agricultural goods, higher input costs, and weather events. Farm bankruptcies (Chapter 12) are up sharply in 2025: There is no shame in filing a bankruptcy if debt reorganization or other measures are no longer sufficient to address your farm’s issues. If fear is holding you back, keep in mind that bankruptcy doesn’t necessarily mean giving up your land or livelihood. Bankruptcy provides an opportunity to force a restructuring of farm debts if the farmer can satisfy the requirements of the bankruptcy code. And the sooner you act, the better your chances are of reorganizing instead of liquidating, or even avoiding bankruptcy altogether. If you are not to the point of considering bankruptcy, but still have worries about your farm’s financial situation, it is better to face difficult decisions and take action now—not later. Indecision is a decision to allow others to make decisions for you. Waiting too long means your bank, your landlord, your vendors, and other people’s attorneys will be calling the shots for you. We want to help you determine your own path as much as possible. How farm history matters Even if your farm or ag business is thriving, it’s worth examining if this is a solid streak or simply a good year. For that reason, every farmer and their bookkeeper should set aside time to review the farm’s finances several times a year. Since harvest is underway and the end of the year will be here before we know it, this is as great a time as any! While quick cash seems an attractive option for desperate times because it’s immediately available and the creditor doesn’t require collateral, the tradeoff is immediate fees and, if not paid back within a short time, compounding interest beyond a normal person’s ability to repay. You can read more of our advice on MCA pitfalls, and better alternatives, here. If you need help assessing your farm’s financial situation, Ag & Business Legal Strategies offers enterprise analysis. This examines the individual parts making up your farm or ag business to show you how each is contributing to profit and loss. Find out more about how this planning tool can save you lots of future time and trouble here. (319) 363-1641 Cash isn’t necessarily financial health Even if you have a positive bank balance, that should not be your only metric for financial stability. Cash on hand doesn’t always indicate profitability, which is tied to management decisions you’ve made that generate income, such as the return on new investment for crops or livestock production. If your positive balance is largely from non-production activities—say, the sale of capital assets (land or equipment, for instance), borrowing funds, or an inheritance payout—you didn’t generate profit. This is important because profit has the possibility of being sustainable, or repeatable. Unless you’ve won a tremendous lottery or your last name is Buffett or Gates, you probably can’t rely on capital gains or a one-time payment as future income. This also applies to cash from refinancing or selling a capital asset, such as taking out a second mortgage. Borrowing and pledging intermediate or long-term assets to make your current situation positive only increases loan payments in future years, further decreasing your ability to cash-flow your operations. We’ve written about profitability versus cash-on-hand in the blog before, which you can find here. The only failure is avoidance This has been a tough year on many farmers, not just in the upper Midwest. With lower commodity prices and higher costs, even if the past few years have been boom, you could be facing difficulties this year in paying all your creditors on time. Whether it’s rent, a bank loan repayment, or what you owe vendors, you need to know who has first security interest in your crops and other farm products so you can structure payments to creditors. In many instances, there will be more claims against the crops and other farm products than the cash from selling those assets. This is another topic we tackled previously, about this time last year. You can read more about collateral, liens, the danger of selling collateral without authorization to pay debts, and how our attorneys can help with negotiations here. If the above is the situation you believe you’ll find yourself in post-harvest, it is time to evaluate your options NOW so you can be proactive in addressing deficits. Ag & Business Legal Strategies has been helping farmers with this problem for many years. One of the reasons we started this blog was to help farmers and small business owners better understand not only the options available to address their financial and legal problems, but how imperative it is to seek assistance as soon as they realize they have a problem. You may have heard that failure to prepare is preparing to fail. We say that failure to make a decision IS a decision—to let others decide for you. Farm debt not dealt with in a timely manner leads to consequences that can range from bad to catastrophic, including added default interest, legal action, seizure of property, and possibly imprisonment for farmers who sell collateral without authorization and do not pay the secured creditor. The earlier you act, the better chance you have to maintain control of decisions over your own future. (319) 363-1641 At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute
Never a Bad Time to Put the Farm’s Cash Flow in Order
These are volatile financial and regulatory times for agriculture. You can’t control the world, but you can assess the financial health and future of your own farm to inform operational decisions with more confidence. It will be harvest time soon, not to mention you’re reviewing any 2026 Iowa farm leases for renegotiation or termination notices before September 1. We understand there’s already quite a lot on your plate, and here we are advocating for adding “just one more.” But it’s an important one! Know your cash flow Common wisdom is that a farmer should keep his or her balance sheet updated throughout the year so they know what standing assets and liabilities they have at any given time. It’s equally a good idea to keep your cash flow numbers updated. The cash flow isn’t just a flat look at revenue and expenses. It’s like a mini-movie of how healthy your farm business is, and if all parts are in balance. Ideally you can check your cash flow upon demand to answer questions like: “How much does it cost me to produce an acre of corn on this property?” or “What am I paying to feed each sow for a year in that barn?” Right now you may be deciding whether to continue with a farm lease, but you face other big decisions throughout the year where it would be valuable to consult your active cash flow at a glance. For now, let’s focus on the lease. Last month’s blog post noted Iowa cash rent rates are down for the first time in several years. It’s only 2.9%, but that margin could mean the difference between severing a lease that’s just a little too pricey or keeping it another year if the landlord agrees to a reduction—depending on your expenses. Deciding for the lease If you haven’t already looked ahead to your operations plan for 2026—even if you have no lease—it is a good idea to start penciling in a draft cash flow. How many acres will you plant? What kind of yield could you conservatively count on next fall? What kind of prices do you think you can get, and what are late 2026 futures? What inputs and labor will you need? Are you planning to buy or lease equipment, or stick with repairs? And what will those cost? If you raise livestock, you have some different questions to answer. How could these considerations impact a lease termination decision? Will you make money next year if you keep it, taking into account all those other factors—or would it be more profitable to terminate, eliminating that ground’s production but also its rent and input costs? This would dovetail well with an overall examination of your cash flow and operations for 2026: Is one part of your farm doing well and “carrying” shortfalls for any part of the rest of it? If so, do you have a good reason for maintaining the loss operation? (For example, you might raise crops and cattle, and now you’re getting great returns on the cattle but not so much for your grain. However, if some of the crop goes into feed, maybe it’s cheaper overall to keep planting than to buy that input off the farm.) As an aside about your lease decision: If you send a termination notice this month, it does not necessarily mean you cannot rent that ground again, depending on your (good) relationship with the landlord. If you need to terminate the lease as it’s currently set to renew next March, go ahead and send the notice even if your landlord has agreed to renegotiate terms. You can draw up a new lease before March. In this scenario, you do run the risk the landlord will rent to another farmer while negotiating with you. But if you have decided to terminate in absence of a renegotiated lease, sending the notice before September 1 is not truly a risk, since it legally protects you from being on the hook for another year’s rate of rent you did not want. Deciding for other reasons If you are on top of your cash flow and know how your farm is operating on any given day, great! If you’re out of practice or need to review everything to get to that point, though, Ag & Business Legal Strategies can help with an enterprise analysis at any time. This is auditing the individual parts of your farm that are supposed to make money, then isolating the factors contributing to its profit or loss. The point of this is to return to you the informed power to make choices about your operations—especially now. Bankers we’ve talked with lately have explained they’re seeing farmers draining the savings they’ve built up over years into just keeping their farms afloat, especially growers who are struggling with lower prices, yet still-high input costs. Farmers make decisions; there’s no shortage of responsibility in their DNA. The problem can be the action itself. Do you maintain a losing proposition as-is by, say, rolling debt into refinancing your mortgage or opening a long-term line of credit—in the hopes income will begin moving back up soon? Or do you decrease your acres or take some other action that means you’re not growing as much, but also spending less? In addition to enterprise analysis, we offer a lease termination service if you do want to send that notice, to make certain you’re following specific state law to the letter and protecting yourself. We can also assist in reviewing your obligations to help you decide if debt restructuring or even bankruptcy is a responsible choice. If you’re not satisfied with your financial situation, do something sooner than later. It’s tempting to say, “I’m going to keep doing the same thing”—but making no change is actively deciding to do nothing. This has created regret for some farmers we’ve helped, who waited until the last minute to call us and learned they would have had more options if they
September 1: Deadline to Terminate Renewal of 2026 Farm Leases
If you rent or lease out farm ground, you may already be aware of September 1 as a critical time for notifications in Iowa—but if not, here’s a brief explanation of what you should know. Farmland leases typically renew on March 1 each year, unless the lessor or lessee has expressly notified the other party in writing to terminate the contract, and this must be done no later than September 1 the previous year. If you intend to try to renegotiate lease terms, this is also the time to do that—so you can make an informed decision about whether to terminate and provide your notification by September 1. Earlier this spring, Iowa State University Extension reported that average Iowa cash rental rates are down for the first time since 2019, by about 2.9% this year. This can of course affect your lease negotiations, along with your 2025 harvest and crop revenue prospects and any government payouts if you are the farmer; or land value if you are the landlord. Ag & Business Legal Strategies provides assistance with lease termination notices. For more valuable details about this process, and to contact us for a consultation and a FREE “Farm Lease Negotiation Checklist,” follow the link below!
Trust Breached: A Hidden Estate Planning Risk
It’s important to consider all factors when making out an estate plan. Trusts are a common estate planning tool, and can provide significant value when used properly; however, trusts also lack certain important legal rights that people and corporate entities have, including the right to file bankruptcy. In 2024, Judge Thad Collins, the chief bankruptcy judge for the Northern District of Iowa, decided a case called In re: Vera Welte Testamentary Trust. When Vera Welte died, she left farmland to a trust with her will, naming her son as the beneficiary. The son needed to borrow money and had the trust pledge a mortgage on its land to secure those debts. When the son couldn’t pay those debts, the creditor sued to foreclose the mortgage. In response, the trust filed bankruptcy. Judge Collins was asked to decide whether the trust was eligible to file bankruptcy. The Bankruptcy Code says that, in general, a “person” can file bankruptcy, but then broadly defines “person” to include individuals, partnerships, and corporations. “Corporation,” in turn, is broadly defined to include entities people would generally think of as corporations, but also a “business trust.” Unfortunately, the Bankruptcy Code does not define “business trust.” To fill this void, courts have developed a six-factor test, with the most weight being given to whether the trust was created and maintained for a business purpose. It’s not sufficient for a trust to merely conduct business operations—business operations must be its primary purpose, not a side effect. The problem becomes apparent: A testamentary trust isn’t created or maintained for business purposes. It is created to facilitate the grantor’s estate planning wishes by protecting and preserving the property in the trust for the beneficiary’s benefit. That’s why Judge Collins dismissed the case—since the trust was not created for a business purpose, it was not a business trust and therefore was not eligible to become a bankruptcy debtor. Make Your Wishes Clear After the dismissal, the creditor foreclosed its mortgage and sold the trust’s land at a sheriff’s sale. Vera Welte could have prevented this outcome by prohibiting the trustee from mortgaging the trust’s land to secure other debts, even though most trusts give the trustee broad powers to pledge the trust property to secure debts. The trustee, too, could have prevented this by refusing to sign the mortgage—but perhaps she thought that the son, as the trust’s beneficiary, was only pledging land that was ultimately his, so it was his business if he wanted to do that. If the son had owned the land himself instead of being the trust’s beneficiary, then he could have filed bankruptcy himself and stopped the foreclosure. While there were several opportunities to prevent this outcome, they share a common thread: The testamentary trust. Moreover, while the business purpose test was determinative in Vera Welte, other typical features of estate planning trusts made it difficult for this trust to satisfy some of the other factors in the six-factor business trust test. Trusts are powerful tools. They can reduce taxes, avoid probate, facilitate distribution of complex assets, allow for assets to be distributed to heirs over time or based on conditions, maintain privacy, protect assets from creditors, and avoid will contests. They can serve many functions in an estate plan. But it is essential to also recognize their limits. Nobody plans to experience financial distress, become unable to pay their creditors, and file bankruptcy—but it can happen. In addition to concerns about cost and losing a step-up in basis, property owners and their estate planning attorneys who consider establishing trusts should carefully contemplate the likelihood that the trust will not be eligible to file for bankruptcy if the trust, or its property, becomes subject to debts that cannot be repaid. It may be appropriate to restrict the trustee’s powers to pledge trust assets to secure non-trust debts, set a date certain when the trust’s property will vest in the beneficiary, or use a different tool to accomplish the grantor’s goals. If your estate-planning attorney has recommended setting up a trust for your farm or business property, reach out to knowledgeable staff at Ag & Business Legal Strategies to discuss the bankruptcy implications of doing so. We can help you and your attorney account for this threat to carrying out your last wishes. or Call us at (319) 363-1641 At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy. Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow. https://www.ablsonline.com/contact/
A Gift That Keeps On Giving: Operating Line Commitment in December
This holiday, the best gift for a farmer is one they can seek themselves: Securing an early commitment from their lending institution for a 2025 operating, or input, line of credit. Depending on a farm’s financial strength, an operating loan is used for different things, most often for bulk purchases necessary to yearly operations: fertilizer, chemicals, seed, cash rent paid upfront, and other vital inputs. If your farm is doing well and not under much stress, you may dip into it to help pay for family living expenses, utilities, and the like as needed until payoff. The more stress your farm is under, the more control the bank may assert over the loan. This might include only advancing funds if an invoice is presented, for example, or a strict limit that does not allow for unforeseen expenses—such as for major engine repair, or underestimating your cost of inputs. Secure Your Loan Early November is the time to assemble your materials and make an appointment with your banker, as soon as you have a good handle on your 2024 harvest volume. There are several reasons to secure a commitment before the end of the year, including the availability of immediate cash to take advantage of input specials. Seed, fertilizer, and equipment dealers want to make cash sales this time of year and are often willing to extend discounts, rewards, and lower interest rates to coax farmers into buying inputs or putting a down payment on equipment in the fourth quarter. (It is not advisable to use an operating loan to purchase equipment or vehicles in full, as this could result in negative consequences for your debt load—you might run out of operating line early or be unable to repay it after harvest.) Another good reason to secure early commitment: More control over taxes. Having ready cash allows you to buy inputs at a time advantageous to your financial position. If it’s been a great year, you may decide to do more business spending before January 1 to lower your tax burden. Keep in mind, though, if you have not finalized your 2023 income taxes yet, doing this may make you look like a less qualified borrower. Peace of mind is not tangible like the first two benefits, but I’d argue it’s just as important. The earlier you step up to take control of your financial situation and request an operating line of credit, the more you can influence a positive decision. What if the bank you’ve been using for 20 years turns you down because the loan officer you’ve worked with retired and the new one doesn’t understand how farm income works? Knowing obstacles early allows time to apply at other institutions if necessary. I knew someone who couldn’t plant because the bank put off an operating line commitment even though everyone thought it would eventually approve the loan. The bank decided in late February—less than a week before the farmer’s rent payments were due—that it wouldn’t offer the loan. Because this farmer waited too long on the decision, he didn’t have time to find another bank. It’s always better to be overly prepared. How To Better Butter Up Your Bank A bank is a business. It is not your friend, although its employees are often friendly. Banks have regulations about how much risk they can take, so if a regulator views your operating loan as unsound for any reason, your banker is required to take action. This may mean not granting you a new operating loan. Or, if you have a loan and your bank requires its name to be on all checks made out to you, the bank may refuse to cash them unless the funds go first to a loan payment. If you budgeted that income for rent or a vendor, it may mean that creditor won’t be paid unless they filed a landlord’s lien or otherwise protected their interests in advance. If you don’t have an “inside man” with the bank to keep you apprised of how things are going behind the scenes—and most people don’t—you may not realize how likely or not it is to approve your loan. If each time you call you are told “I have to check with our main office” but never receive an answer, or you are put with a new loan officer you don’t know, it could be cause for concern. You can be aware of your balance sheet and debts in such a way to meet with the banker around December 1 armed with the best information to increase your chance at success: Know When To Seek Professional Advice It is important to recognize when you need assistance, and Ag & Business Legal Strategies is here to help. With combined decades of experience in not only law and banking but also agriculture, our attorneys and I have worked with ag operations in all types of situations, so we know what options are available depending on circumstances. We can help analyze your operation and financials, restructure debt as necessary, and advocate on your behalf with your lending institution. We have never assisted in a situation in which a farmer called us “too soon”—if you have a feeling something isn’t right, heed it sooner than later. Contact us when harvest is done, or sooner if you can see coming up short on bushels or projected income. The sooner you reach out, the earlier we can help you stabilize your financial position. The longer you wait, even if it’s just until January or February, the more likely you could be out of business come April. Call Us: (319) 363-1641 At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our attorneys and financial strategist will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy. 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Unintended Consequences: The Inflation Reduction Act of 2022’s Farm Debt Relief Causes Farmers Massive Tax Headaches
For a deeper analysis into this topic, see a version of this article written for tax professionals and other interested parties here. On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. Section 22006 of the IRA provided $3.1 billion for the United States Department of Agriculture (USDA) to provide relief for distressed borrowers under certain Farm Service Agency (FSA) direct and guaranteed loans. On October 18, 2022, USDA provided nearly $800 million in assistance to distressed borrowers to help cure delinquencies and resolve uncollectable farm loan debts: Unintended Consequences of the IRA Payments Farm debt relief is certainly welcome, especially to its recipients. However, when Congress authorized the IRA payments it did not consider that those payments would be counted as income for many recipients, leading to: Two Distressed Borrowers, Similar Problems Consider these two typical borrowers with FSA debts who are in currently not collectible (CNC) status, both of whom benefitted from IRA farm debt relief: Scenario 1: In 2010, Robert defaulted on his FSA-direct loan, which was secured by a lien on his property. When he could not obtain further financing, he could not continue his farming business and the loan went into default. FSA foreclosed, leaving a $100,000 deficiency judgment. Although FSA initially contacted Robert to collect on the debt after the foreclosure, the account was moved into CNC status, where it has remained for 12 years. As of 2022, his past due balance was $150,000, with interest.[1] Scenario 2: Charles has been in default on his FSA-guaranteed loan from a local bank for several years. Charles has continued to farm while working with his bank under forbearance agreements. The debt was moved to the CNC status in 2019. In October of 2022, FSA repaid his entire guaranteed loan to local bank. The payment consisted of principal of $400,000 and interest of $12,000. Now, instead of owing a long-term debt to his bank, with low payments and the option of obtaining a forbearance, he faces a large tax liability (equal to multiple years of payments) due all at once. IRA’s Effects: Increased Taxes While the IRA’s debt relief payments could have many consequences for recipients, for Robert and Charles the primary consequences are increased federal income taxes. Because of this repayment Robert could owe $24,000 or more in additional federal income taxes, and Charles $96,000. Since this debt relief was targeted at farmers who were behind on their payments, Robert and Charles likely cannot pay these bills. Current Nonviable and Viable Options Robert and Charles do have options to address their taxes, but all of them have significant downsides. However, two of the common tools for addressing these taxes are off the table from the get-go. Bankruptcy will not help Robert or Charles any time soon, because these tax debts will be nondischargeable (they will survive a bankruptcy) until at least 2026. Similarly, while insolvent taxpayers don’t pay tax on debt cancellation, that does not apply to a debt repayment like this. Robert and Charles could enter into an installment agreement to pay off their tax debts (with interest and penalties) over six year, if the IRS agrees and they can afford that additional cost. They could make an offer in compromise to the IRS to reduce the amount they owe, but that is a lengthy, difficult, and expensive process, often requiring professional assistance. Moreover, the IRS can take up to two years to review an offer in compromise. USDA is Considering Options to Assist Farmers with their Income Tax Problems. After being informed of the significant problems caused by the repayment of the debt for over 13,000 farmers, the USDA has held a series of meeting and considered three options to ease the income tax problems experienced by farmers: asking the IRS to streamline and ease offer in compromise criteria, giving farmers the option to retroactively opt out of this debt relief, and recharacterizing this debt repayment as debt cancellation instead. The USDA is also considering asking the IRS to grant IRA farm debt relief beneficiaries an extension of time to file their tax returns so they can better plan for and adapt to this unexpected income. It is also considering sponsoring professional tax assistance for affected farmers. Get the Advice You Need and Contact your Members of Congress! If you or someone you know received IRA farm debt relief but now don’t know how to deal with the tax consequences contact Ag & Business Legal Strategies today! We can assist in assessing the consequences, navigating the options, and making an informed decision. Moreover, contact your members of Congress! Tell them USDA needs to find ways to help farmers with the unforeseen tax consequences of the IRA’s farm debt relief. Download a letter template here. Read a deeper analysis here. [1] Thanks to Kristine Tidgren of Iowa State University’s Center for Agricultural Law and Taxation for Robert’s scenario.