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A charitable remainder trust (CRT) enables a family selling a farm or ranch to avoid tax on the sale of their land, livestock and equipment and generate lifetime income for retirement. 

In addition to saving taxes and generating a lifetime income, a CRT provides several other benefits:

Potentially reduces estate taxes,

May generate an immediate income tax deduction and a state income tax credit,

Provides a vehicle to diversify assets for retirement income,

Helps support your favorite church and/or charities and

Allows you to leave behind a lasting legacy.

How it works

A donor establishes a CRT and then transfers appreciated assets – for example land, livestock, equipment – to the trust, removing the assets’ values from the donor’s estate.  The trust then sells the assets, and since it is a tax-exempt entity, there are no taxes due upon the sale. 

The proceeds from the sale are then invested within the trust in a manner designed to provide a lifetime income for the beneficiaries. 

Two sets of beneficiaries are established, the income beneficiaries – generally the donor and his or her spouse, and the remainder beneficiaries – the charity or charities that will receive the principal, or “remainder,” of the trust after the income beneficiaries die.

One does not have to contribute their entire farm or ranch in a CRT.  A portion of land and/or livestock and equipment may be contributed to and sold by a CRT with the rest of the property sold for cash and/or through a 1031 exchange.

Example sale

The following is a hypothetical example of a married couple in Wyoming, both age 65, selling highly appreciated ranch land valued at $5 million through a CRT.  The illustration below compares the sale of this land with and without a CRT.

For this example, we’ll assume that our donors are age 65, and the value of the land donated it $5 million. The cost basis of the property is $500,000, and the CRT payout rate is seven percent. We’ll also assume a quarterly payout schedule.

The benefits of such a CRT would be a charitable deduction of $1,113,100 and $350,000 in estimated payments in the first full year. Future payment will vary, depending on the performance of assets in the trust.

In selling the property without a CRT, $900,000 in taxes would be due, and an estimated $287,000 annual cash flow would be seen to the ranch, before taxes.

With a seven percent CRT, no taxes would be due, and estimated annual cash flow before taxes would total $350,000.

As you can see in this example, by selling their property through a charitable remainder trust, this Wyoming couple saved $900,000 in taxes and generated an additional first year retirement income of $63,000.

Chris Nolt is the owner of Solid Rock Wealth Management, Inc. and Solid Rock Realty Advisors, LLC, sister companies dedicated to working with families selling a farm or ranch and transitioning into retirement. 

For more information, call 406-582-1264 or visit solidrockwealth.com and solidrockproperty.com

When I reflect on USDA’s international work over the past seven years, I don’t just see a great record of accomplishments, I see the building of a strong foundation that positions rural Americans to compete, grow and thrive in the years ahead.

As we launch the sixth chapter of USDA Results, which tells the story of our efforts and our impact, alongside our partners over the last seven years to open new export markets, improve trade and capacity building, and empower future trading partners striving to build their own economies.

Trade represents 20 percent of U.S. farm income – roughly the amount of profit margin across U.S. agriculture. Trade agreements open new markets, helping American producers succeed even in challenging economic times, while promoting agricultural diversification. Ratifying the Trans-Pacific Partnership (TPP) agreement will boost annual net farm income in the United States by $4.4 billion according to American Farm Bureau estimates.  But what does $4 billion really mean to farm and ranch families and the communities they live in?  Every one dollar of agricultural exports stimulates another $1.27 in business activity, creating a positive ripple affect across the country that leads to more demand for U.S. agriculture, increased job opportunities, expanding rural communities and more.

I’ve seen this on my own family farm back in Holy Cross, Iowa. In good years, my dad would re-invest profits back into the farm in the form of additional conservation measures, improved seed technology and farm equipment. These investments made a big impact on our farm’s productivity, and multiplied by many more farms like ours, those investments rippled through the rest of the agricultural supply chain.

We see this across the agricultural sectors, as well. USDA-established equivalence arrangements with Canada, the European Union, Japan, Korea and Switzerland helped organic product sales grow by more than 78 percent between 2009 and 2015, thanks to streamlined access for farmers to international organic markets valued at over $35 billion.

Our capacity building efforts with other countries, such as Vietnam, have also led to strong trade relationships. Over the last three years, USDA’s Cochran Fellows from Vietnam have sourced more than $20 million in U.S. feed ingredients, through immediate sales following their U.S. training. Ms. Thi Hoang Hoa Nguyen attended the Cochran Fellowship Program on Grain and Feed Procurement in 2014, which focused on best practices for grain procurement and marketing and how the U.S. regulatory system and grain grading systems worked. Upon her return to Vietnam, from October 2014 to October 2015, her company purchased over $9 million in animal feeds from U.S. farmers.

USDA’s work to assist developing nations in achieving their own food security, as well as a stable agricultural economy, bolsters long-term diplomatic relationships. Our support, by way of the Food for Progress Program, helps developing countries and emerging democracies modernize and strengthen their agricultural sectors. I had the opportunity to visit one of these projects last year in Senegal that worked with farmers to develop their millet production and improve conservation practices. The program also invested in microfinance, providing loans to the farmers and in processing the millet into cous cous with fish oil, employing women in the community. The multiplier effect of investing in agriculture pays off here, too. Employment for Senegalese women means they’re able to afford food for their children with enough income left over to send their children to school. Educated children will grow up to innovate and lead Senegal into a more economically secure future.  Offering our Senegalese counterparts, many of whom are farmers, a hand up is not creating competitors. This critically important work is cultivating future trading partners and a more politically stable world.

The key to USDA’s record of success in its international portfolio and what makes leading this work so personally rewarding is that we invest in the entire continuum of economic prosperity. From our global food security commitments like Food for Progress and the McGovern-Dole program; to capacity building and market development programs like the Borlaug Fellowship Program, the Foreign Market Development Program and the Cochran Fellowship Program; to promoting trade agreements that strengthen agriculture, like TPP, this strategy aligns with the American tradition, a nation serving as a steward of global prosperity, and reinforces our competitive advantage in the global economy as we move into the future.

In a stunning display of federal overreach, on March 1, the Environmental Protection Agency (EPA) and the U.S. Geological Service issued a “Scientific Investigations Report” arguing that the Clean Water Act (CWA) can also be used to regulate the quantity or amount of water in the nation’s rivers and streams. According to the federal government’s logic, because stream flows can potentially effect aquatic life and because the Clean Water Act requires the protection of the chemical, physical and biological integrity of our nation’s waters, National Pollution Discharge Elimination System (NPDES) permits or CWA Section 401 certifications should be required when an individual, community or municipality alters the quantity or amount of water available in rivers and streams. In an area that has always been left to the purview of the individual states based upon state constitutional mandates, and since a water right is a private property right, I believe that this amounts to an outright attack on state sovereignty and private property rights. 

The comment period on the “Draft EPA-USGS Technical Report: Protecting Aquatic Life From Effects of Hydrologic Alteration,” Docket ID No. EPA-HQ-OW-2015-0335 ends June 17.

EPA’s draft report arguments

According to EPA, more needs to be done to “restore and maintain the chemical, physical and biological integrity of the nation’s waters.”

Human alteration of the natural flow regime can change a stream’s physical and chemical properties, “leading to a loss of aquatic life and reduced biodiversity.” The EPA goes on to state that the human activities that can alter a stream’s characteristics include impoundments, channelization, diversions, agricultural practices, groundwater pumping, urban development, thermoelectric power generation and others.

Climate change, the agency claims, exacerbates these harms.

Because the CWA requires EPA to protect the “nation’s waters,” the report urges the following items.

First, states or the federal government should do more to quantify water quality standards for water flow to “protect aquatic life designated uses.” “Doing more” should include using numeric standards to quantify stream flow impacts on aquatic life.

Second, once states adopt such water quantity standards, water quantity monitoring programs should be developed to determine if flow is contributing to water quality impairments such as altering the channel geomorphology, reducing riparian and flood-plain connectivity, causing salinity, sedimentation, erosion and temperature increases and encouraging the invasion of non-native aquatic species.

Because there are now numeric standards, the third step is to alter NPDES permitting programs to incorporate the new water quantity or amount standards. Currently, the only time EPA has included numeric standards for water quantity or water flow is for post-construction municipal storm water systems that can require the treatment of storm water run-off or require retention of a specified volume of water runoff. The EPA draft report would argue that this type of numeric standard setting and management should apply to all permitted activities impacting water quantity.

In the alternative, even if a state does not have any type of numeric water quantity standards in place, EPA argues that the state can still require a CWA Section 401 certification related to water quantity.

Under the CWA, an applicant for a federal license or permit to conduct any activity that may result in a discharge to “waters of the United States” must provide the federal permitting agency with a CWA Section 401 certification. The certification declares that the discharge will not exceed water quality standards. Since the EPA report argues that water quantity or amount standards should be included in a state’s water quality standards, the CWA Section 401 certification would be required for diversions or uses that may require a federal permit since the diversion or use would impact the quantity of water in a stream.

To bring this home, consider these examples.

If an irrigator wants to divert water on his private land but is applying for federal funding through the Environmental Quality Incentives Program or any of the other numerous Farm Bill programs, he would be required to get a CWA Section 401 certification because he may impact the quantity of water in a stream.

If a municipality wants to drill wells for drinking water and is using federal funds to supply clean, safe drinking water to their citizens, it would be required to get a CWA Section 401 certification because EPA believes that groundwater pumping can impact stream characteristics.

If a rancher is working to develop additional water sources on his Forest Service or BLM grazing allotment, he would also be required to get a CWA Section 401 certification, separately from the BLM or Forest Service National Environmental Policy Act or other permitting requirements.

Reasons to be very concerned

EPA’s draft report is disheartening on so many levels.

First, EPA’s draft report is the first step in significantly expanding federal power over the individual states. The management of water quality, water rights and water use has always remained completely within the purview of the state, without any interference from the federal government.

Wyoming’s Constitution, like the constitutions in most western states, provides that the water of all natural streams, springs, lakes or other collections are the property of the state. Even in eastern states, where water rights are based upon riparian uses, water rights and uses are governed by state law. EPA’s draft report is the first step in advocating federal oversight of an individual state’s ownership of water quantity.

Second, the courts have time and again recognized that a water right, properly granted by the state, is a private property right. Even the right to use water in a riparian system is a private property right. And while the EPA will argue that these new requirements are not prohibiting the use of water, giving the state or federal government the ability to grant a permit under the CWA is giving them the ability to condition the permit to meet some state or federal numeric standards simply based on water quantity.

Additionally giving the state or federal agency the ability to require a permit is giving them the chance to deny a permit.

Third, although EPA’s draft report claims that it is merely providing a “flexible, non-prescriptive framework” and it is not impinging on state management of water rights, there is an entire appendix called “Legal Background and Relevant Case Law” arguing that the CWA applies to water quantity not just water quality. I believe that this section is solely meant to counter any argument from water right property owners that the CWA cannot be used to regulate water rights.

Finally, although the CWA has been applied to “pollutants” being added to water whether from a point source or a non-point source, the draft report advocates CWA control over the use of the water itself. Under this theory, a state or federal permit would be required even if a water right is simply exercised. 

Again, the comment period on the “Draft EPA-USGS Technical Report: Protecting Aquatic Life From Effects of Hydrologic Alteration,” Docket ID No. EPA-HQ-OW-2015-0335 ends June 17.

Should you have any questions, please do not hesitate to contact me.

Budd-Falen Law Offices can be reached at 307-632-5105 or online at buddfalen.com.

In 2010, the Rangeland Health Assessment Program (RHAP) was conceived through the legislature. The legislature, along with many agriculture producer groups, realized that livestock grazing allotments throughout Wyoming were in jeopardy due to the lack of information or quantifiable data on grazing allotments and grazing management practices. Non-Governmental Organizations (NGOs) were beginning to protest, appeal and sue permit renewal decisions because of perceived impacts caused by livestock grazing. The premise of RHAP was to collect rangeland health data to provide quantifiable and defensible data for permittees and federal land managers to use in livestock grazing permit renewals and National Environmental Policy Act (NEPA) documents.

Fast forward six years and RHAP is still running strong and – sadly – is still needed to provide defensible data and help with directing grazing management on federal lands. Over the past six years, RHAP has funded approximately 45 projects throughout Bureau of Land Management (BLM) and Forest Service lands in Wyoming. Through cooperation with local governments, permittees, private landowners, state lands and federal land managers, the program has enrolled almost 4 million acres of land into this rangeland monitoring program.

The program has ultimately improved communication between permittees and land managers, created cooperation and joint cooperative monitoring efforts and more importantly developed long-term monitoring plans for all the allotments enrolled. In addition, it has provided valuable, quantifiable data for the allotments that have assisted in livestock grazing permit renewals and have directly thwarted NGO claims against various allotment.

The program started in 2010 but was not fully funded until 2011. The program has grown from $200,000 for the fiscal year (FY) 2011 and FY 2013 budgets to $300,000 in the FY 2015 and FY 2017 biennial budgets. This will provide funding for an additional 15 to 20 projects over the next two years and continue to collect valuable information for our permittees and land managers to use for on the ground management decisions.

Grazing is under attack, and the sad reality is that we still need such programs to continue to protect livestock grazing in the state. As long as the federal agencies are unable to monitor their lands adequately and certain NGO groups continue to wage war on livestock grazing based on opinion rather than facts, the demand and value for real rangeland data that RHAP provides will not go away.

Rangeland data is still the key to continuing livestock grazing on public lands, because it provides a solid defense. Collected rangeland data is quantifiable and defensible for land managers. It tells a story and documents the history of the allotments, as well as answers important resource questions and identifies impacts of management practices.

And now, the importance of monitoring and having rangeland data has grown significantly with the signing of the BLM and Forest Service’s Land Use Plan Amendments for Sage Grouse. These plans will only increase the demand for monitoring and data collection. If the range staff were unable to meet current monitoring demands previously, it must appear impossible to accomplish all the additional monitoring required in the new sage grouse plans.

The Record of Decision for the plans basically identifies several areas where rangeland and rangeland health data is needed for livestock grazing. Data will be required for all of the following – in determining the priority list of allotments for renewal and consideration for sage grouse conservation objectives; for assessments of range conditions for sage grouse habitats in the Habitat Assessment Framework; for determining whether land health standards are being met; for adjusting the conservation objectives/desired conditions table to the suitability and capability of the site; for determining causal factors if a site does not meet a standard; for determining if thresholds and responses are being met or acceptable for the area; and finally, for monitoring and evaluating any adjustments or changes in management.

In my mind this is just the beginning, and everyone needs to make sure the federal land management agencies have the necessary data to justify any changes or additions to their livestock grazing permits.

I do not see the demand for good quantifiable and defensible data going away in the foreseeable future. If anything, the need will continue to grow. That is where the RHAP program can again be utilized. The program is flexible enough to continue the type of rangeland health monitoring we have done for the past six years, but I feel RHAP can also assist our permittees and the federal land management agencies in the daunting task of sage grouse required monitoring. Again, the intent of RHAP is to cooperatively monitor the rangelands and allotments to acquire quantifiable and defensible data to assist in the permit renewal process. The RHAP program still applies to this situation.

Monitoring is required in the sage grouse plans and must be a priority for our livestock producers on public lands. Rangeland monitoring is no longer a novel idea that should be considered but a sad reality that must occur in order to maintain livestock grazing on public lands.

The demand for data continues.