Michigan Farm News

Law of the Land: Varnum LLP

John Kenny | Varnum LLP | June 27, 2018

John-Kenny-MFN-2018

Due to the Michigan Department of Treasury’s inconsistent interpretation of Michigan sales tax exemptions regarding agricultural equipment, more than 600 farmers across Michigan contacted state representatives, senators and Governor Snyder expressing their concerns regarding Treasury’s approach.

Through their efforts, new legislation has been enacted which clarifies the types of agricultural equipment that are exempt. This is a significant win for local farmers since these changes will exempt modern agricultural equipment and technology from sales tax.

The types of equipment purchases that are exempt include:

Machinery capable of harvesting grain or other crops and biomass and machinery used for the purpose of harvesting biomass.

Agricultural land tile and subsurface irrigation pipe.

Portable grain bins, including tangible personal property affixed or to be affixed to portable bins and directly used in the operation of a portable grain bin.

Grain drying equipment and the fuel or energy source that powers that equipment.

Tangible personal property purchased and installed as a part of a structure such as a barn or shop, including, but not limited to, heating and cooling systems, water systems and milking systems.

Greenhouse structures that can be disassembled and reassembled without affecting the functionality of the greenhouse.

Agricultural land tile, subsurface irrigation pipe, portable grain bins, and grain drying equipment to a person in the business of constructing, altering, repairing or improving real estate for others to the extent that it is made a part of the real estate and used for an exempt agricultural purpose.

Tangible personal property used directly by an owner of a business enterprise to gather fish by net or line.

Tangible personal property directly used in the harvesting of aquatic vegetation from the waters of the state to a person engaged in the business of harvesting aquatic vegetation and ultimately used for agricultural purposes.

Finally, it should be noted, these changes are intended to be retroactive, but do not apply to refund claims filed prior to April 9, 2018.

 

Kenny is an associate in the Corporate and Tax practice at Varnum LLP. He can be reached at [email protected]

 

Varnum LLP | September 19, 2017

 Matt Zimmerman

It is generally well accepted that a building permit is not required for buildings used for agricultural purposes if the building does not include retail trade.  Section 10 of the Michigan Building Code plainly provides this. 

Unfortunately, this has not kept local building officials from stopping the construction of agricultural buildings for failure to have building permits or meeting other building code requirements.  It is unclear why there appears to be an increase in local attempts to regulate agricultural buildings through the building code.  It might be that new or inexperienced building officials simply do not understand the agricultural building exemption within the building code.  It might also simply be a matter of local politics – for example, a neighbor not wanting a building located where it can be seen who complains to local officials.  Or the building official may simply disagree that a particular building fits the definition of agricultural building.  In any event, what options does a farmer have when local building officials insist that a farmer apply for a building permit for agricultural buildings?

The easiest course of action may appear to be to simply file a permit application.  This may especially be the case where local building officials assure farmers that permits will be issued.  But farmers should consider the following before choosing to apply for a building permit:  you may be subjecting yourself to electrical, plumbing, mechanical and maintenance code provisions within the state building code that otherwise might not apply; you will have to pay an application fee; and you may be subjecting yourself to local zoning requirements that might have been preempted by Michigan's Right to Farm Act.

So what other options are available to farmers facing a local building official's demand to apply for a building permit?  One easy resolution that has a high success rate is to refer the building official to the attorney representing the local unity of government.  Most municipal attorneys are familiar with the Michigan Building Code and how the agricultural building exemption applies. 

If the building official refuses to involve the municipal attorney, or if the municipal attorney does not convince the building official that agricultural buildings are exempt from building permit applications, then you can appeal the building official's decision to the construction board of appeals. 

That is a board consisting of between three and seven members appointed by the governing body of the governmental subdivision.  Members are supposed to be qualified by experience or training.  Thus, they often have a better understanding of the agricultural building exemption within the Michigan Building Code than the building official.  An unfavorable ruling of the construction board of appeals may be appealed to state circuit court.

Another option is to essentially go "over the head" of the building official.  This often means the local government administrator or, if there is no administrator, the head of the legislative body of the local government (i.e. township supervisor, village president or city mayor). 

If the basis for the building official's insistence on applying for a building permit is something other than a misunderstanding of the law, these administrators or elected officials can often straighten out the situation.

Finally, you could simply do nothing and make the municipality consider if it is worth its scarce resources to bring an enforcement action.  If the municipality takes such action, you would have an opportunity to present your exemption defense before a judge.

You may never know the rationale behind a building official's demand that you apply for a building permit when the agricultural building exemption clearly applies.  Regardless of the rationale, giving in to such demands might seem to be the quickest and easiest option in the short-term.  But there are long-term ramifications that could far outweigh the short-term benefits.  So consider all of your options before deciding.

Matt Zimmerman is a partner and leads the Environmental, Energy and Natural Resources Practice Team at Varnum Law. Visit www.varnumlaw.com to learn more.

Columnists

Varnum LLP | July 6, 2017

 Kimberly Clark png

As more employers plan to use the H-2A program, completing the following items this year will make an easier transition to H-2A employment.

Implement a three-step discipline process

Many agricultural employers have not developed or consistently applied work rules.  Management should assess work activities and determine work rules and related discipline important to an effective workforce in its operations. 

While the Department of Labor generally prefers a three-step process - verbal warning, written warning, termination ‑ there is some conduct that management may assess warrants immediate termination such as violence or illegal drug use.

Managers should provide workers and train workers with customized work rules and document any disciplinary or termination process consistent with those rules. The work rules developed will need to be a part of the H-2A contract so that implementation and assessment over the course of this season will assist employers in revising as needed for the H-2A contract. 

In addition, seasonal employers sometimes choose not to discipline or terminate workers to allow the worker to complete the season without conflict, and the employer plans to not recruit or rehire that worker the following year. 

In an H-2A situation, employers must recruit all workers completing the previous season.  Accordingly, employers will need to rehire the workers not disciplined or terminated so that consistent application and action under the discipline process is essential to securing a quality workforce in the H-2A operations.

Investigate agents or contractors

Agricultural employers may participate in the H-2A program directly or through a contractor.  Employers participating directly may apply on their own or with the assistance of an agent. 

Often, employers daunted by H-2A complexities and requirements prefer to begin H-2A through a contractor.  Even though Department of Labor announced the withdrawal of the joint employer policy memo, Department of Labor will certainly assert joint employment situations whenever a farm labor contractor is operating the labor force for the agricultural entity. 

Employers and contractors may attempt to manage operations to avoid joint employer liability, but given the risk, employers should complete due diligence in selecting a contractor and enter into a contract assigning responsibilities and liabilities.  Similarly, if an employer plans to use an agent to process the direct H-2A employment contract, the employer should assess the services, costs and past experiences and performances of the agents.  In both contractor and agent situations, the entities should be willing to provide references to previous customers and be willing to discuss compliance processes and any previous Department of Labor or other audits and outcomes.

Assure housing sufficient for H-2A

H-2A employers must provide free certified housing for H-2A workers and non-local domestic workers and families (unless prevailing practice confirms no families), three meals/day or convenient cooking facilities if meals are not provided. 

Non-local domestic workers are workers who provide an address farther than 60 miles from the work location.  Michigan migrant labor housing inspectors are willing to assess migrant housing for H-2A purposes prior to use of the program so that employers may make any necessary changes and/or build or arrange for additional housing needed.  Employers may not use FHA/Rural Development Section 514 Housing for H-2A workers unless the loans are repaid and restrictions are confirmed removed.

Transportation

Employers must pay workers in-bound and out-bound transportation, but the transportation that requires the most planning is the daily transportation from housing to work locations and the weekly transportation to a grocery store. 

Employers need to assess options for vans and/or buses, drivers who can be licensed and will pass medical exams and secure the safety evaluations, insurance and driver medical exams and licenses. 

The size and location of housing units, whether the employer will operate various work schedules and availability of CDL passenger endorsed drivers will determine whether the employer chooses to operate vans with 15 person or less capacity or whether 15 plus person buses are used.

Develop job descriptions

H-2A contracts require employers to list activities with detailed job descriptions, and H-2A workers may complete only those tasks.  Employers should therefore take notes throughout this season related to the jobs the employer plans to include within the contract and job description details such as lifting requirements, bending, walking, and ladder or other equipment use.

All workers completing any work activities listed in the H-2A contract will be entitled to H-2A wages and benefits so employers often start with limited activities and preserve some positions and activities such as supervising, driving and packing to be completed by workers outside the H-2A contract. 

Over time, employers generally expand the work activities for the flexibility in placement of H-2A workers in all work activities and because employers often provide non-H-2A workers the same or better wage and benefits as the H-2A workers.

Completing review of these issues now will prepare employers to begin the H-2A process.  First-time H-2A employers should plan to begin the process approximately 6 months prior to the worker need to allow time to work through the many issues and considerations required by the program.

 

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Lights of hope for dairy producers

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