Overview
With this article I have reached what I view as the “Top 3” ag law and tax developments of 2024. These are the most important in terms of their anticipated application to the agricultural sector as a whole.
Number 3 – The Beneficial Ownership Information (BOI) Reporting Rule. The BOI Reporting Rule is a regulation established under the Corporate Transparency Act (CTA) (which, in turn, was part of the Defense Reauthorization Act of 2020) with an effective date of January 1, 2024. The idea behind the CTA is to enhance financial transparency and prevent illicit activities such as money laundering and fraud. The rule requires certain businesses (those that must register with the state) to report their beneficial owners—individuals who ultimately own (to a certain degree) or control a company—to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. For covered entities (essentially) in existence before 2024, the reporting was required by January 1, 2025. For entities created during, reporting is required within 90 days of registering with the state. For covered entities created after 2024, necessary reports must be filed within 30 days of registering with the state.
Here are the key aspects of the BOI Reporting Rule:
- Who Must Report?
- Most corporations, limited liability companies (LLCs), and other similar entities created or registered in the U.S.
- Exemptions exist for certain regulated entities, such as publicly traded companies, banks, credit unions, and nonprofits.
- Who is a Beneficial Owner?
- Any individual who owns 25% or more of a company’s ownership interests.
- Any individual who exerts substantial control over the company (e.g., senior officers, decision-makers).
- What Information Must Be Reported?
- Full legal name
- Date of birth
- Residential address
- A unique identifying number (e.g., passport or driver’s license number)
- Filing Deadlines
- Existing entities (created before January 1, 2024) have until January 1, 2025, to file their initial report.
- New entities (formed on or after January 1, 2024) must file within 90 days of formation.
- Beginning January 1, 2025, new companies must report within 30 days of creation.
- Penalties for Non-Compliance (as enacted, but adjusted for inflation)
- Civil penalties of up to $500 per day for willful non-compliance.
- Criminal penalties including fines up to $10,000 and imprisonment for up to 2 years.
In 2024, numerous court cases were filed challenging the constitutionality of the BOI reporting rules. As of the end of 2024, a nationwide injunction was imposed barring enforcement of the BOI reporting rules. Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, 2024 U.S. App. LEXIS 32702 (5th Cir. Dec. 26, 2024).
Note: The BOI reporting rules will continue to be a big issue in 2025. Numerous legal challenges have been filed challenging the legitimacy of the rules. On February 10, 2025, legislation (H.R. 736) unanimously (408-0) passed the House that would delay the effective date of the CTA until January 1, 2026, for businesses in effect before 2024. Companion legislation has been introduced in the Senate.
No. 2 – Administrative Agency Deference. The broad delegation of deference to federal administrative agencies stems from Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), where the U.S. Supreme Court set forth the standard specifying that courts should defer to a federal agency’s interpretation of an ambiguous statute if the interpretation is reasonable. What is “reasonable” is a very low “hurdle” for an agency to clear for any particular regulation to be upheld. Indeed, though due process demands that every party have the opportunity to be heard in court and have their cases decided based on relevant law, under Chevron, agencies could have claims thrown out procedurally.
Chevron deference came to an end in 2024 with the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), which overruled its prior Chevron decision. The Court ruled that the APA requires courts to review regulations independently, rather than to defer to the agency’s interpretation if it is a permissible construction of the statute. However, the Supreme Court did not overturn all deference. It only disregarded the high deference that Chevron granted. As a result of the Court’s Loper Bright decision, the deferential standard that applies to federal administrative agencies reverts to “Skidmore” deference which uses the lower standard of granting “respect” to agency decisions. Skidmore v. Swift & Co., 323 U.S. 134 (1944). When courts use Skidmore’s lower threshold, agencies win a lower percentage of the time.
Note: Skidmore’s lower deferential standard allows courts to utilize judicial review to protect afflicted parties’ due process rights by weighing an affected parties’ due process interest against the government’s interest in technocratic independence from the political and legal processes.
The Supreme Court decided another case in 2024 with further implications for administrative agency deference. In Securities and Exchange Commission v. Jarkesy, 603 U.S. 799 (2024), the Court affirmed a defendant’s Seventh Amendment right to a trial by jury before a federal agency can take their property. The Securities and Exchange Commission (SEC) initiated an enforcement action against Jarkesy and his firm for violating anti-fraud provisions under federal securities laws. An administrative law judge issued a final order levying a civil penalty of $300,000. Jarkesy sought judicial review, and the Fifth Circuit vacated the order on the grounds that it violated the defendants’ right to a jury trial. The Supreme Court affirmed. The Court noted that the right to a jury trial in such matters is deeply rooted in U.S. history. British practices of evading juries through adjudications in juryless tribunals formed part of the foundation for the Declaration of Independence. The SEC penalties at issue, which involved monetary relief, were not merely designed to restore the status quo, as they were not required to be used to compensate victims. Instead, they were used to punish the defendant. As a result, the Court, agreeing with the lower appellate court, determined that the SEC penalties and associated procedures implicated Seventh Amendment rights. However, the Jarkesy majority limited the scope of its decision to penalties levied based on violations that stem from common law. Thus, if a fine arises from a violation that wasn’t historically handled by the judiciary, then a jury trial isn’t required. If an agency requests a penalty and cannot convince a jury that the penalty requested is reasonable, then the penalty was unreasonable for the violation. Jarkesy will impact how the SEC and other federal agencies enforce federal regulations because defendants are now less likely to face civil fines without a jury trial. This, in turn, should protect defendants from unreasonable fines.
The Supreme Court issued yet another significant opinion in 2024 involving administrative agencies. In Corner Post, Inc. v. Board of Governors, 144 S. Ct. 2440 (2024), the Court held that the statute of limitations for regulatory challenge begins upon injury from final agency action. The plaintiff, a truck stop and convenience store, was formed in 2017 and opened its business in 2018. The plaintiff sued in 2021 under the APA to challenge regulations promulgated by the Federal Reserve Board in 2011 in response to the Dodd-Frank Act that set the maximum interchange fees for debit cards. The plaintiff was not directly regulated by the Federal Reserve, but it paid the fees when customers used debit cards to pay for goods and services. The plaintiff sought to set aside these regulations on the ground that they set interchange fees higher than “reasonable and proportional to the cost incurred by the issuer”, as required by statute. The trial court dismissed the case on the ground that the claim was barred by a six-year statute of limitations. In other words, the trial court determined that the statute of limitations began when the regulation was issued in 2011 and had expired before the plaintiff was formed. On appeal, the Eighth Circuit affirmed. The Supreme Court reversed, holding that the statute of limitations at issue does not begin to run until the plaintiff is injured by a final agency action which, in this case, was 2018. Thus, the suit was timely.
Observation: The Corner Post decision has significant implications for administrative law and marks a pivotal shift in how and when federal regulations can be contested, potentially reshaping the landscape of administrative law and regulatory practice in the United States.
No. 1 – The Fall 2024 Federal Election. Certainly, the biggest development of 2024 in terms of its impact on agriculture is the election for a second term of Donald J. Trump along with Republican majorities in the House and Senate. The Republicans kept the House with a slight 220-215 advantage, regained the Senate with a 53-47 majority, and retook the White House. Had the Democrats swept, substantial tax increases were anticipated along the lines of a Senator Warren wealth tax or a Biden millionaire tax. That seems assured not to occur now, for the next four years. Indeed, a Trump victory suggests that it is unlikely that significant new taxes will be imposed. Since the Republicans also won the House more tax cuts may be possible.
Perhaps even more impactful is the anticipated blow to the administrative state. When coupled with the Supreme Court’s 2024 decision in Loper Bright that reduced the deference given to federal administrative agencies and the creation of the Department of Government Efficiency, it is anticipated that the federal regulation of agricultural activities will soften, perhaps substantially. In addition, the tax burden is anticipated to not increase, farm estates are not likely to be increasingly subjected to federal estate tax, and the inflationary effect of “green energy” regulations will be eliminated (which will reduce input costs for farmers and food prices for consumers) or at least substantially reduced. It is also likely that the threat of tariffs on foreign nations will be used to secure the nation’s borders and increase demand for and the production of domestically produced goods.
Conclusion
Those are what I see as the biggest developments in agricultural law and taxation in 2024. Some of the developments will certainly loom large in 2025 and other issues will surface. 2025 will certainly be interesting.