← FarmCPA Home

Your CRP Income May Be Subject to SE Tax

By: | Trackback URL | No Comments

June 19th, 2013

In the Morehouse Tax Court case just issued yesterday, the court ruled that the receipt of CRP payments by a non-farmer are subject to self-employment taxes.  The case involved a taxpayer located in Minnesota who inherited property in South Dakota and continued to invest in additional farm land in that state.  At all times, the taxpayer never “farmed” the property, but instead either rented the land out or participated in CRP.  Over the years, the taxpayer placed additional land into CRP.

The court ruled that the payments were subject to self-employment tax since the taxpayer was in the business of farming primarily due to his participation in the following activities:

  • Satisfied seeding and weed control obligations;
  • Visited properties to ensure that the properties maintained their status as CRP properties;
  • Filed annual certificates;
  • Participated in emergency haying programs;
  • Requested cost-sharing payments; and
  • Made decisions regarding the profitability of keeping the properties enrolled in CRP.

Additionally, the court indicated that taxpayer was engaged in an “environmental friendly farming operation”.  It seems to me the taxpayer was simply trying to make more money from enrolling the land in CRP than he could get from cash renting the property. 

The Court also ruled that the taxpayer was not a farmer, but “was engaged in the business of participating in the CRP and that he enrolled, maintained, and managed multiple properties subject to CRP contracts with the primary intent of making a profit.”  It seems under this logic that the court could easily extend this definition to any rental activity that has some type of contract with a governmental agency such as low-income housing, etc.  This may become a slippery slope by the court.

The Court also overruled its own Wuebker decision in arriving at its current ruling in this case.  Courts are like people, they can change their mind.

Under the ruling of this case, it appears that almost any farmland enrolled in CRP will be subject to SE tax (at least in the Eighth Circuit) unless the case gets appealed and overruled which may take a couple of years to resolve.  We will keep you posted with any update on the case, but for now, if you have land enrolled in CRP, make sure to discuss this case with your tax advisor.

Paul Neiffer, CRP

Paul Neiffer

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation. Leave a comment for Paul. If you would like to leave a comment for Paul, follow the link above, however, please make sure to include your email address so that he can reply to your comment (your email address will not automatically show up).

More Posts - Website

Follow Me:

← FarmCPA Home

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Subscribe to this blog by:

Previous Posts


View upcoming speaking engagements and other networking events for Paul Neiffer and CliftonLarsonAllen’s agribusiness team.

See All

  • Twitter Feed

    After 82 days in a rental car my wife has talked me into a cruise. We leave Thursday for Miami. Can't wait 24 hours ago

    Will final ear weights set a new record. If so final corn yield will be going higher (unless we get an early hard freeze) 5 days ago

    Getting Train the Trainer info on the new Dairy Margin Protection program today in Denver. Learning a lot so far 5 days ago

    Has the chatter on an early freeze disappeared or is it just dormant 7 days ago

    Ag Economy; Policy Issues; and, Political Notes: farmpolicy.com/2014/09/05/ag-… 7 days ago

    Nothing prettier in August than to see rain water on the ground. At least the crops like it 3 weeks ago

    If tenants have compensated landlords fully for cash rents over the last few years, it will be much easier to get them to accept lower rents 3 weeks ago

    Is this Russia / Ukraine a case of buy the rumor / sell the news 3 weeks ago

    Nice rain and warmer temps yesterday should make good growing conditions 3 weeks ago

    Driving through Southern Minnesota and seeing some SDS in the soybeans 3 weeks ago