Semantics Can Be Important
It has been brought to our attention that certain AGR crop insurance policy claims are being denied. These claims are being made by a single member LLC which is being filed on a schedule F on the farmers personal tax return. An AGR policy is based upon the gross revenue of the farm operation.
A single member LLC is usually disregarded for federal income tax purposes, however the AGR policy requires a tax return be filed in the name of the entity. So to fix this problem we are required to place the name of the LLC on the schedule F with federal identification number. If these steps are not followed, the claim may be disallowed.
This is a case of where two federal governmental agencies contradict each other The IRS requires the single member LLC to be disregarded while the RMA requires a return be filed in the name of the entity. In this case it is probably better to get a letter from the IRS than have a million dollar crop insurance claim denied.
We are hoping that an appeal of this will succeed, but you never know.
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 principal with CliftonLarsonAllen in Walla Walla, 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. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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