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Corporate Farming Laws after Jones v. Gale

Corporate Farming Laws after Jones v. Gale. Anthony Schutz University of Nebraska College of Law. The DCC doctrine. A State Law that discriminates against interstate commerce will be invalid unless it serves a legitimate purpose

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Corporate Farming Laws after Jones v. Gale

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  1. Corporate Farming Laws after Jones v. Gale Anthony Schutz University of Nebraska College of Law

  2. The DCC doctrine • A State Law that discriminates against interstate commerce will be invalid unless • it serves a legitimate purpose • AND there is no alternative non-discriminatory means available to achieve that purpose • A State Law that “regulates evenhandedly” is valid unless • the putative local benefits • are clearly outweighed by the burden imposed on interstate commerce • (and there are no less burdensome means of achieving the local benefits)

  3. Discrimination • Three Types of Discrimination • Discriminatory Purpose • Explicit Discrimination • Discriminatory Effect • burden all outsiders, but no (or not all) insiders • Generally not, however, when only a lesser disproportionate impact • e.g. a larger percentage of outsiders are burdened than the percentage of insiders burdened • especially when it is unclear whether market correction will result in continued disparity • If no discrimination (or only a lesser disparate impact), then the measure “regulates evenhandedly”, but may place an “incidental burden” on interstate commerce

  4. Corporate Farming Laws Synthesis • Restricted entities • Prohibited activities • Exceptions • Family Farm Entities & Authorized Entities • Ownership Structure • 2 Camps • Income and size • qualifying activities • Qualifying individual • Residency • Actively Farming

  5. Nebraska’s Corporate Farming Law • No corporations may own agricultural land or engage in farming or ranching in this State • Except, a family farm corporation. • 50% or more of the voting stock is owned by members of a family • At least one of the family members • resides on the farm OR • is actively engaged in the day-to-day labor and management of the farm

  6. What does it do?What is the burden? • prohibits some corporations from owning land or engaging in ag? • market access • prohibits some individuals from using the corporate form? • can’t raise capital in the form of equity • harder to access credit • (entity is not shielded from owner’s liability) • owner exposure to entity’s liabilities • harder to transfer assets • makes shareholder estate planning more difficult • keeps some players out of the game

  7. The Farm Farm 2 Farming Operation Farm 1 (home) Farm 3 Farm 4 Operational View (residency or active engagement anywhere is sufficient) v. Separate Parcel View (residency or active engagement must occur on each farm)

  8. Discriminatory Effect on Separate Parcel View?

  9. Nebraska’s Discriminatory Purpose • Ballot Title: Shall a constitutional prohibition be created prohibiting ownership of Nebraska farm or ranch land by any corporation, domestic or foreign, which is not a Nebraska family farm corporation . . . ? • Explanatory Statement: A vote FOR will create a constitutional prohibition against further purchase of Nebraska farm and ranch lands by any corporation or syndicate other than a Nebraska family farm corporation. A vote AGAINST will reject such a constitutional restriction on ownership of Nebraska farm and ranch land. • Campaign Materials

  10. Discriminatory Purpose • Must Entail • benevolence toward insiders • hostility toward outsiders • Problems • loose definitions • outsiders as outsiders or as representative of a larger problem? • problems for proactive legislation • too easily avoided • fictional, at best • whose purpose matters, how many must have it?

  11. Lessons • Lessons for Corporate Farming Laws from Meeting the DCC • What is “the farm” as it relates to family farms • Stay away from restricting absentee ownership • Think and speak globally, act locally (avoid discriminatory purpose) • Lessons for the DCC from Meeting Corporate Farming Laws • Clarifying the role of purpose • Clarifying the role of effects

  12. What States Survive • purpose? • effect? • location of qualifying activities • “the farm” • “actively engaged” & personal presence on “the farm” • other geographic concerns • foreign corporations

  13. Nebraska’s Failed Legislation • Defined farm at operational level • Required labor and management as qualifying activities • Eliminated residency • Provided exception for associations of active farmers, one of which is actively engaged (l & m) in the association’s operation • limited # of owners at 5 • Fixed a variety of interpretational problems (e.g. Banks as Trustees, omission of term spouses, etc.)

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