|The Center for Rural Affairs is partnering with the Nebraska Farmers Union, Friends of the Constitution, and other organizations to provide background and factual information on Initiative 300, Nebraska’s constitutional prohibition on non-family corporate ownership of agricultural land and assets.|
April 2008: Restriction on Corporate Farming Rejected in Nebraska Legislature
Today the legislature killed LB 1174. On a vote of 27 opposed to 20 in support the legislature rejected the committee amendment that addressed opponents concerns about the legislation by allowing unrelated farmers to form farm corporations. LB 1174 itself was withdrawn from debate after the amendment failed.
"While this vote is deeply disappointing, it is only the first round. We will be back. Nebraskans understand the importance of family farms and ranches, as well as corporate responsibility," commented Dan Owens, policy organizer for the Center for Rural Affairs.
March 2008: LB 1174 PASSES AGRICULTURE COMMITTEE 7-1
Today, March 12th, the Agriculture Committee in the Unicameral passed LB 1174 on a 7-1 vote. LB 1174 now awaits floor action by the entire Unicameral. Introduced by Senator M.L. “Cap” Dierks and co-sponsored by five other Agriculture Committee Senators, LB 1174 is a legislative replacement for Nebraska’s anti-corporate farming constitutional amendment, Initiative 300. I-300 was ruled unconstitutional by a federal court in the fall of 2006.
Read our full press release.
See our March action alert.
February 2008: Fight for I300 Replacement Bill at the State Capitol
View our action alert here and find your Senators email and phone number here. For more information on the legislative replacement for I300 download this two page PDF outlining the rational and highlights of the legislative.
In 1982, Nebraska voters went to the polls and approved Initiative 300, a constitutional amendment to limit corporate ownership of agricultural assets within the state of Nebraska. I-300 stood as an expression of the people's will for twenty-five years, strongly embracing family farming and ranching and public policy designed to support rural communities. Unfortunately, in the fall of 2006 a federal judge ruled Initiative 300 violated the United States Constitution's Commerce Clause, a decision we strongly disagree with.
We support Legislative Bill 1174 to protect family farming and ranching and support the spirit of I-300. LB 1174 would address the court's concerns and once again enact a law placing reasonable limits on the corporate ownership of Nebraska's agricultural assets.
The federal court ruled that I-300 discriminated against out of state individuals and business entities, thus violating the Commerce Clause of the United States Constitution. LB 1174 would be very close to the text of the original I-300 constitutional amendment. However, it would explicitly allow family farm corporations based in other states, with owners actively engaged in day to day labor and management, to farm and own farm land and assets in Nebraska. LB 1174 addresses the court's objections to I-300 while preserving its original intent.
LB 1174 restricts the use of limited liability entities in farming or ranching to individuals and families who work and manage their operations. Its rationale is simple. Government has conferred advantages to corporations, limited partnership, limited liability companies and other limited liability entities. They have tax advantages. And most important, they are allowed to shift responsibility for their debts and liabilities to neighbors and those with whom they do business. It is in the public interest to limit the use of these advantages to owner-operated family farms because they are the most socially responsible and socially beneficial form of agriculture. It is critical to prevent the use of limited liability entities by uninvolved investors to gain a competitive advantage over more socially beneficial family farms and ranches.
August 2007: Developing a Legislative Plan to Move Beyond Initiative 300
In the 2007 session of the Nebraska Legislature, Sen. Phil Erdman (chair of the Agriculture Committee) introduced Legislative Resolution 93. The purpose of this Interim Study Resolution is to “examine implications for the future structure, development, and progress of agricultural production in Nebraska” arising from judicial findings that Initiative 300, Nebraska’s constitutional regulation of corporate farming, is unconstitutional and no longer the law of the state.
LR 93 will allow the Agriculture Committee to obtain public comments and ideas on potential policy instruments available to the Legislature and the people of Nebraska related to the structure and development of agricultural production in the Nebraska.
In the 2007 session LB 516 was also adopted by the Legislature and signed into law. LB 516 allows for funding to support the study contemplated by LR 93. LB 516 also allows the Agriculture Committee and the Nebraska Attorney General to contract with legal and economic experts to obtain ideas on what policy instruments are available to the Legislature and the people of Nebraska.
The initial public meetings resulting from this legislation are scheduled for August 27, 28 and 30 in Norfolk, Lincoln and Scottsbluff. More details can be found here.
Initiative 300 Circuit Court Ruling Upholds District Court
On December 13, 2006, a three judge panel of the U.S. 8th Circuit Court of Appeals upheld the ruling of the U.S. District Court that Initiative 300 is an unconstitutional violation of the Commerce Clause in the U.S. Constitution. The next step in the appellate process is a request for review by the entire 8th Circuit Court of Appeals.
Following in the Omaha World-Herald, Nebraska Attorney General Jon Bruning said the state would pursue such action and, if necessary, appeal to the U.S. Supreme Court. Governor Dave Heineman also stated he supports Initiative 300 and that the U.S. Supreme Court should consider the case.
While that doesn’t necessarily impact the legal process, it may eventually bode well if the Legislature has to consider a potential substitute for I-300 (according to the Governor, it is too early to consider legislative action).
Initiative 300 Declared Unconstitutional
On December 15, 2005, a federal judge declared that Initiative 300 interferes with interstate commerce and violates the federal Americans with Disabilities Act and enjoined the state of Nebraska from enforcing the law. Attorney General Jon Bruning promised to appeal the decision. Initiative 300 will remain in effect while the case is appealed.
Others are now debating and will continue to debate the merits of the decision in this case, and that debate may play out in an appeal to the 8th U.S. Circuit Court of Appeals. But, at a time like this, it is also important to remember why the Center for Rural Affairs and our allies have fought so hard and so long to preserve Initiative 300.
I-300 Decision a Blow to State and Local Power over Corporations
The federal court ruling striking down Nebraska’s corporate farm law should send shivers down the spines of all Americans. Its implications reach far beyond agriculture and Nebraska.
The decision will be appealed. But if it stands, it strikes a profound blow to the power of states to control corporate power. And it concentrates power in the federal government. More local and responsive levels of government will be neutered of their ability to control corporate excess.
Nebraska’s Initiative 300 was challenged on grounds that it violates the commerce clause of the U.S. Constitution, by discriminating against out-of-state companies in favor of in-state interests. It was prompted by the successful challenge of the South Dakota corporate farm law. But this ruling went much further – to extreme lengths.
The South Dakota ruling was based on circumstances. The judge there found that the law’s proponents demonstrated through their statements that they intended to favor South Dakota companies over out-of-state companies. We disagree with that finding, but the legal rationale was based on longstanding precedent. States cannot pass laws for the purpose of favoring in-state companies over out-of-state companies in interstate commerce.
But in the Nebraska case, the judge never held a trial to discern the evidence. She ruled that Initiative 300 is unconstitutional on its face, essentially because it is inconvenient for out-of-state interests to comply. She based that conclusion on the fact that to qualify as a family farm corporation allowable under Initiative 300, a family member must either live on or operate the farm.
There are two problems with her finding. First, it’s wrong on the facts. Initiative 300 does not distinguish between in-state and out-of-state corporations. So a resident of Utah who works everyday on his Utah ranch could qualify his operation as a family farm corporation with no more difficulty than a rancher in the Nebraska Sandhills.
And once the Utah ranch qualifies as a family farm corporation, it can place its cattle in Nebraska custom feedlots just like Nebraska ranchers, who don’t drive to the feedlot each day to feed the cattle they own.
But most troubling is the far reaching legal precedent established by the ruling that could undermine a wide range of state laws, thereby transferring power to corporations and the federal government. For example, it is inconvenient for a Floridian to gain certification to teach school in Iowa, compared to an Iowan prepared to meet those requirements in the state’s teachers colleges. If this ruling stands, will state teacher certification laws be struck down and that responsibility handed to the federal government?
In years past, politicians railed about activist judges handing down liberal rulings. We are in a new era. Now, activist judges hand down rulings that are neither conservative nor liberal, but rather designed to protect corporate interests and concentrate power at whatever level of government they can best manipulate.
This ruling is more evidence that elections matter. It calls on each of us to carefully consider the philosophies of candidates for governor and president on regulation of corporate excess before we cast our votes.
Efforts at Modification: Initiative 300 and LB 1086
COMMITTEE HEARS "HANDS OFF I-300"
On February 17, 2004 over 400 supporters of Initiative 300 descended upon the Nebraska State Capitol to tell their state senators “Hands Off” I-300. The occasion was the hearing on LB 1086, a bill that proposed to create a gubernatorial-appointed task force to determine ways to “modify” Nebraska’s anti-corporate farming constitutional amendment.
At the hearing, representatives from the Center, Nebraska Farmers Union, the AFL-CIO, the Nebraska Catholic Conference, Nebraska Grange, Women Involved in Farm Economics (WIFE), the American Corn Growers, the Organization for Competitive Markets, and the Sierra Club all testified about the positive aspects of I-300 and the Pandora’s Box that would be created by opening I-300 for changes.
Dr. William Heffernan of the University of Missouri testified as to the unique position Nebraska enjoys in providing agricultural structural and market access advantages compared to other states. Several farmers and ranchers – including beginning farmers and ranchers – testified to the positives of I-300 and the fact that I-300 has not acted as a barrier in their operations (contrary to the assertions of many proponents of LB 1086).
This activity shows the power of an engaged citizenry. Finally, the legislative clock ran out on LB 1086. Though advanced out of the Agriculture Committee, LB 1086 never received a minute's worth of debate on the legislative floor.
Our view on LB 1086 was well known – we opposed it, thought it unfairly targeted I-300, and thought it an attempt to begin the process of changing I-300 under the guise of a “study.” We look forward to working with the Legislature – both opponents and proponents of LB 1086 – on genuine studies of all issues facing agriculture and rural communities in Nebraska.
Protecting I-300 from the Governor's Task Force
Friends of the Constitution is partnering with the Center for Rural Affairs, Nebraska Farmers Union, Friends of the Constitution, and other organizations to sponsor a series of Public Information meetings across Nebraska.
These meetings will provide background and factual information on Initiative 300, Nebraska’s constitutional prohibition on non-family corporate ownership of agricultural land and assets.
February's Public Information meetings will also provide information on LB 1086, a bill in the
Nebraska Legislature that would create a task force to recommend
modifications to Initiative 300. Finally, the meetings will provide ways
for citizens to become active in protecting Initiative 300 and opposing LB
Check back for a meeting in your area! To schedule a meeting in your area, contact Jon Bailey at the Center, 402.687.2100 x 1013 or firstname.lastname@example.org.
On April 2, 2002, the Nebraska Attorney General's Office announced it has filed a lawsuit against a corporation it accuses of violating the Initiative 300 law by operating farmland in Red Willow County.
In 1999, the attorney general's office contacted the limited liability company, Tejon Investments LLC, after receiving information that it had been operating farmland in Red Willow County since March 10, 1997.
At the time, Tejon said it would be using the farm for a non-agricultural purpose and planned to build structures on the property. The attorney general's office then approved a five-year, non-agricultural exemption as provided under Initiative 300, to give the limited liability corporation time to make improvements on the land or to divest ownership of the property.
The lawsuit filed by the Nebraska Attorney General alleges that no improvements have been made and no structures have been built, while crops continue to grow on the property. The state than filed a petition in Red Willow County District Court to have the court order Tejon Investments to divest the land and pay for the costs of not filing the LLC's existence in Nebraska with the Secretary of State.
New Research Says Anti-Corporate Farming Laws Benefit Rural Communities
Research presented at the recent meeting of the Rural Sociological Society shows that anti-corporate farming laws, such as Nebraska’s Initiative 300, lead to fewer families in poverty, lower unemployment, and higher percentages of farmers receiving cash gains from farming. The research also indicated that, while low levels of agricultural industrialization tend to benefit rural communities, these same communities suffer when industrialization and consolidation begins to dominate a county’s farm structure. (View the Executive Summary or full report)
The research was conducted by Dr. Rick Welsh of Clarkson University and Dr. Tom Lyson of Cornell University, both located in New York State. First presented at the 2001 annual meeting of rural sociologists in August, the research is being published by Friends of the Constitution, a Nebraska coalition of farm, environmental, and church groups opposed to corporate farming.
Drs. Welsh and Lyson analyzed data from the 433 counties in the United States classified as "agriculturally dependent," meaning 75% of the county’s land is used for farming and 50% of the county’s total gross receipts for goods and services come from farm sales. Based on census and economic data over a period of two decades, the researchers concluded that "states that restrict or regulate corporate agriculture (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma, South Dakota, and Wisconsin) are more likely to score higher in rural community well-being than states without such laws." In addition, states with the most restrictive anti-corporate farming laws, such as Nebraska’s Initiative 300, fared even better in the percentage of farms realizing cash gains from farming and unemployment. The restrictiveness of a state’s anti-corporate farming law was determined by a select group of legal experts.
On the issue of agricultural industrialization, the research concluded that some economic flexibility and low levels of industrialization are beneficial to rural communities. "However, there appears to be a ceiling on the beneficial effects of agricultural industrialization, and beyond a certain level, the impact turns negative," according to Welsh and Lyson. For example, higher levels of industrialization were associated with higher levels of poverty and unemployment in rural communities.
The researchers concluded, "economic flexibility ... is needed to promote healthy rural communities. However, there is also a need to limit the degree to which industrialization and the corporate penetration of agriculture occurs." Since anti-corporate farming laws have had beneficial impacts on rural communities, the researchers suggested they were good "starting points" for public policy development in U.S. agriculture.
A copy of the full report is available on request from Friends of the Constitution, 1813 250th Street, Elmwood, Nebraska 68349. For more information, contact Annette Dubas at 308-536-2082.
Attorney General Don Stenberg has reached a settlement in its lawsuit against Seaboard Farms. Stenberg had alleged that Seaboard was violating Initiative 300 because of its dealings with Nebraska Premium Farms. In the lawsuit filed in 2000 the Attorney General claimed Nebraska Premium Farms was under the control and direction of Seaboard. The feeding of hogs by Premium Farms was done for the benefit of Seaboard, with Premium Farms acting as an "instrumentality or alter-ego" for Seaboard. Actions taken to portray a sale of hogs between Premium Farms and Seaboard were just a "facade", according to the Attorney General.
In the settlement reached in August, 2001 the Attorney General agreed to drop the lawsuit in return for Seaboard's termination of all its business dealings with Nebraska Premium Farms and its owners occurring in the state. In addition, for a period of four years, Seaboard must provide annual reports on any business arrangements with anyone involving the purchase, sale, lease, or financing of livestock in Nebraska. Seaboard also granted the Attorney General consent to review National Pork Board checkoff records on the sale of any hogs sold to Seaboard by Nebraska entities for a period of four years. The Attorney General also agreed to drop claims for the collection of fines for Seaboard's failure to register with the Secretary of State in Nebraska.
Lengthy debate on other bills and redistricting battles have caused LB 196 to be held over until the 2002 legislative session. The bill, designated an Agriculture Committee Priority, reached the full legislature in March after being passed 6-0 from the Committee. But even being named a priority wasn't enough to move a bill in this session. The bill would require certain general partnerships to file a statement with the Secretary of State indicating what agricultural activity they are engaged in and in what counties they are operating. Only general partnerships in which one of the partners is a limited liability entity (like a corporation or LLC) will have to file the statement. Friends of the Constitution will be back to the legislature next year to see that LB 196 is adopted.
In early May Nebraska Attorney General Don Stenberg announced a settlement in the lawsuit against Christensen Farms of Minnesota for violation of Initiative 300. The lawsuit had been brought in June 2000 alleging that Christensen Farms was farming illegally in the state because it didn't qualify as a family farm corporation. None of the family members of the corporation resided on or provided day-to-day labor and management at the corporation's hog operations. The settlement reached with the corporation requires that all assets owned by the corporation in Nebraska be transferred to a general partnership, which provides no limited liability or tax benefits. The settlement also requires that for five years the partnership will have to provide insurance documents, tax returns, checkoff payment records, and other documents to ensure that neither the Minnesota corporation nor any other limited liability entity connected to the Christensens is engaged in farming in Nebraska.
Friends of the Constitution has filed an amicus curiae ("friend of the court") brief in a lawsuit brought by the Farm Bureau against South Dakota's constitutional ban on corporate farming. The brief was filed on behalf of Everett Holstein, Rudy Meduna, and Dan Hodges, three Nebraska family farmers and Initiative 300 supporters. The Farm Bureau and other plaintiffs in the South Dakota lawsuit claim the law, which was modeled after Initiative 300, violates the equal protection and commerce clauses of the federal constitution. A trial in the lawsuit is scheduled to begin on December 3, 2001.
Friends of the Constitution, a coalition of farm, church, and environmental groups that support Initiative 300, has requested that Attorney General Don Stenberg investigate several entities for possible violation of the law that bans corporate farming. Most of the entities reported to the Secretary of State in 1999 or 2000 that they were engaged in agricultural activities in the state. Others were identified through inquiries made by FOC supporters. A list of some of the entities submitted in 2000 and 2001 for investigation are as follows:
1. Farmland Industries, Inc. – Kansas City, Missouri. In 1999 it reported it has owned land in Gage County since 1988. It claims as an exemption that it is a business that leases land for alfalfa production (this exemption is only available to alfalfa processors).
2. GSI Cattle Company (c/o CT Corporation System) – Lincoln, Nebraska. In 1999 it reported that it is engaged in livestock feeding in Platte County. It claimed an exemption for livestock futures contracts, livestock purchased for slaughter, or livestock purchased and resold within two weeks (this exemption is generally only available to meatpackers).
3. LDH Farms, Inc. – Chanute, Kansas. In 1999 it reported that it is engaged in livestock feeding in Cherry, Dawson, and Lincoln counties. It claimed an exemption for livestock futures contracts, livestock purchased for slaughter, or livestock purchased and resold within two weeks.
4. Middle States Realty, Inc. – Lincoln, Nebraska. In 1999 it reported to be engaged in farming in Fillmore, Dawson, and Phelps County (as well as Cherokee County, Iowa). It claimed an exemption as a family farm corporation.
5. Omaha Social Club, Inc. – Omaha, Nebraska. In 1999 it reported to be engaged in livestock feeding in Douglas County. It claimed an exemption for alfalfa production.
6. Ranch Spur, Inc. – Pittsburgh, Pennsylvania. In 1999 and 2000 it reported to be engaged in farming in Burt County. It claimed an exemption as a family farm corporation.
7. Schou Enterprises, Inc. – Ft. Collins, Colorado. In 2000 it reported to be engaged in farming in Cheyenne County. It claimed an exemption as a family farm corporation.
8. Steininger Farms, Inc. – South Milwaukee, Wisconsin. In 1999 it reported to own CRP land in Pawnee County. It claimed an exemption as a family farm corporation.
9. Vaquero, Inc. – Norfolk, Nebraska. In 1999 it reported to be engaged in livestock feeding in Stanton County. It claimed an exemption for futures contracts, livestock purchased for slaughter, or livestock purchased and resold within two weeks.
10. Windmill Valley Enterprises, Inc. – Sioux City, Iowa. In 1999 it reported to be engaged in farming in Lancaster County. It claimed an exemption as a family farm corporation.
11. Benson Chiropractic Clinic P.C. -- Omaha, Nebraska. In 1999 it reported it is engaged in farming activities in Nance County and claims an exemption for growing seed, nursery plants, or sod.
12. Birchtree, Inc. -- Dickinson, Texas. In 1999 it reported to be engaged in farming in Dawson County and claims an exemption as a family farm corporation and a business that leases land for alfalfa production (this exemption is only for alfalfa processors).
13. Calla Corporation -- Bellingham, Washington. In 1999 it reported to be engaged in farming, ranching, and livestock feeding in nine Nebraska counties. It reported that the property is leased to others and claimed an exemption for alfalfa production and growing seed, nursery plants, or sod.
14. Crow Butte Land Company -- Denver, Colorado. In 1999 it reported it leased land to others for haying in Dawes County. It claimed an exemption for mineral rights and land purchased for immediate or potential use for non-farming or non-ranching activities.
15. Koch Agriculture Company -- Wichita, Kansas. In 1999 and 2000 it reported to be engaged in livestock feeding in Dawson, Red Willow, and Hitchcock Counties. It claimed an exemption for livestock futures contracts, livestock purchased for slaughter, or livestock purchased and resold within two weeks.
16. Morrison and Quirk, Inc. -- Hastings, Nebraska. In 1999 it reported to be engaged in farming in Burt, Cuming, Thurston, and Dakota Counties. It claimed an exemption for alfalfa production.
17. Sauvage Gas Service, Inc. -- Las Vegas, Nevada. In 1999 it reported it was engaged in farming and livestock feeding in Red Willow County. It claimed an exemption as a family farm corporation.
18. Sinclair Cattle Company, Inc. -- Towson, Maryland. In 1999 it reported to be engaged in cattle breeding and raising of livestock in Brown and Stanton Counties. It claimed an exemption for livestock futures contracts, livestock purchased for slaughter, and livestock purchased and resold within two weeks.
19. Walker III -- Voss, LLC, Denver, Colorado. In 1999 it reported it leased agricultural land to livestock producers in Dawes County. It claimed an exemption as a family farm corporation.
20. Yuma Holding Company, Inc. Englewood, Colorado. In 1999 it reported to be engaged in farming in Sheridan County. It claimed an exemption for growing seed, nursery plants, or sod.
21. Nebraska Partners (d.b.a. Mead Cattle Company), Mead, Nebraska. Nebraska Partners is a general partnership. The two partners are Bryan and Washington LLC from West Point, Mississippi and Van Horn LLC. The Van Horn LLC lists Mead, Nebraska as its location but there is evidence the primary member in this LLC lives in California. General partnerships are only exempt from I-300 if all of the partners are likewise exempt from the law.
22. Agri Management Systems, Inc. -- Holdrege, Nebraska. In 1999 it reported it was engaged in livestock feeding in Phelps County. It claimed an exemption for livestock futures contracts, livestock purchased for slaughter, or livestock purchased and resold within two weeks (this exemption is generally only available to meatpackers).
23. Agrium Nitrogen Company -- Denver, Colorado. In 1999 it reported to own land in Lancaster County that was rented out for farming. It claimed an exemption for custom spraying, fertilizing, or harvesting.
24. Agrium U.S. Inc. -- Denver, Colorado. In 1999 it reported it owned land in Lancaster County that was rented out for farming. It claimed an exemption for custom spraying, fertilizing, or harvesting.
25. Beaver Valley Investment Company -- Edina, Minnesota. In 1999 it reported it was engaged in farming in Merrick County. It claimed an exemption as a family farm entity.
26. Blue Stem Land and Cattle Co. In 1999 the company listed Fairbanks, Alaska as its address and reported it was engaged in farming in Hamilton County. It claimed an exemption for growing seed, nursery plants, or sod. In 2000 the company listed Broken Bow, Nebraska as its address and again reported to be engaged in farming in Hamilton County. In 2000 it claimed an exemption as a business that leases land for the production of alfalfa (this exemption is only available for alfalfa processors).
27. Brown's Canyon Country, LTD. -- Maywood, Nebraska. In 1999 this limited partnership reported it owned land in Hayes, Frontier, and Lincoln counties. It reported it rented the land out to others to farm and ranch. It claimed an exemption as a family farm entity.
28. ESG Watts, Inc. -- Rock Island, Illinois. In 2000 it reported to contract with others for the production of agricultural commodities in Cass County. It claimed an exemption for the production of alfalfa.
29. Excel Corporation -- Wichita, Kansas. In 1999 it reported it was engaged in ranching in Colfax and Dawson County. Two reports were filed, with one of them indicating they contracted with others for the production of agricultural commodities. It claimed an exemption for the production of alfalfa and for livestock futures contracts, livestock purchased for slaughter, or livestock purchased and resold within two weeks. This company's meatpacking activities would be exempt under I-300's exemption (1)(N) but this would not exempt any ranching activity that it may be conducting.
30. Riddell Sales, Inc. -- Dakota Dunes, South Dakota. In 2000 it reported to be engaged in farming in Burt County. It claimed an exemption as a family farm entity.
31. Scottsdale A.K. Medical LLC. This is a foreign limited liability company from Arizona but its registered agent is from Norfolk, Nebraska. In 1999 it reported to be engaged in ranching in Knox County. It claimed an exemption as family farm entity.