Chuck Hassebrook, email@example.com, Executive Director, Center for Rural Affairs
The federal court ruling striking down Nebraska’s corporate farm law is not only bad for family farmers, it’s bad for all Americans.
The decision on Initiative 300 will be appealed. But if it stands, it will establish an extreme precedent that concentrates power in the federal government and deprives states and localities of authority to establish rules that serve the common good – far beyond agriculture. The most responsive levels of government will be weakened.
Initiative 300 provides owner-operated farms and ranches a level playing field on which to compete with large investor owned operations. That is sound social policy. A large body of research demonstrates that owner operated farms support stronger, middle-class communities, while large investor owned farms lead to weak communities with “a few wealthy elites, a majority of poor laborers and virtually no middle class.”
Initiative 300 is also sound economic policy. In the 23 years since its passage, Nebraska has risen to the nation’s number one red meat producing state. Initiative 300 denies no one the right to invest in agriculture. It simply requires investors who neither live on nor operate their farm to compete on the same basis as most family operations – as sole proprietors and general partnerships.
That prevents investors from gaining unfair tax advantages over family operations and using the corporate shield to shirk legal responsibility for their investments. Without Initiative 300, farm investors cannot be held personally responsible if their corporate farm wreaks havoc on the environment or fails to pay its bills. Neighbors and the community are left holding the bag and suffering the consequences.
Nonetheless, Initiative 300 was challenged on grounds that it violates the Commerce Clause of the U.S. Constitution by discriminating against out-of-state companies. 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 unique circumstances. The judge found that the law’s proponents intended to discriminate against out-of-state companies. We disagree with that finding, but the legal rationale was based on long standing precedent. States cannot pass laws for the purpose of favoring in-state companies in interstate commerce.
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.
The ruling is wrong on the facts. Initiative 300 does not distinguish between in-state and out-of-state corporations. A resident of North Dakota who works everyday on his North Dakota ranch could qualify his operation as a family farm corporation with no more difficulty than a Nebraska Sandhills rancher.
Once the North Dakota ranch qualifies as a family farm corporation, it can also operate in Nebraska. For example, it can have its cattle fed for a fee 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. It could undermine a wide range of state and local laws and transfer power to the federal government.
For example, it is inconvenient for a Floridian to gain certification to teach school in Nebraska, compared to someone prepared to meet those requirements in our teachers’ colleges. If this ruling stands, will Nebraska teacher certification laws be struck down and that responsibility handed to the federal government?
The irony of this ruling is that some of its unintended consequences may most displease its most ardent advocates. It is inconvenient for New York companies to qualify for Nebraska job creation tax incentives. It requires moving a plant to a remote location far from management. These incentives were created with the explicit purpose of favoring Nebraska production of items in interstate commerce.
If this ruling stands, will state tax incentives also be ruled unconstitutional? Even when powerful interests twist the law to suit their needs, it can come back to bite them.
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 designed to protect corporate interests and concentrate power at whatever level of government they can best manipulate.
That's not just bad for Nebraska family farmers. That’s bad for America.
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Center for Rural Affairs
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