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North Dakota Anti-Corporate Discussion
The state of North Dakota, North Dakota Farmers Union (Farmers Union) and the Dakota Resource Council are claiming victory after a Sept. 21, 2018, decision involving a lawsuit regarding the state’s anti corporate farming laws.
Anti-corporate farming laws restrict the power of certain corporations to engage in farming or agriculture or to attain land that is used for agriculture purposes. The state of North Dakota Attorney General, Farmers Union and Dakota Resource Council are in strong support of the anti-corporate farming laws and defended the law during the proceedings.
“We have had the anti-corporate farming laws in place since 1932, with only a minor change in the early 1990s which allowed for family farm corporations,” said Mark Watne, Farmers Union president. “What anti-corporate farming laws do is allow the ownership of the land to remain in the hands of family farmers and ranchers.”
“It creates an opportunity for North Dakota farmers and ranchers to be the people that own and operate the land. It also takes away another competitor’s ability to purchase that land,” says Watne. “We fully understand that there is an economic model that is important to why people farm. If you make the economics successful, family farms and ranches can do everything that corporations can do.”
North Dakota Farm Bureau (Farm Bureau) and other groups filed the lawsuit in June of 2016, on behalf of family farms and ranches across the state, calling the laws unconstitutional.
“The corporate farming laws restrict the ability for farmers and ranchers to utilize a corporate financial structure that is available to any other legal business in the state,” said Daryl Lies, Farm Bureau president.
The decision made by Judge Daniel L. Hovland of the U.S. District Court for North Dakota will continue to allow the North Dakota Attorney General to enforce the law but severed the statues that showed “concrete and imminent injury” to the plaintiffs.
By doing this they removed the parts of the law that required discrimination against those outside North Dakota and entered an order prohibiting such discrimination. Therefore, the state will now allow an exception to small family farm corporations and to corporations organized outside the state.
“It’s gratifying to see the court acknowledge the injury and harm our current law causes to our plaintiffs. Additionally, we were happy to see the court acknowledge the existing corporate farming laws clearly violate the dormant Commerce Clause, regarding the definition of the term ‘domestic,’” states the Farm Bureau official statement regarding the anti-corporate farming law. The term ‘domestic’ will now be removed from the language of the law.
Daryl Lies, Farm Bureau president, expressed shock that the Farmers Union and other groups claimed a full victory during his monthly podcast, Dialogue With Daryl.
“We have prevailed in many, if not a majority of, the motions contained within the decision,” Lies explains. “Time and time again, the judge ruled that the motions brought forth by the Farmers Union, Dakota Resource Council and the Attorney General were not in good standing. And we prevailed on those.”
Lies goes on to explain that Farm Bureau “prevailed in the situation of where we felt that the dormant Commerce Clause was violated in how non-resident, out-of-state interests were treated, and the judge ruled in our favor, that yes, that did violate the dormant Commerce Clause.”
The Farm Bureau board of directors and plaintiffs, are committed to continuing to review the decision and determine what additional needs and actions will need to be addressed. “Now, we did not prevail on everything,” states Lies. “And we are looking through and studying thoroughly, along with our legal advisors, of what those next steps will be in this fight to provide freedom and opportunity, and the ability of self-reliance for farmers and ranchers in North Dakota.”
Currently to qualify as a family farm corporation in North Dakota, the entity must be made of family members within a certain degree of kinship with at least one shareholder actively engaged in farming or ranching. Only those shareholders that are actively engaged in farming and ranching can serve as officers or directors of a farm corporation.
Sixty-five percent of the gross income over the past five years, or every year of its existence, must also come from farming or ranching and the corporation cannot acquire ownership of land for being leased out to others. A farm corporation that is incorporated in another state can engage in farming and ranching in North Dakota if the appropriate documents are filed, and the farm corporation continues to meet the North Dakota requirements for a family farm corporation.
There are currently nine states that have laws that prohibit or limit corporate farming including North Dakota, South Dakota, Nebraska, Iowa, Minnesota, Wisconsin, Oklahoma, Missouri and Kansas.