California Ag Network

Tag: 2017 California Wildfires

  • Bee-Well Farms: Resilience In The Face of Destruction

    In The Face of Destruction, Austin and Melissa Lely Are Resilient Young Farmers with a Positive Outlook on the Future of Agriculture

    Glen Ellen, Calif., (March 15, 2018) – Austin and Melissa Lely met at Chico State in 2010. They graduated as recreation majors and neither had a farming background. After graduating, the married couple moved to Glen Ellen, near where Austin grew up.

    Austin, 28, and Melissa, 27, fell in love with food and said their shared interest just spiraled. At the same time, the couple was seeing issues with the local food system, and saw a trend towards consumers seeking healthy food.

    Five years ago, they moved to a house in Glen Ellen where they were caretakers of the property and began growing their own food.

    “We decided that if we were going to have our own garden, let’s have it big enough for the community and farmers’ markets,” said Melissa.

    The couple incorporated as Bee-Well Farms in 2015 and was growing an acre and a half of produce for local farmers’ markets and raising chickens for egg production. They did one farmers’ market the first year and have expanded every year since.

    In 2017, they increased from raising 65 chickens to more than 400. Their chickens are raised in mobile coops which essentially make the entire farming operation moveable.

    A year and a half ago Melissa left her job at Beltane Ranch where she worked for their Bed and Breakfast and in their organic garden to work full time on Bee-Well Farm. Austin left his 5 year career with Benziger Family Winery, where he originally joined the company as event staff. Eventually Austin advanced to a position in Benziger’s tasting room, then their viticulture and sustainability department before his most recent position as ranch manager. During his time with Benziger, Austin learned a lot through their biodynamic program, skills he is looking forward to applying to Bee-Well.

    “This year was going to be the year we dive right in and really grow the farm,” said Austin. “We had planned on growing our egg production to 2,000 laying hens for 2018. We had ordered the 1,600 chicks in July of 2017 and they were supposed to be delivered on October 12, 2017.

    “On the night of October 8, around 11:30 p.m. our neighbor woke us up in a panic. He said that there is a fire and everyone needs to leave. We drove to the back of the property to check the cows and the fire was already burning the ranch next to us.

    “We did what we could for the cows but there was no fire break between the ranches and the winds were around 60 mph and blowing in our face. There were cops and firefighters telling us to leave now. We went back to our house and grabbed my wife’s wedding ring, important documents, our cash and dog and left Glen Ellen.”

    That was right before midnight, and at 7 a.m. on October 9th Austin and Melissa received a call from their landlords that everything was gone, including the house they had lived in the last five years.

    By 8 a.m., they were back on the property. They had stopped and picked up a bale of hay from a neighbor, and came back to find that all their animals had survived.

    On the right, crews finish cleaning up the debris of the house Austin and Melissa Lely lived in that burned in the October wildfires. On the left is where Austin and Melissa will grow row crops for farmer’s market this spring.

    “We lost our house, truck, UTV, hay barn with hay and chicken feed, greenhouse, poultry barn, chick brooder, tool shed full of our power tools and farm equipment, packing facility, all our fence lines, the wells and power,” said Austin. “We literally lost everything.”

    Austin and Melissa stayed for eight days with the fire burning around them. They described the roadblocks into the evacuation zone as a nightmare and said they were meeting friends to bring in bare necessities of food and supplies.

    They said that during the days that ensued, the couple was in survival mode taking care of their animals as well as their neighbors stock who were unable to access their adjacent properties. They said they each worked more than 80 hours in the first five days, sleeping in shifts of four hours.

    Austin and Melissa said they were particularly grateful for the community support over the following months, especially their neighbors. The Kunde family put them up after they lost their house and the Lelys are continuing to rent that house. Austin and Melissa tried to keep their animals on their home property, but after two weeks of hauling water for the animals, the Kunde family encourage the young couple to house their animals on the Kunde ranch.

    A relative of the Lelys started a GoFundMe for the couple that raised more than $10,000.

    Both Austin and Melissa agree they learned a lot through the recovery process.

    They applied through grants with NRCS and FSA for fencing, erosion control, creating defensible space and more. They learned about many additional programs these organizations offered which they didn’t know about before the fires.

    The last standing building on the Lelys’ property as crews continue to clear debris.

    Austin and Melissa are positive about their business and what the future has in store for them.

    “We are all all-in,” said Melissa. “All of this will go forward and be even stronger than before.”

    Their landlords, who have a small vineyard and produce wine, also have tenants growing cannabis. They all see the three businesses working together to create a polyculture and agritourism hub.
    “It will be easier to rebuild with a focus and direction,” said Melissa. “We’ll have the opportunity to build a functional flowing system and all work together.”

    Melissa sees their business shifting slightly from last year. Where they participated in seven farmers’ markets per week in 2017, they are going to focus on a couple of the markets they felt worked better for their farm.

    They plan to open an on-site farm stand and build a website where they can sell commodities online. They’re also planning on hosting events starting with a plant sale in the spring and pumpkin patch in the fall.

    They’re passionate about educating their community, and they hope to share their message about eating locally as well as hosting seminars and workshops.
    They plan to continue to grow, especially their egg production which they said there is a high demand for, but they also have plans to diversify. Additionally, the Lelys are planning to transition their row crops into more permanent raised beds.

    “This year, we’re really excited to just be able to focus on farming,” said Melissa.

    At the end of February, the couple still had no power or water to their farm, but they began to see progress in the clean-up of debris and everything began to happen quicker than they expected.
    When asked how they got through the most difficult times, they both responded at once: “She’s a badass,” Austin said while Melissa said, “luckily I’ve got this guy by my side.”

    “We have a passion for making this place happen and a strong vision for the farm,” said Melissa. “We’re trying to focus on the positives, the blessings and the awesomeness of the community.”

    Through the recovery process, Austin and Melissa were both excited to see that people still value the service of agriculture. The couple said they are saddened to hear about other farmers who have chosen not to continue farming after the October wildfires, but they know it’s a difficult decision and said they couldn’t do it without the community support they have received.

    You can donate to the GoFundMe for Austin and Melissa at gofundme.com/missys-homebusiness.

    Written By: Rachel LaFranchi

  • After the Thomas Fire: Growers Inspire With Resiliency, Optimism

    Sacramento, Calif., (February 16, 2018) – The recent holiday season collapsed in flames for thousands of Ventura and Santa Barbara County residents in the path of the catastrophic Thomas Fire. It is considered the largest fire in California history, burning nearly 282,000 acres and destroying more than one-thousand homes and other structures. The fire spread across 440 square miles, more land than any California city except Los Angeles. It burned all the way to the Pacific Ocean, and it also damaged terrain near the community of Fillmore, about 30 miles away.

    California farmers were in the path of the fire, as well, and I was privileged yet saddened to meet with some of them last week on a trip through the burn area. There was a profound feeling of devastation when standing on homesites that were completely leveled by fire.

    Avocado growers suffered damage across nearly five-thousand acres of groves, and citrus growers also experienced losses. One of the things I learned is that avocado orchards were more susceptible than citrus because the plantings are generally at higher elevations, where the Thomas Fire cut much of its destructive path. There were also significant losses to rangelands.

    However, I must point out that as I visited with growers I was struck right away by their resiliency and their optimism. They shifted into recovery mode almost immediately, going into their orchards as soon as it was safe to replace irrigation drip tape that melted in the fire, in order to protect their trees and soils from further damage.

    Incidentally, those irrigation systems demonstrated the value of working Ag lands by generating enough moisture to help keep the fire from doing even more damage to homes.

    I wish to thank the California Avocado Commission for hosting my visit. The farmers I met last week are already looking to the long-term, talking about opportunities to rebuild rather than focusing on what was lost. Their sense of cooperation and commitment to community is truly inspiring.

    Secretary Ross looks over a part of the Thomas Fire burn area with avocado grower Dan Pinkerton while Ventura County agricultural commissioner Henry Gonzales looks on.
    All photos courtesy of Ken Melban, California Avocado Commission.
    The fire burned all the way to the ocean.
    A charred avocado grove near Santa Paula.
    Secretary Ross (fifth from right) with growers in Fillmore.

  • RCD Secures Fire Recovery Funding

    Ventura, Calif., (January 22, 2018) – The Ventura County Resource Conservation District, working with the California Avocado Commission, has secured a grant from the State Water Resources Control Board to pay for post-fire restoration projects. The $105,000 grant must be expended by March 31, so property owners are encouraged to contact the RCD quickly to apply.

    The money can be used for such projects as:

    • Replacement of fire- or slide-damaged culverts
    • Removal of invasive plants and revegetation with native plants along burned riparian corridors.
    • Purchase and installation of erosion-control materials such as fencing, straw wattles, seed and native plants.

    The RCD will purchase materials and supplies. Landowners are responsible for installation costs, including labor and delivery charges.

    The RCD also administers funding through the federal Nonpoint Source Grant Program, and can provide support for long-term fire recovery, mitigation and management. Post-fire projects that reduce threats to endangered or threatened species, and/or municipal drinking water supplies, will receive preference. Limited funding is also available for restoration planning and damage assessments in areas affected by the fire. Applications are due Feb. 8.

    For more information about either program, contact Lexi Everhart at the RCD:

    (805) 764-5135, lexieverhart.vcrcd@gmail.com.

  • Tax Relief & Deductions for Wineries this Year

    Q&A with a Winery Tax Expert

    1. What tax relief is available for wineries affected by fires in 2017?

    The IRS has announced that individuals and businesses affected by the fires in California now have until January 31, 2018 to file certain tax returns and make certain payments. There are currently seven counties eligible for relief: Butte, Lake, Mendocino, Napa, Nevada, Sonoma and Yuba. This list may continue to grow if the disaster continues to spread. Individuals, businesses, as well as visiting firefighters and relief workers, qualify for the extension.

    Individual and business tax filings and payment deadlines that occurred starting on October 8, 2017 have been extended, giving those affected until January 31, 2018 to file returns and pay any taxes originally due during this period. The affected deadlines include:

    • Extension for October 31 deadline for quarterly payroll and excise tax returns
    • Extension for calendar year tax-exempt organizations with 2016 extensions running out on November 15, 2017
    • Waiving of late deposit penalties for federal payroll and excise tax deposits normally due between October 8 and October 23 (if deposits are made by October 23, 2017). Find additional information on the disaster relief page on IRS.gov.
    1. What is the difference between casualty loss and disaster loss?

    These two types of losses overlap. Every disaster loss is also a casualty loss, but not every casualty loss is a disaster loss.

    Disaster Area Losses: a loss that occurred in an area declared by the President to be eligible for federal assistance— usually during a major disaster or emergency. The following website maintains an updated list of the disaster declarations by year and area: https://www.fema.gov/disasters/grid/year

    Casualty Losses: the result of damage, destruction, or loss of property from any sudden, unexpected, or unusual event. This includes flood, hurricane, tornado, fire, earthquake, or volcanic eruption. Some losses due to vandalism, theft and human cause may also qualify. A casualty doesn’t include normal wear and tear or progressive deterioration.

    1. My home is located on my winery and both have been damaged by fire, how will this affect my taxes?

    The amount of loss not covered by insurance should be deductible as casualty losses for both your home and business — the difference is compliance or tax forms. For your home, you can claim casualty losses for any personal property on your individual tax return, Form 1040. Losses from the winery are business related and should therefore be claimed on the business return.

    1. If I donate wine, can I claim it on my tax returns as a charitable contribution?

    Yes, it is characterized as a non-cash donation. The value of the deduction will depend on whether the wine was an inventory item or wine collection. Typically, you will be limited to your cost basis. However, if you donate an inventory item, the amount of your deductible contribution is the fair market value (FMV) of the item minus any gain you would have realized if you had sold the item at its FMV on the date of the donation.

    Note that depending on the value of the donated wine, additional information may be required. If the value of your non-cash donation exceeds $500, but is less than $5,000, you will need to include additional IRS tax forms with your tax return (Form 8283 Noncash Charitable Contributions). If the value of your non-cash donations exceeds $5,000 dollars, you will need to obtain an appraisal report from a qualified wine appraiser, unless it is inventory.

    1. What counts as Research and Development (R&D) for wineries?

    Most people think that R&D is only for tech and medical companies, but agriculture can also qualify for the Federal Research and Development Tax Credit. Eligible costs typically include employee wages, cost of supplies, cost of testing, contract research expenses, and costs associated with developing a patent.

    The Tax Credit allows a credit of up to 20% of the excess of qualified research expenses, which must meet the following criteria:

    • New or improved products, processes, or software
    • Technological in nature
    • Elimination of uncertainty
    • Process of experimentation

    For wineries, the following processes may qualify for R&D Credit:

    • Developing wine cave
    • Land development and irrigation improvement
    • Analytical software
    • Harvesting technologies
    • Gene culturing
    • Spoilage prevention
    • Preservation (after the bottle has been opened)
    • Wine blending
    • Packaging and bottling innovation

    To claim the credit, a third party may be hired to perform a Research and Development study aimed at identifying qualifying processes and activities. If R&D efforts do not warrant a third party study, internal documentation with respect to innovative processes and activities should be maintained to support qualifying expenses for R&D credit calculation.

    1. Do wineries qualify for the Section §199 Tax Deduction?

    Any manufacturing, blending, and finishing of wine that is later poured into a bottle with a label for wholesale is considered an eligible production activity. IRC § 199 allows a business with “qualified production activities” to take a deduction equal to 9% of the lesser of (1) the qualified production activities income of the taxpayer for the tax year or (2) taxable income (determined without regard to Section 199) for the tax year. The deduction is also limited to 50% of the W-2 wages of the employer for the tax year. The IRC § 199 deduction is allowed for both the regular tax and the alternative minimum tax.

    Bottom line, if you’re making wine and making money, there is 9% deduction in taxes that is available to you. Note that the Trump Administration’s tax reform proposal is seeking to eliminate this deduction, so take advantage of it while you can!

    1. Are there any additional tax breaks for wineries?

    There are many special deductions available to agricultural businesses, here are a few that most wineries can benefit from:

    • Agricultural businesses, including wine producers, can carry losses back five years, while most businesses are only allowed a two-year net operating loss carryback
    • Many growers who cannot use the cash method can deduct post-harvest/pre-bud break costs.
    • Agricultural equipment that is primarily used in producing and harvesting is allowed a sales tax exemption. Solar equipment that help power qualifying machinery are exempt from sales tax. If you have already installed a solar system, you may be eligible for a refund on taxes paid up to three years ago
    • IC-DISC: if your winery exports products, it may benefit from Interest-Charge Domestic International Sales Corporation (IC-DISC) entity structure. IC-DISC only exists on paper and it is not taxed at the federal level. This entity’s sole purpose is to collect sales commission from overseas and then distribute the income back to their shareholders in the form of qualified dividends. Tax savings can be significant at the highest tax bracket due to lower rate at which qualified dividends are taxed compared to ordinary income.

      Monic Ramirez

    Monic Ramirez is a Tax Partner at Sensiba San Filippo specializing in tax planning and compliance. She is an expert in multi-state taxation and foreign operations and works with a wide range of industries, including closely-held businesses, agriculture and manufacturing and distribution. Monic can be reached at mramirez@ssfllp.com or at 408.776.8900.