House File 2072 - Introduced
HOUSE FILE
BY ALONS, LALK, CHAMBERS, SODERBERG,
KAUFMANN, DRAKE, DE BOEF, DOLECHECK,
UPMEYER, WATTS, TJEPKES, HUSEMAN,
HUTTER, JONES, BAUDLER, WILDERDYKE,
GREINER, RAYHONS, J.K. VAN FOSSEN,
STRUYK, S. OLSON, SANDS, HUSER,
J.R. VAN FOSSEN, PAULSEN, KURTENBACH,
HORBACH, JACOBS, GRANZOW, EICHHORN,
MAY, ANDERSON, ROBERTS, BOAL, TYMESON,
CARROLL, HEATON, KUHN, MERTZ,
WHITAKER, FREVERT, DIX, RASMUSSEN,
SWAIM, DAVITT, HOGG, SHOMSHOR,
SCHUELLER, ELGIN, JENKINS, MILLER,
HOFFMAN, and LUKAN
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to financial transactions associated with
2 agricultural production, by providing for a tax credit to
3 facilitate the transfer of assets, and including an effective
4 and applicability date.
5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN
1 1 Section 1. Section 175.2, Code 2005, is amended by adding
1 2 the following new subsection:
1 3 NEW SUBSECTION. 0A. "Agricultural assets" means
1 4 agricultural land, depreciable agricultural property, crops,
1 5 or livestock.
1 6 Sec. 2. NEW SECTION. 175.37 AGRICULTURAL ASSETS TRANSFER
1 7 TAX CREDIT == AGREEMENT.
1 8 1. An agricultural assets transfer tax credit is allowed
1 9 under this section. The tax credit is allowed against the
1 10 taxes imposed in chapter 422, division II, as provided in
1 11 section 422.11M, and in chapter 422, division III, as provided
1 12 in section 422.33, to facilitate the transfer of agricultural
1 13 assets from a taxpayer to a beginning farmer.
1 14 2. In order to qualify for the tax credit, the taxpayer
1 15 must meet qualifications established by rules adopted by the
1 16 authority. At a minimum, the taxpayer must comply with all of
1 17 the following:
1 18 a. Be a person who may acquire or otherwise obtain or
1 19 lease agricultural land in this state pursuant to chapter 9H
1 20 or 9I. However, the taxpayer must not be a person who may
1 21 acquire or otherwise obtain or lease agricultural land
1 22 exclusively because of an exception provided in one of those
1 23 chapters or in a provision of another chapter of this Code
1 24 including but not limited to chapter 10, 10C, 10D, or 501, or
1 25 section 15E.207.
1 26 b. Execute an agricultural assets transfer agreement as
1 27 provided in this section.
1 28 3. An individual may claim a tax credit under this section
1 29 of a partnership, limited liability company, S corporation,
1 30 estate, or trust electing to have income taxed directly to the
1 31 individual. The amount claimed by the individual shall be
1 32 based upon the pro rata share of the individual's earnings
1 33 from the partnership, limited liability company, S
1 34 corporation, estate, or trust.
1 35 4. The tax credit is allowed only for agricultural assets
2 1 that are subject to an agricultural assets transfer agreement.
2 2 The agreement shall provide for the lease of agricultural land
2 3 improvements and may provide for the rental of agricultural
2 4 equipment as defined in section 322F.1.
2 5 a. The agreement may be made on a cash basis or on a
2 6 commodity share basis which includes a share of the crops or
2 7 livestock produced on the agricultural land. The agreement
2 8 must be in writing.
2 9 b. The agreement must provide for the lease of the
2 10 agricultural land for a term of at least two years, and the
2 11 agreement or that part of the agreement providing for the
2 12 lease may be renewed by the lessee for a term of at least two
2 13 years. The taxpayer may claim the tax credit under the
2 14 renewal agreement in the same manner as the original
2 15 agreement. An agreement does not include a lease or the
2 16 rental of equipment intended as a security.
2 17 5. The tax credit shall be calculated based on the gross
2 18 amount paid to the taxpayer under the agricultural assets
2 19 transfer agreement.
2 20 a. Except as provided in paragraph "b", the tax credit
2 21 shall equal five percent of the amount paid to the taxpayer
2 22 under the agreement.
2 23 b. The tax credit shall equal fifteen percent of the
2 24 amount paid to the taxpayer from crops or animals sold under
2 25 an agreement in which the payment is exclusively made from the
2 26 sale of crops or animals.
2 27 6. a. In order to qualify as a beginning farmer, a person
2 28 must be eligible to receive financial assistance under section
2 29 175.12. The taxpayer may claim the tax credit on the gross
2 30 amount paid to the taxpayer under an agricultural assets
2 31 transfer agreement as provided in this section until the
2 32 beginning farmer is no longer eligible to receive financial
2 33 assistance under section 175.12.
2 34 b. A tax credit in excess of the taxpayer's liability for
2 35 the tax year may be credited to the tax liability for the
3 1 following five years or until depleted, whichever is earlier.
3 2 A tax credit shall not be carried back to a tax year prior to
3 3 the tax year in which the taxpayer redeems the tax credit. A
3 4 tax credit shall not be transferable to any other person other
3 5 than the taxpayer's estate or trust upon the taxpayer's death.
3 6 7. A taxpayer shall not claim a tax credit under this
3 7 section unless a tax credit certificate issued by the
3 8 authority is attached to the taxpayer's tax return for the tax
3 9 year for which the tax credit is claimed. The authority must
3 10 review and approve an application for a tax credit as provided
3 11 by rules adopted by the authority. The application must
3 12 include a copy of the agricultural assets transfer agreement.
3 13 The authority may approve an application and issue a tax
3 14 credit certificate to a taxpayer who has previously been
3 15 allowed a tax credit under this section. However, the
3 16 authority shall not approve an application or issue a
3 17 certificate to a taxpayer if any of the following applies:
3 18 a. The taxpayer is at fault for terminating a prior
3 19 agricultural assets transfer agreement as determined by the
3 20 authority.
3 21 b. The taxpayer is any of the following:
3 22 (1) A party to a pending administrative or judicial
3 23 action, including a contested case proceeding under chapter
3 24 17A, relating to an alleged violation involving an animal
3 25 feeding operation as regulated by the department of natural
3 26 resources, regardless of whether the pending action is brought
3 27 by the department or the attorney general.
3 28 (2) Classified as a habitual violator for a violation of
3 29 state law involving an animal feeding operation as regulated
3 30 by the department of natural resources.
3 31 c. The beginning farmer is responsible for managing or
3 32 maintaining agricultural land and other agricultural assets
3 33 that are greater than necessary to adequately support a
3 34 beginning farmer as determined by the authority according to
3 35 rules which shall be adopted by the authority.
4 1 d. The agricultural assets are being leased or rented at a
4 2 rate which is substantially higher or lower than the market
4 3 rate for similar agricultural assets leased or rented within
4 4 the same community, as determined by the authority.
4 5 8. The authority shall review each existing agricultural
4 6 assets transfer agreement which is part of an application
4 7 approved by the authority on a quarterly basis. The authority
4 8 may require that the taxpayer and the beginning farmer provide
4 9 additional information as determined relevant by the
4 10 authority.
4 11 9. A taxpayer or the beginning farmer may terminate an
4 12 agricultural assets transfer agreement as provided in the
4 13 agreement or by law. The taxpayer must immediately notify the
4 14 authority of the termination.
4 15 a. If the authority determines that the taxpayer is not at
4 16 fault for the termination, the authority shall not issue a tax
4 17 certificate to the taxpayer for a subsequent tax year based on
4 18 the approved application. Any prior tax credit is allowed as
4 19 provided in this section. The taxpayer may apply for and be
4 20 issued another tax credit certificate for the same
4 21 agricultural assets as provided in this section for any
4 22 remaining tax years for which a certificate was not issued.
4 23 b. If the authority determines that the taxpayer is at
4 24 fault for the termination, any prior tax credit allowed under
4 25 this section is disallowed. The tax credit shall be
4 26 recaptured and the amount of the tax credit shall be
4 27 immediately due and payable to the department of revenue. If
4 28 a taxpayer does not immediately notify the authority of the
4 29 termination, the taxpayer shall be conclusively deemed at
4 30 fault for the termination.
4 31 Sec. 3. NEW SECTION. 422.11M AGRICULTURAL ASSETS
4 32 TRANSFERRED TO BEGINNING FARMERS.
4 33 The taxes imposed under this division, less the credits
4 34 allowed under sections 422.12 and 422.12B, shall be reduced by
4 35 an agricultural assets transfer tax credit as allowed under
5 1 section 175.37.
5 2 Sec. 4. Section 422.33, Code Supplement 2005, is amended
5 3 by adding the following new subsection:
5 4 NEW SUBSECTION. 20. The taxes imposed under this division
5 5 shall be reduced by an agricultural assets transfer tax credit
5 6 as allowed under section 175.37.
5 7 Sec. 5. EFFECTIVE DATE AND RETROACTIVE APPLICABILITY
5 8 PROVISIONS. This Act takes effect January 1, 2007, and is
5 9 applicable to tax years beginning on or after that date.
5 10 EXPLANATION
5 11 This bill amends provisions regarding the agricultural
5 12 development authority established in Code chapter 175, the
5 13 "Iowa Agricultural Development Act". The authority is an
5 14 instrumentality housed in the office of treasurer of state
5 15 that is responsible for administering a number of programs to
5 16 assist agricultural producers, including the beginning farmer
5 17 program. A beginning farmer is an individual, partnership,
5 18 family farm corporation, or family farm limited liability
5 19 company as provided under Code chapter 9H (Iowa's corporate
5 20 farming law), with a low or moderate net worth who engages in
5 21 farming or wishes to engage in farming.
5 22 The bill provides a tax credit for owners of agricultural
5 23 assets (agricultural land, depreciable agricultural property,
5 24 crops, or livestock) who help beginning farmers to acquire
5 25 agricultural assets by lease or rental arrangements. The bill
5 26 provides that the owner who executes an agricultural assets
5 27 transfer agreement (referred to as the agreement) may claim a
5 28 tax credit against individual or corporate income. The owner
5 29 (referred to as the taxpayer) may claim the tax credit after
5 30 receiving a certificate issued by the authority which is
5 31 attached to the taxpayer's tax return. The bill provides for
5 32 limited carryforward but does not provide for carryback.
5 33 Generally, the taxpayer cannot transfer the tax credit. There
5 34 is one exception: the tax credit can pass to the taxpayer's
5 35 estate or trust after death.
6 1 The taxpayer must be a person who may acquire or otherwise
6 2 obtain or lease agricultural land in the state under Code
6 3 chapter 9H or 9I (restricting foreign ownership of
6 4 agricultural land). In addition, the taxpayer cannot acquire
6 5 or otherwise obtain or lease agricultural land exclusively
6 6 because of an exception provided in one of those Code chapters
6 7 (e.g., an encumbrance taken for purposes of security). The
6 8 person also cannot hold land based on an exception in other
6 9 Code provisions, including Code chapter 10 (corporate
6 10 networking entities), 10C (life science enterprises), 10D
6 11 (qualified enterprises) and 501 (closed cooperatives) as well
6 12 as Code section 15E.207 (an Iowa agricultural industry finance
6 13 corporation). The bill provides a number of restrictions upon
6 14 the authority in approving applications and issuing
6 15 certificates.
6 16 The taxpayer cannot be at fault for terminating a prior
6 17 agreement; the taxpayer cannot be involved in legal
6 18 proceedings regarding environmental violations; the beginning
6 19 farmer cannot be provided more agricultural assets than what
6 20 the beginning farmer can be expected to adequately manage; and
6 21 the agricultural assets cannot be leased or rented at a rate
6 22 substantially different from similar market arrangements. The
6 23 bill provides that an agreement may be terminated but also
6 24 provides that if the termination is the fault of the owner,
6 25 any tax credits must be repaid and no further tax credit
6 26 certificates can be issued to the taxpayer.
6 27 The bill takes effect on January 1, 2007, and applies to
6 28 tax years beginning on or after that date.
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