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PAG LIN
1 1 Section 1. Section 422.7, Code Supplement 1995, is amended
1 2 by adding the following new subsection:
1 3 NEW SUBSECTION. 35. a. Subtract the amount computed
1 4 under this subsection for the contract sale of agricultural
1 5 land to a beginning farmer with interest charged at less than
1 6 an annual percentage rate of eight percent. The amount of the
1 7 deduction for a tax year equals the product of the difference
1 8 between an annual percentage interest rate of eight percent
1 9 and the annual percentage interest rate under the contract
1 10 multiplied by the amount of principal, not to exceed four
1 11 hundred thousand dollars, on the agricultural land left to be
1 12 paid, determined as of the first day of the tax year. If the
1 13 contract was initially entered into during the tax year, the
1 14 principal is the amount, not to exceed four hundred thousand
1 15 dollars, as of the first day the contract is entered into.
1 16 b. The deduction in this subsection is only allowed if all
1 17 of the following apply:
1 18 (1) The contract sale is for agricultural land which may
1 19 include agricultural improvements as both terms are defined in
1 20 section 175.2.
1 21 (2) The contract sale is to a beginning farmer as defined
1 22 in section 175.2.
1 23 (3) The contract sale is for at least twenty years.
1 24 (4) The value of the agricultural land and any
1 25 improvements has been assessed by the agricultural development
1 26 authority. The authority shall determine the fraction of the
1 27 total value that is agricultural land and that fraction shall
1 28 be used in determining the amount of principal left to be paid
1 29 for the agricultural land under paragraph "a".
1 30 c. The deduction in this subsection shall continue for a
1 31 subsequent tax year if all of the following apply:
1 32 (1) The agricultural land continues to be used for farming
1 33 by a beginning farmer.
1 34 (2) The sales contract has not been transferred except as
1 35 a result of death or upon approval of the agricultural
2 1 development authority.
2 2 d. Notwithstanding the amount computed under paragraph
2 3 "a", the amount deducted under this subsection shall not
2 4 result in the adjusted gross income, after all other
2 5 deductions under this section, being reduced below zero. If
2 6 the amount computed under paragraph "a" would reduce the
2 7 adjusted gross income below zero any excess amount shall not
2 8 be carried forward or backward to other tax years.
2 9 Sec. 2. This Act, being deemed of immediate importance,
2 10 takes effect upon enactment and applies to contract sales of
2 11 agricultural land entered into after the effective date of
2 12 this Act and during tax years ending after the effective date
2 13 of this Act.
2 14 EXPLANATION
2 15 The bill allows an individual income tax deduction for
2 16 contract sales of agricultural land to beginning farmers at an
2 17 interest rate of less than 8 percent. The amount of the
2 18 deduction equals the difference between an 8 percent interest
2 19 rate and the contract sale interest rate multiplied by the
2 20 amount, up to $400,000, of the contract sale which is for
2 21 agricultural land. This deduction will continue for
2 22 succeeding years if the land continues to be used for farming
2 23 by a beginning farmer. The amount of the deduction would be
2 24 reduced each year as the amount of the contract principal for
2 25 the agricultural land is reduced by previous payments.
2 26 However, this deduction cannot be used to reduce the
2 27 taxpayer's adjusted gross income below zero and any excess
2 28 deduction cannot be carried forward or backward.
2 29 The bill takes effect upon enactment for contract sales of
2 30 agricultural land entered into after that date during tax
2 31 years ending after that date.
2 32 LSB 3227SS 76
2 33 mg/cf/24.1
Text: SF02230 Text: SF02232 Text: SF02200 - SF02299 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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