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PAG LIN
1 1 Section 1. Section 175.2, Code 2003, is amended by adding
1 2 the following new subsections:
1 3 NEW SUBSECTION. 0A. "Actively engaged in farming" means
1 4 that a person does any of the following:
1 5 a. Inspects the production activities periodically and
1 6 furnishes at least half of the value of the tools used for
1 7 crop or livestock production and pays at least half the direct
1 8 cost of crop or livestock production.
1 9 b. Regularly and frequently makes or takes an important
1 10 part in making management decisions substantially contributing
1 11 to or affecting the success of the farm operation.
1 12 c. Performs physical work which significantly contributes
1 13 to crop or livestock production.
1 14 NEW SUBSECTION. 0B. "Agricultural assets" means
1 15 agricultural land, depreciable agricultural property, crops,
1 16 or livestock.
1 17 NEW SUBSECTION. 10A. "Farming entity" means any of the
1 18 following:
1 19 a. An individual or a fiduciary for an individual who
1 20 regularly participates in physical labor or operations
1 21 management in a farming operation and files schedule F as part
1 22 of the person's annual form 1040 or form 1041 filing with the
1 23 United States internal revenue service.
1 24 b. A family farm corporation, family farm limited
1 25 liability company, family farm limited partnership, or family
1 26 trust, as defined in section 9H.1.
1 27 c. A general partnership as organized under chapter 486,
1 28 Code 1999, or chapter 486A, in which all of the partners are
1 29 natural persons and at least one of the partners is actively
1 30 engaged in farming.
1 31 Sec. 2. NEW SECTION. 175.37 AGRICULTURAL ASSETS – TAX
1 32 CREDITS.
1 33 1. A tax credit is allowed against the taxes imposed in
1 34 chapter 422, division II or division III, to facilitate the
1 35 acquisition of agricultural assets by beginning farmers. An
2 1 individual shall not claim a tax credit that is allowed for a
2 2 family farm entity unless the family farm entity elects to
2 3 have income taxed directly to the individual. The amount
2 4 claimed by the individual shall be based upon the pro rata
2 5 share of the individual's earnings from the family farm
2 6 entity.
2 7 2. In order to qualify for the tax credit, the taxpayer
2 8 must meet qualifications established by rules adopted by the
2 9 authority. At a minimum, the taxpayer must be a family farm
2 10 entity who is the titleholder of the agricultural assets. In
2 11 addition, at least fifty percent of the family farm entity's
2 12 gross annual income must be derived from farming as computed
2 13 in the person's annual tax return for the preceding tax year
2 14 filed with the United States internal revenue service. In
2 15 order to qualify as a beginning farmer, a person must be
2 16 eligible to receive financial assistance under section 175.12.
2 17 3. The tax credit is allowed only for agricultural assets
2 18 that are subject to a lease or rental agreement. The
2 19 agreement may be made on a cash basis or on a commodity share
2 20 basis which includes a share of the crops or livestock
2 21 produced on the agricultural land. The agreement must be in
2 22 writing and must be for a term of at least three years.
2 23 4. The tax credit shall equal five percent of the gross
2 24 income paid to the taxpayer under the lease or rental
2 25 agreement. The taxpayer may claim the tax credit for not more
2 26 than three tax years. A tax credit in excess of the
2 27 taxpayer's liability for the tax year may be credited to the
2 28 tax liability for the following five years or until depleted,
2 29 whichever is earlier. A tax credit shall not be carried back
2 30 to a tax year prior to the tax year in which the taxpayer
2 31 redeems the tax credit. A tax credit shall not be
2 32 transferable to any other taxpayer.
2 33 5. A taxpayer shall not claim a tax credit under this
2 34 section unless a tax credit certificate issued by the
2 35 authority is attached to the taxpayer's tax return for the tax
3 1 year for which the tax credit is claimed. The authority must
3 2 review and approve an application for a tax credit as provided
3 3 by rules adopted by the authority. The application must
3 4 include a copy of the lease or rental agreement. The
3 5 authority may approve an application and issue a tax credit
3 6 certificate to a taxpayer who has previously been allowed a
3 7 tax credit under this section. However, the authority shall
3 8 not approve an application or issue a certificate to a
3 9 taxpayer if any of the following applies:
3 10 a. The taxpayer is at fault for terminating a prior lease
3 11 or rental agreement under this section as determined by the
3 12 authority.
3 13 b. The taxpayer is any of the following:
3 14 (1) A party to a pending administrative or judicial
3 15 action, including a contested case proceeding under chapter
3 16 17A, relating to an alleged violation involving an animal
3 17 feeding operation as regulated by the department of natural
3 18 resources, regardless of whether the pending action is brought
3 19 by the department or the attorney general.
3 20 (2) Classified as a habitual violator for a violation of
3 21 state law involving an animal feeding operation as regulated
3 22 by the department of natural resources.
3 23 c. The beginning farmer is responsible for managing or
3 24 maintaining agricultural land and other agricultural assets
3 25 that are greater than necessary in order to adequately support
3 26 a beginning farmer as determined by the authority according to
3 27 rules which shall be adopted by the authority.
3 28 d. The agricultural assets are being leased or rented at a
3 29 rate which is substantially higher or lower than the market
3 30 rate for similar agricultural assets leased or rented within
3 31 the same community, as determined by the authority.
3 32 6. The authority shall review each existing lease or
3 33 rental agreement which is part of an application approved by
3 34 the authority on a quarterly basis. The authority may require
3 35 that the taxpayer and the beginning farmer provide additional
4 1 information as determined relevant by the authority.
4 2 7. A taxpayer or the beginning farmer may terminate a
4 3 lease or rental agreement as provided in the agreement or by
4 4 operation of law. The taxpayer must immediately notify the
4 5 authority of the termination.
4 6 a. If the authority determines that the taxpayer is not at
4 7 fault for the termination, the authority shall not issue a tax
4 8 certificate to the taxpayer for a subsequent tax year based on
4 9 the approved application. Any prior tax credit is allowed as
4 10 provided in this section. The taxpayer may apply for and be
4 11 issued another tax credit certificate for the same
4 12 agricultural assets as provided in this section for any
4 13 remaining tax years for which a certificate was not issued.
4 14 b. If the authority determines that the taxpayer is at
4 15 fault for the termination, any prior tax credit allowed under
4 16 this section is disallowed. The tax credit shall be
4 17 recaptured and the amount of the tax credit shall be
4 18 immediately due and payable to the department of revenue and
4 19 finance. If a taxpayer does not immediately notify the
4 20 authority of the termination, the taxpayer shall be
4 21 conclusively deemed at fault for the termination.
4 22 Sec. 3. APPLICABILITY AND EFFECTIVE DATES. This bill
4 23 takes effect January 1, 2003, and is applicable to tax years
4 24 beginning on or after that date.
4 25 EXPLANATION
4 26 This bill amends provisions regarding the agricultural
4 27 development authority (referred to as the "authority")
4 28 established in Code chapter 175, the "Iowa Agricultural
4 29 Development Act". The authority is an instrumentality housed
4 30 in the department of agriculture and land stewardship that is
4 31 responsible for administering a number of programs to assist
4 32 agricultural producers, including the beginning farmer
4 33 program. A beginning farmer is an individual, partnership,
4 34 family farm corporation, or family farm limited liability
4 35 company as provided under Code chapter 9H (Iowa's corporate
5 1 farming law), with a low or moderate net worth who engages in
5 2 farming or wishes to engage in farming.
5 3 The bill provides a tax credit for owners of agricultural
5 4 assets (agricultural land, depreciable agricultural property,
5 5 crops, or livestock) who help beginning farmers to acquire
5 6 agricultural assets by lease or rental arrangements. The tax
5 7 credit may be taken against individual or corporate income.
5 8 An owner (referred to as the taxpayer) claims the tax credit
5 9 after receiving a certificate issued by the authority which is
5 10 attached to the taxpayer's tax return. The bill provides for
5 11 limited carry forward but does not provide for carry back or
5 12 transfer.
5 13 In order to be eligible for the tax credit, the taxpayer
5 14 must apply to the authority and satisfy several conditions.
5 15 The owner must be a person who is an individual or organized
5 16 as a general partnership or a type of family farm entity which
5 17 can hold unlimited agricultural land under Code chapter 9H.
5 18 The individual or at least one equity holder of the
5 19 organization must be actively engaged in farming and at least
5 20 50 percent of the person's income must be derived from
5 21 farming. The tax credit depends upon the owner and the
5 22 beginning farmer executing a written lease or rental agreement
5 23 for at least three years. The amount of the tax credit is 5
5 24 percent of the gross income paid to the owner under the
5 25 agreement. The owner may claim the tax credit for each tax
5 26 year for three years, regardless of whether the agreement is
5 27 extended.
5 28 The bill provides a number of restrictions upon the
5 29 authority in approving applications and issuing certificates.
5 30 The taxpayer cannot be at fault for terminating a prior lease;
5 31 the taxpayer cannot be involved in legal proceedings regarding
5 32 environmental violations; the beginning farmer cannot be
5 33 provided more agricultural assets than what the beginning
5 34 farmer can be expected to adequately manage; and the
5 35 agricultural assets cannot be leased or rented at a rate
6 1 substantially different from similar arrangements.
6 2 The bill provides that an agreement may be terminated but
6 3 also provides that if the termination is the fault of the
6 4 owner, any tax credits must be repaid and no further tax
6 5 credit certificates can be issued to the owner.
6 6 The bill takes effect on January 1, 2004, and applies to
6 7 tax years beginning on or after that date.
6 8 LSB 1308XS 80
6 9 da/sh/8
Text: SF00429 Text: SF00431 Text: SF00400 - SF00499 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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