Senate File 169 - Introduced SENATE FILE 169 BY SCHOENJAHN A BILL FOR An Act relating to the family farm property tax credit by 1 providing for eligible entities and including effective date 2 and applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1425XS (3) 84 da/sc

S.F. 169 Section 1. Section 425A.2, subsection 4, Code 2011, is 1 amended by adding the following new paragraphs: 2 NEW PARAGRAPH . 0d. If the owner is a family farm limited 3 liability company, a family member who is a member of the 4 family farm limited liability company or the member’s spouse. 5 NEW PARAGRAPH . 0e. If the owner is an authorized limited 6 liability company, a member who holds at least fifty-one 7 percent of all membership interests in the authorized limited 8 liability company, or the member’s spouse. 9 NEW PARAGRAPH . 0f. If the owner is an individual who leases 10 the tract to a family farm limited liability company, a member 11 of the family farm limited liability company if the combined 12 interests of the family farm limited liability company held 13 by the owner of the tract and persons related to the owner as 14 enumerated in paragraph “a” is equal to at least fifty-one 15 percent of the interests of the family farm limited liability 16 company. 17 Sec. 2. Section 425A.2, subsection 6, paragraph f, Code 18 2011, is amended to read as follows: 19 f. A family farm corporation or , family farm limited 20 liability company, authorized farm corporation, as both are or 21 authorized limited liability company, as defined in section 22 9H.1 , which owns the agricultural land. 23 Sec. 3. EFFECTIVE DATE AND APPLICABILITY. This Act takes 24 effect January 1, 2012, and applies to family farm limited 25 liability company and authorized limited liability company tax 26 credit claims filed on or after that date. 27 EXPLANATION 28 This bill amends Code chapter 425A which creates a family 29 farm tax credit which benefits an owner of agricultural land 30 located in a school district in which the levy for its general 31 school fund exceeds $5.40 per thousand dollars of assessed 32 value. There are two general requirements. First, the owner 33 must be an individual or an eligible corporate entity. Second, 34 the agricultural land must be farmed by a “designated person” 35 -1- LSB 1425XS (3) 84 da/sc 1/ 3

S.F. 169 who is limited to the owner or a person related to the owner. 1 OWNERSHIP. The bill increases the number of eligible 2 corporate entities entitled to claim the tax credit. Currently 3 the tax credit can be claimed by a family farm corporation or 4 an authorized farm corporation which are both exempt from the 5 provisions of Code chapter 9H, prohibiting corporate entities 6 from holding agricultural land. 7 CONDITIONS. The bill provides that a family farm limited 8 liability company must comply with the same conditions as a 9 family farm corporation. It must be founded for the purpose 10 of farming and the ownership of agricultural land; a majority 11 of the members must be related; all the members must be 12 individuals, or acting in a fiduciary capacity for individuals; 13 and 60 percent of its gross revenues over the last three years 14 must come from farming. An authorized limited liability 15 company must comply with the same conditions as an authorized 16 farm corporation. It also must be founded for the purpose of 17 farming and the ownership of agricultural land; there cannot be 18 more than 25 members who must be individuals or persons acting 19 in a fiduciary capacity for individuals; and it cannot hold 20 more than 1,500 acres of agricultural land. 21 RESTRICTION ON LEASES. Code chapter 425A provides that an 22 owner cannot qualify for the tax credit if the owner leases 23 the agricultural land to another person. One exception 24 applies when the owner is also a shareholder of a family farm 25 corporation and leases the land to that entity. The bill 26 provides that the same exception applies to an owner who is 27 also a member of a family farm limited liability company. The 28 owner leasing the agricultural land to a family farm limited 29 liability company cannot qualify for the tax credit, unless a 30 designated person is actually farming the agricultural land, 31 and 51 percent or more of the total membership interest in the 32 family farm limited liability company is held by the owner or 33 the owner’s relatives. 34 EFFECTIVE DATE. The bill takes effect January 1, 2012, 35 -2- LSB 1425XS (3) 84 da/sc 2/ 3

S.F. 169 and applies to a family farm limited liability company and 1 authorized limited liability company tax credit filed on or 2 after that date. 3 -3- LSB 1425XS (3) 84 da/sc 3/ 3