Senate Study Bill 3172 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON AGRICULTURE BILL BY CHAIRPERSON SENG) A BILL FOR An Act allowing the holders of interests in certain entities 1 eligible to hold agricultural land to be elected as trustees 2 of drainage or levee districts. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5782XC (5) 85 da/sc

S.F. _____ Section 1. Section 468.506, subsection 3, Code 2014, is 1 amended by striking the subsection and inserting in lieu 2 thereof the following: 3 3. An individual who has a legal or equitable interest in 4 an entity that holds an interest in agricultural land located 5 in the election district for which the trustee is elected, 6 including as a bona fide owner. In addition, all of the 7 following must apply: 8 a. The entity must be a general partnership formed under 9 section 486A.202 or a person who holds the agricultural land 10 under chapter 9H as a family farm corporation, authorized 11 corporation, family farm limited liability company, authorized 12 limited liability company, family farm limited partnership, 13 limited partnership, family farm unincorporated nonprofit 14 association, authorized unincorporated nonprofit association, 15 family trust, or authorized trust. 16 b. The individual must hold the legal or equitable interest 17 in the entity described in paragraph “a” as a partner in the 18 general partnership, shareholder in the corporation, member in 19 the limited liability company, general or limited partner in 20 the limited partnership, member in the unincorporated nonprofit 21 association, or beneficiary in the trust. 22 c. The individual must be a resident of the county in 23 which the election district is located or of a county that is 24 contiguous to or corners on that county. 25 Sec. 2. Section 468.506, subsection 4, Code 2014, is amended 26 to read as follows: 27 4. a. In a A bona fide owner of benefited land in a 28 drainage or levee district in which is a levee and drainage 29 district which has eighty-five percent of its acreage is 30 situated within the corporate limits of a city and has been 31 under the control of a city under subchapter II, part 3 , a bona 32 fide owner of benefited land in the district . 33 b. (1) If For nonagricultural land, if the bona fide 34 owner is a family farm corporation as defined by section 9H.1, 35 -1- LSB 5782XC (5) 85 da/sc 1/ 4

S.F. _____ subsection 9 , a business corporation organized and existing 1 under chapter 490 or 491 , or a partnership, a stockholder or 2 officer authorized by the corporation or a general partner may 3 be elected as a trustee of the district. 4 (2) For agricultural land, if the bona fide owner is an 5 entity described in subsection 3, paragraph “a” , an individual 6 holding a legal or equitable interest in that entity may be 7 elected as trustee. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 BILL’S PROVISIONS. This bill relates to the election of 12 an individual as a trustee to a board managing a drainage or 13 levee district (district) (Code section 468.506). It provides 14 for the election of an individual who has a legal or equitable 15 interest in an entity allowed to hold agricultural land in 16 this state, including under Iowa’s corporate farming law 17 (Code chapter 9H). The bill requires that the individual be a 18 resident of a county where the election district is located or 19 a bordering county, unless the agricultural land is located in 20 a district in which 85 percent of its territory is situated 21 within the corporate limits of a city and the city also manages 22 the district. 23 CURRENT LAW —— GOVERNANCE. A district is established and 24 managed by a county’s board of supervisors, or joint board of 25 supervisors if the district crosses county borders. The board 26 may transfer jurisdiction to manage the district to another 27 governing body, including a city (Code chapter 468, subchapter 28 II, part 3), or a board of elected trustees (Code chapter 468, 29 subchapter III). 30 CURRENT LAW —— ELIGIBILITY OF TRUSTEES. In order to hold 31 office as a trustee, an individual must be 18 years of age and a 32 United States citizen (Code section 468.506). If the district 33 includes agricultural land, the individual must satisfy two 34 additional conditions: (1) be an owner of such land and 35 -2- LSB 5782XC (5) 85 da/sc 2/ 4

S.F. _____ (2) reside in the county in which the election district is 1 located or a bordering county. Two exceptions apply which 2 allow an individual to be elected as a trustee even though the 3 individual is not the owner of the agricultural land. The 4 first exception applies to a shareholder of a family farm 5 corporation who must still reside in the county where the 6 election district is situated or a bordering county. The 7 second exception applies when 85 percent of the district’s 8 territory is situated within the corporate limits of a city 9 that also manages the district. In that case, the individual 10 may be a shareholder of a family farm corporation or a partner 11 in a general partnership. In this case, there is no residency 12 requirement. 13 CURRENT LAW —— PERSONS ELIGIBLE TO HOLD AGRICULTURAL LAND. 14 Code chapter 9H does not restrict a general partnership from 15 holding any number of acres of agricultural land. The Code 16 chapter does restrict a number of other entities from holding 17 such land, including corporations, limited liability companies, 18 trusts, and nonprofit associations (Code sections 9H.1 and 19 9H.4), and limited partnerships, including limited liability 20 limited partnerships (Code sections 9H.1 and 9H.5). A family 21 farm entity (family farm corporation, family farm limited 22 liability company, family farm trust, or family farm nonprofit 23 association) must be founded for farming, its interest holders 24 must be natural persons or fiduciaries, a majority of its 25 interest holders must be related to each other as family 26 members, and 60 percent of its gross revenue must come from 27 farming (Code section 9H.1). A family farm entity may own any 28 number of acres of agricultural land. An authorized entity 29 (authorized farm corporation, authorized farm limited liability 30 company, authorized farm trust, or authorized farm nonprofit 31 association) cannot include more than 25 interest holders who 32 are individuals, fiduciaries, or nonprofit corporations (Code 33 section 9H.1). An interest holder in an authorized entity 34 or limited partnership cannot belong to multiple authorized 35 -3- LSB 5782XC (5) 85 da/sc 3/ 4

S.F. _____ entities or limited partnerships or hold more than 1,500 acres 1 of agricultural land. 2 -4- LSB 5782XC (5) 85 da/sc 4/ 4