House File 522 - Introduced HOUSE FILE 522 BY COMMITTEE ON AGRICULTURE (SUCCESSOR TO HSB 137) A BILL FOR An Act increasing the number of years that a taxpayer may 1 claim a custom farming contract tax credit under a contract 2 executed by the holder of agricultural land and a qualified 3 beginning farmer, and including effective date and 4 retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2359HV (3) 86 da/rj

H.F. 522 Section 1. Section 16.81, subsection 5, Code 2015, is 1 amended to read as follows: 2 5. The custom farming contract must provide that the 3 taxpayer pay the qualified beginning farmer on a cash basis. 4 The contract must be in writing for a term of not more than 5 twelve twenty-four months. The total cash payment for each tax 6 year that the tax credit is claimed must equal at least one 7 thousand dollars. 8 Sec. 2. Section 16.81, subsection 10, Code 2015, is amended 9 to read as follows: 10 10. a. A taxpayer shall not claim a custom farming contract 11 tax credit unless a tax credit certificate issued by the 12 authority under this section is included with the taxpayer’s 13 tax return for the each tax year for which the tax credit is 14 claimed. 15 b. A taxpayer may submit a single application to the 16 authority for the authority’s review and approval of the 17 issuance of a tax credit certificate for either one or two tax 18 years as covered in the custom farming contract. The authority 19 must review and approve an the application for a and each 20 tax credit certificate as provided by rules adopted by the 21 authority. The application must include a copy of the custom 22 farming contract. Either or both parties as required by the 23 authority shall notify the authority of any amendment to the 24 contract or other material changes affecting the application 25 or contract. The authority may require that the parties to 26 the contract provide additional information as determined 27 relevant by the authority. The information may include but 28 is not limited to a list of all custom work completed and a 29 verification of all payments made to the beginning farmer for 30 each tax year that the tax credit may be claimed. 31 c. The authority may approve an application and issue a 32 tax credit certificate to a taxpayer who has previously been 33 allowed a tax credit under this section another application . 34 The authority may require that the parties to the contract 35 -1- LSB 2359HV (3) 86 da/rj 1/ 3

H.F. 522 provide additional information as determined relevant by the 1 authority. The authority shall review an application for a tax 2 credit certificate which includes the renewal of a contract to 3 determine that the parties to the renewed contract meet the 4 same qualifications as required for an original application. 5 d. The authority shall not approve an application or issue 6 a tax credit certificate to a taxpayer for an amount in excess 7 of fifty thousand dollars. In addition, the authority shall 8 not approve an application or issue a tax credit certificate to 9 a taxpayer if any of the following applies: 10 a. (1) The taxpayer is at fault for terminating another 11 custom farming contract, as determined by the authority. 12 b. (2) The taxpayer is party to a pending administrative or 13 judicial action, or classified as a habitual violator in the 14 same manner as provided in section 16.80 . 15 c. (3) The contract amount is substantially higher or lower 16 than the market rate for a similar custom farming contract, as 17 determined by the authority. 18 Sec. 3. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 19 immediate importance, takes effect upon enactment. 20 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies 21 retroactively to January 1, 2015, for tax years beginning on 22 or after that date. 23 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanation’s substance by the members of the general assembly. 26 BILL —— PROVISIONS. This bill increases the maximum period 27 of a custom farming contract executed by a taxpayer who holds 28 agricultural land and a qualified beginning farmer from 12 to 29 24 months in order to meet the eligibility requirements for 30 the taxpayer to claim the custom farming contract tax credit. 31 The tax credit is administered by the Iowa finance authority 32 and the department of revenue. The bill provides that a party 33 or both parties to the contract must notify the authority of 34 any amendment to the contract or other material change to 35 -2- LSB 2359HV (3) 86 da/rj 2/ 3

H.F. 522 claim the tax credit. The authority may require additional 1 information which may include a list of custom work completed 2 and a verification of payments made to the beginning farmer for 3 each tax year that the tax credit is claimed. 4 BILL EFFECTIVE DATE AND RETROACTIVE APPLICABILITY. The 5 bill takes effect upon enactment and applies retroactively to 6 January 1, 2015, for tax years beginning on or after that date. 7 BACKGROUND. A taxpayer who holds agricultural land is 8 entitled to claim a tax credit against individual or corporate 9 tax liability under the terms of a custom farming contract 10 executed with a qualified beginning farmer. The contract 11 amount cannot be substantially higher or lower than the 12 market rate for similar contracts. The taxpayer must make all 13 management decisions substantially contributing to or affecting 14 the production of crops or livestock located on the taxpayer’s 15 agricultural land, although the qualified beginning farmer may 16 make day-to-day operational decisions affecting production. 17 The qualified beginning farmer must have a low or moderate net 18 worth and have education or experience and resources necessary 19 to participate in farming. The tax credit is allowed only for 20 the amount paid by the taxpayer to a qualified beginning farmer 21 on a cash basis equaling at least $1,000. The tax credit is 22 7 percent of the amount paid by the taxpayer to a qualified 23 beginning farmer with one exception. For the first tax year, 24 the tax credit is 8 percent if the qualified beginning farmer 25 is a veteran. 26 -3- LSB 2359HV (3) 86 da/rj 3/ 3