HF 495 (LSB 2617HV (1) 87)

HOUSE FILE 495

BY  COMMITTEE ON AGRICULTURE

(SUCCESSOR TO HSB 140)

A BILL FOR

An Act extending the beginning farmer tax credit program and appropriations used to support the program, including the agricultural assets transfer tax credit and the custom farming contract tax credit. 
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
AGRICULTURAL ASSETS TRANSFER TAX CREDIT —— REPEAL —— EXTENSION 

    Section 1.  2014 Iowa Acts, chapter 1080, section 125, is amended to read as follows:
   SEC. 125.  EFFECTIVE DATES.
   1.  a.  Except as provided in subsection 2, this This division of this Act takes effect January 1, 2018 2023.
   b.  2.  The section of this division of this Act which enacts the agricultural assets transfer tax credit as codified in section 16.80 takes effect instantly upon the repeal of the agricultural assets transfer tax credit previously codified in section 16.80 and enacted in another division of this Act.
   2.  The section of this division of this Act which requires the Iowa finance authority to propose legislation for consideration by the general assembly takes effect July 1, 2016.
    Sec. 2.  REPEAL.  2014 Iowa Acts, chapter 1080, section 124, is repealed.
DIVISION II
FORMER, CURRENT, AND FUTURE VERSIONS OF THE AGRICULTURAL ASSETS TRANSFER TAX CREDIT —— TEN-YEAR CARRYFORWARD

    Sec. 3.  2014 Iowa Acts, chapter 1112, section 1, subsection 3, is amended to read as follows:
   3.  The carryforward provisions of this section shall continue to be effective until no longer applicable, including by application to tax years beginning on or after January 1, 2018 2023.
    Sec. 4.  2014 Iowa Acts, chapter 1112, section 5, subsection 4, is amended to read as follows:
   4.  The carryforward provisions of this section shall continue to be effective until no longer applicable, including by application to tax years beginning on or after January 1, 2018 2023.
    Sec. 5.  2014 Iowa Acts, chapter 1112, section 9, subsections 2 and 3, are amended to read as follows:
   2.  For any tax year commencing in calendar years 2015 through 2017 2022, a tax credit that is first issued, awarded, or allowed and claimed under section 16.80, as that section applies when the tax credit is first claimed, and in excess of the taxpayer’s liability, may be credited to the tax liability of that taxpayer for ten tax years following the tax year that the taxpayer first claims the tax credit, or until depleted, whichever is earlier.
   3.  The carryforward provisions of this section shall continue to be effective until no longer applicable, including by application to tax years beginning on or after January 1, 2018 2023.
    Sec. 6.  2014 Iowa Acts, chapter 1112, section 15, is amended to read as follows:
   SEC. 15.  EFFECTIVE DATE —— CONDITION.  This division of this Act takes effect January 1, 2018, only if 2014 Iowa Acts, Senate File 2328, is enacted 2023.
    Sec. 7.  2014 Iowa Acts, chapter 1112, section 16, is amended to read as follows:
   SEC. 16.  APPLICABILITY.  This division of this Act applies to tax years beginning on or after January 1, 2018 2023.
    Sec. 8.  2014 Iowa Acts, chapter 1112, section 18, subsection 4, is amended to read as follows:
   4.  The carryforward provisions of this section shall continue to be effective until no longer applicable, including by application to tax years beginning on or after January 1, 2018 2023.
    Sec. 9.  2014 Iowa Acts, chapter 1112, section 22, subsections 2 and 3, are amended to read as follows:
   2.  For any tax year commencing in calendar years 2015 through 2017 2022, a tax credit that is first issued, awarded, or allowed and claimed under section 16.81, as that section applies when the tax credit is first claimed, and in excess of the taxpayer’s liability, may be credited to the tax liability of that taxpayer for ten tax years following the tax year for which the taxpayer first claims the tax credit, or until depleted, whichever is earlier.
   3.  The carryforward provisions of this section shall continue to be effective until no longer applicable, including by application to tax years beginning on or after January 1, 2018 2023.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   GENERAL. This bill extends the beginning farmer tax credit program established in 2013 which allows taxpayers holding agricultural land used for farming to claim two types of income tax credits: (1) the agricultural assets transfer tax credit and (2) the custom farming contract tax credit. The program is due to expire on January 1, 2018, and the bill extends that date five years to January 1, 2023. On that same date, a former version of the agricultural assets transfer tax credit as it existed immediately prior to 2013 is restored with one exception. The former version would incorporate a change made in the 2013 legislation which increased the carryforward period from five to 10 years. When the program is eliminated and the former version of the agricultural assets transfer tax credit is restored, the available standing appropriation used to support the agricultural assets transfer tax credit is restored to the pre-2013 amount of $6 million, a reduction from $12 million currently available to support both tax credits.
   BACKGROUND —— PROGRAM. A taxpayer who holds agricultural land which may include other assets (such as depreciable agricultural property, crops, or livestock), and who executes an agreement with a beginning farmer is entitled to claim a tax credit against individual or corporate tax liability (Code section 16.80). The agricultural assets transfer tax credit is available to a taxpayer who assists a beginning farmer in acquiring agricultural assets (land by lease or equipment by rental agreement). The custom farming contract tax credit is available to a taxpayer who enters into a contract with a beginning farmer to perform custom work on agricultural land held by the taxpayer (Code section 16.81). Generally, $8 million of the appropriated $12 million is allocated to support the agricultural assets transfer tax credit and the remaining $4 million is allocated to support the custom farming contract tax credit (Code section 16.82). For the agricultural assets transfer tax credit, the tax credit percentages for cash rent and crop share agreements are 7 percent and 17 percent, respectively, with an additional 1 percent bonus provided for the first year of the agreement if the beginning farmer is a veteran. Once the former agricultural assets transfer tax credit is restored, the tax credit percentages are reduced to 5 and 15 percent, respectively, and without a veteran bonus. For a custom farming contract tax credit, the tax credit percentage equals 7 percent of the value of the contract on a tax credit with an additional 1 percent bonus provided if the beginning farmer is a veteran. A taxpayer cannot claim a tax credit in excess of $50,000 under either program. The restored version of the agricultural assets transfer tax credit does not limit the amount that a taxpayer may claim. 
   BACKGROUND —— ADMINISTRATION. In 2013 and 2014, supervision of the program was transferred from the Iowa agricultural development authority to the Iowa finance authority and the relevant statutory provisions were transferred from Code chapter 175 to Code chapter 16 (2013 Iowa Acts, ch. 100, and 2014 Iowa Acts, ch. 1080).