House Study Bill 140 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON AGRICULTURE BILL BY CHAIRPERSON HEIN) A BILL FOR An Act extending the beginning farmer tax credit program and 1 appropriations used to support the program, including the 2 agricultural assets transfer tax credit and the custom 3 farming contract tax credit. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2617YC (3) 87 da/rj

H.F. _____ DIVISION I 1 AGRICULTURAL ASSETS TRANSFER TAX CREDIT —— REPEAL —— EXTENSION 2 Section 1. 2014 Iowa Acts, chapter 1080, section 125, is 3 amended to read as follows: 4 SEC. 125. EFFECTIVE DATES. 5 1. a. Except as provided in subsection 2, this This 6 division of this Act takes effect January 1, 2018 2023 . 7 b. 2. The section of this division of this Act which enacts 8 the agricultural assets transfer tax credit as codified in 9 section 16.80 takes effect instantly upon the repeal of the 10 agricultural assets transfer tax credit previously codified in 11 section 16.80 and enacted in another division of this Act. 12 2. The section of this division of this Act which requires 13 the Iowa finance authority to propose legislation for 14 consideration by the general assembly takes effect July 1, 15 2016. 16 Sec. 2. REPEAL. 2014 Iowa Acts, chapter 1080, section 124, 17 is repealed. 18 DIVISION II 19 FORMER, CURRENT, AND FUTURE VERSIONS OF THE AGRICULTURAL ASSETS 20 TRANSFER TAX CREDIT —— TEN-YEAR CARRYFORWARD 21 Sec. 3. 2014 Iowa Acts, chapter 1112, section 1, subsection 22 3, is amended to read as follows: 23 3. The carryforward provisions of this section shall 24 continue to be effective until no longer applicable, including 25 by application to tax years beginning on or after January 1, 26 2018 2023 . 27 Sec. 4. 2014 Iowa Acts, chapter 1112, section 5, subsection 28 4, is amended to read as follows: 29 4. The carryforward provisions of this section shall 30 continue to be effective until no longer applicable, including 31 by application to tax years beginning on or after January 1, 32 2018 2023 . 33 Sec. 5. 2014 Iowa Acts, chapter 1112, section 9, subsections 34 2 and 3, are amended to read as follows: 35 -1- LSB 2617YC (3) 87 da/rj 1/ 4

H.F. _____ 2. For any tax year commencing in calendar years 2015 1 through 2017 2022 , a tax credit that is first issued, awarded, 2 or allowed and claimed under section 16.80 , as that section 3 applies when the tax credit is first claimed, and in excess of 4 the taxpayer’s liability, may be credited to the tax liability 5 of that taxpayer for ten tax years following the tax year that 6 the taxpayer first claims the tax credit, or until depleted, 7 whichever is earlier. 8 3. The carryforward provisions of this section shall 9 continue to be effective until no longer applicable, including 10 by application to tax years beginning on or after January 1, 11 2018 2023 . 12 Sec. 6. 2014 Iowa Acts, chapter 1112, section 15, is amended 13 to read as follows: 14 SEC. 15. EFFECTIVE DATE —— CONDITION. This division of 15 this Act takes effect January 1, 2018, only if 2014 Iowa Acts, 16 Senate File 2328, is enacted 2023 . 17 Sec. 7. 2014 Iowa Acts, chapter 1112, section 16, is amended 18 to read as follows: 19 SEC. 16. APPLICABILITY. This division of this Act applies 20 to tax years beginning on or after January 1, 2018 2023 . 21 Sec. 8. 2014 Iowa Acts, chapter 1112, section 18, subsection 22 4, is amended to read as follows: 23 4. The carryforward provisions of this section shall 24 continue to be effective until no longer applicable, including 25 by application to tax years beginning on or after January 1, 26 2018 2023 . 27 Sec. 9. 2014 Iowa Acts, chapter 1112, section 22, 28 subsections 2 and 3, are amended to read as follows: 29 2. For any tax year commencing in calendar years 2015 30 through 2017 2022 , a tax credit that is first issued, awarded, 31 or allowed and claimed under section 16.81 , as that section 32 applies when the tax credit is first claimed, and in excess of 33 the taxpayer’s liability, may be credited to the tax liability 34 of that taxpayer for ten tax years following the tax year 35 -2- LSB 2617YC (3) 87 da/rj 2/ 4

H.F. _____ for which the taxpayer first claims the tax credit, or until 1 depleted, whichever is earlier. 2 3. The carryforward provisions of this section shall 3 continue to be effective until no longer applicable, including 4 by application to tax years beginning on or after January 1, 5 2018 2023 . 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 GENERAL. This bill extends the beginning farmer tax credit 10 program established in 2013 which allows taxpayers holding 11 agricultural land used for farming to claim two types of income 12 tax credits: (1) the agricultural assets transfer tax credit 13 and (2) the custom farming contract tax credit. The program 14 is due to expire on January 1, 2018, and the bill extends that 15 date five years to January 1, 2023. On that same date, a 16 former version of the agricultural assets transfer tax credit 17 as it existed immediately prior to 2013 is restored with one 18 exception. The former version would incorporate a change made 19 in the 2013 legislation which increased the carryforward period 20 from five to 10 years. When the program is eliminated and the 21 former version of the agricultural assets transfer tax credit 22 is restored, the available standing appropriation used to 23 support the agricultural assets transfer tax credit is restored 24 to the pre-2013 amount of $6 million, a reduction from $12 25 million currently available to support both tax credits. 26 BACKGROUND —— PROGRAM. A taxpayer who holds agricultural 27 land which may include other assets (such as depreciable 28 agricultural property, crops, or livestock), and who executes 29 an agreement with a beginning farmer is entitled to claim a 30 tax credit against individual or corporate tax liability (Code 31 section 16.80). The agricultural assets transfer tax credit 32 is available to a taxpayer who assists a beginning farmer in 33 acquiring agricultural assets (land by lease or equipment by 34 rental agreement). The custom farming contract tax credit 35 -3- LSB 2617YC (3) 87 da/rj 3/ 4

H.F. _____ is available to a taxpayer who enters into a contract with 1 a beginning farmer to perform custom work on agricultural 2 land held by the taxpayer (Code section 16.81). Generally, 3 $8 million of the appropriated $12 million is allocated to 4 support the agricultural assets transfer tax credit and the 5 remaining $4 million is allocated to support the custom farming 6 contract tax credit (Code section 16.82). For the agricultural 7 assets transfer tax credit, the tax credit percentages for cash 8 rent and crop share agreements are 7 percent and 17 percent, 9 respectively, with an additional 1 percent bonus provided for 10 the first year of the agreement if the beginning farmer is 11 a veteran. Once the former agricultural assets transfer tax 12 credit is restored, the tax credit percentages are reduced to 5 13 and 15 percent, respectively, and without a veteran bonus. For 14 a custom farming contract tax credit, the tax credit percentage 15 equals 7 percent of the value of the contract on a tax credit 16 with an additional 1 percent bonus provided if the beginning 17 farmer is a veteran. A taxpayer cannot claim a tax credit in 18 excess of $50,000 under either program. The restored version 19 of the agricultural assets transfer tax credit does not limit 20 the amount that a taxpayer may claim. 21 BACKGROUND —— ADMINISTRATION. In 2013 and 2014, supervision 22 of the program was transferred from the Iowa agricultural 23 development authority to the Iowa finance authority and the 24 relevant statutory provisions were transferred from Code 25 chapter 175 to Code chapter 16 (2013 Iowa Acts, ch. 100, and 26 2014 Iowa Acts, ch. 1080). 27 -4- LSB 2617YC (3) 87 da/rj 4/ 4