H.F. 647 Section 1. Section 2.48, subsection 3, paragraph e, 1 subparagraph (1), Code 2019, is amended to read as follows: 2 (1) The agricultural assets transfer beginning farmer 3 tax credit program as provided in section 16.80 chapter 16, 4 subchapter VIII, part 5, subpart B . 5 Sec. 2. Section 16.2B, subsection 3, paragraph b, Code 2019, 6 is amended to read as follows: 7 b. Obtain agricultural assets transfer Claim the beginning 8 farmer tax credits , including tax credit certificates issued 9 pursuant to subchapter VIII, part 5 , subpart B . 10 Sec. 3. Section 16.2C, subsection 2, Code 2019, is amended 11 to read as follows: 12 2. The agricultural development board is created to 13 exercise all powers and perform all duties necessary to 14 administer subchapter VIII according to policies established 15 by the authority . The authority shall establish policies 16 and practices for the division and oversee its operations. 17 The authority may review or approve decisions affecting the 18 division or administration of subchapter VIII , including 19 decisions of the agricultural development board. 20 Sec. 4. Section 16.58, subsections 6 and 9, Code 2019, are 21 amended to read as follows: 22 6. “Beginning farmer” means an individual, partnership, 23 family farm corporation, or family farm limited liability 24 company , with a low or moderate net worth that engages 25 in farming or wishes to engage in farming and meets the 26 eligibility requirements of the applicable program as provided 27 in this subchapter . 28 9. “Farming” means the cultivation of land for the 29 production of agricultural crops, the raising of poultry, the 30 production of eggs, the production of milk, the production of 31 fruit or other horticultural crops, grazing, the production of 32 livestock, aquaculture, hydroponics, the production of forest 33 products, or other activities designated by the authority by 34 rules adopted by the agricultural development board subject to 35 -1- LSB 1882HV (2) 88 da/jh 1/ 16

H.F. 647 chapter 17A . 1 Sec. 5. Section 16.59, subsection 4, Code 2019, is amended 2 to read as follows: 3 4. For a family farm limited liability company, an aggregate 4 net worth of all members, including each member’s ownership 5 interest in the family farm limited liability company, and 6 each member’s spouse and minor children of not greater than 7 twice the low or moderate net worth. However, the aggregate 8 net worth of each member and that member’s spouse and minor 9 children shall not exceed the low or moderate net worth. 10 Sec. 6. Section 16.75, subsection 3, Code 2019, is amended 11 by adding the following new paragraph: 12 NEW PARAGRAPH . h. The beginning farmer has a low or 13 moderate net worth. 14 Sec. 7. NEW SECTION . 16.77 Definitions. 15 As used in this subpart B, unless the context otherwise 16 requires: 17 1. “Agricultural development board” or “board” means the 18 agricultural development board created in section 16.2C. 19 2. “Agricultural development division” or “division” means 20 the agricultural development division created within the 21 authority pursuant to section 16.2B. 22 3. “Agricultural lease agreement” or “agreement” means an 23 agreement for the transfer of agricultural assets, that must at 24 least include a lease of agricultural land, from an eligible 25 taxpayer to a qualified beginning farmer as provided in section 26 16.79A. 27 4. “Eligible taxpayer” means a taxpayer who may participate 28 in the beginning farmer tax credit program, including by 29 meeting all the criteria as provided in section 16.79. 30 5. “Program” means the beginning farmer tax credit program 31 created pursuant to section 16.78. 32 6. “Qualified beginning farmer” means a beginning farmer who 33 meets the requirements to participate in a beginning farmer tax 34 credit program as provided in section 16.79. 35 -2- LSB 1882HV (2) 88 da/jh 2/ 16

H.F. 647 7. “Tax credit” means the beginning farmer tax credit 1 allowed under section 16.82. 2 Sec. 8. NEW SECTION . 16.78 Beginning farmer tax credit 3 program —— establishment and administration. 4 1. A beginning farmer tax credit program is established 5 under the control of the agricultural development board. 6 2. To every extent practicable, the board shall administer 7 the program in a manner that encourages participation by 8 eligible taxpayers and qualifying beginning farmers for the 9 primary purposes of providing beginning farmers access to 10 farmland and enhancing the stability of the beginning farmer’s 11 farming business. 12 3. The board shall adopt rules in accordance with chapter 13 17A as necessary for the administration of this subpart. The 14 eligibility requirements for taxpayers and the qualifications 15 for beginning farmers as provided in the rules shall not be 16 more stringent than provided in this subpart. 17 4. The board shall approve the preparation or revision and 18 publication or distribution of forms necessary to administer 19 this subpart. 20 5. The department of revenue shall cooperate with the 21 authority, including the division, in administering the 22 program. 23 Sec. 9. NEW SECTION . 16.79 Beginning farmer tax credit 24 program —— eligibility criteria. 25 1. A taxpayer is eligible to participate in the beginning 26 farmer tax credit program if the taxpayer meets all of the 27 following requirements: 28 a. The taxpayer is a person who may acquire or otherwise 29 obtain or lease agricultural land in this state pursuant to 30 chapter 9H or 9I. However, the taxpayer must not be a person 31 who may acquire or otherwise obtain or lease agricultural 32 land exclusively because of an exception provided in one of 33 those chapters or in a provision of another chapter of this 34 Code including but not limited to chapter 10, 10D, or 501, or 35 -3- LSB 1882HV (2) 88 da/jh 3/ 16

H.F. 647 section 15E.207. 1 b. The taxpayer has entered into an agricultural lease 2 agreement with a qualified beginning farmer to lease 3 agricultural land as provided in section 16.79A. 4 c. The taxpayer has not been at fault for terminating a 5 prior agreement under the program or another agreement in which 6 the taxpayer was allowed to claim a tax credit under section 7 175.37 as it existed prior to January 1, 2015, or section 16.80 8 as it existed prior to January 1, 2018. 9 d. If the agreement includes the lease of a confinement 10 feeding operation structure as defined in section 459.102, the 11 taxpayer is not a party to a pending administrative or judicial 12 action, including a contested case proceeding under chapter 13 17A, relating to an alleged violation involving an animal 14 feeding operation as regulated by the department of natural 15 resources, regardless of whether the pending action is brought 16 by the department or the attorney general. 17 e. The taxpayer is not classified as a habitual violator for 18 a violation of state law involving an animal feeding operation 19 as regulated by the department of natural resources under 20 chapter 459. 21 2. A farmer is a qualified beginning farmer eligible to 22 participate in the program by meeting all of the following 23 criteria: 24 a. Is a resident of the state. If the beginning farmer is a 25 partnership, all partners must be residents of the state. If a 26 beginning farmer is a family farm corporation, all shareholders 27 must be residents of the state. If the beginning farmer is 28 a family farm limited liability company, all members must be 29 residents of the state. 30 b. Has sufficient education, training, or experience in 31 farming. If the beginning farmer is a partnership, at least 32 one partner who is not a minor must have sufficient education, 33 training, or experience in farming. If the beginning farmer is 34 a family farm corporation, at least one shareholder who is not 35 -4- LSB 1882HV (2) 88 da/jh 4/ 16

H.F. 647 a minor must have sufficient education, training, or experience 1 in farming. If the beginning farmer is a family farm limited 2 liability company, at least one member who is not a minor must 3 have sufficient education, training, or experience in farming. 4 The individual who is the partner, shareholder, or member 5 meeting the requirements of this paragraph shall also meet the 6 criteria described in paragraph “e” . The eligible taxpayer 7 claiming the beginning farmer tax credit shall not be a partner 8 of a partnership, shareholder of a family farm corporation, or 9 member of a family farm limited liability company leasing the 10 agricultural asset. 11 c. Has access to adequate working capital and production 12 items. 13 d. Will materially and substantially participate in 14 farming. If the beginning farmer is a partnership, family 15 farm corporation, or family farm limited liability company, 16 at least one of the partners, shareholders, or members who is 17 not a minor must materially and substantially participate in 18 farming. The individual who is the partner, shareholder, or 19 member meeting the requirements of this paragraph shall also 20 meet the criteria described in paragraph “e” . 21 e. Has owned and operated a farming business for ten years 22 or less at the time of application. Time spent as an employee 23 in another person’s farm business is excluded from the ten-year 24 limitation. 25 f. Does not own more than a ten percent ownership interest 26 in an agricultural asset included in the agreement. 27 Sec. 10. NEW SECTION . 16.79A Agricultural lease agreement. 28 1. A beginning farmer tax credit is allowed only for 29 agricultural assets that are subject to an agricultural lease 30 agreement entered into by an eligible taxpayer and a qualifying 31 beginning farmer participating in the beginning farmer tax 32 credit program established pursuant to section 16.78. 33 2. The agreement must include the lease of agricultural 34 land located in this state, including any improvements, and may 35 -5- LSB 1882HV (2) 88 da/jh 5/ 16

H.F. 647 provide for the rental of agricultural equipment as defined in 1 section 322F.1. 2 3. a. The agreement must include provisions which describe 3 the consideration paid for the agreement in a manner that 4 allows the agricultural development board to estimate the value 5 of the lease as provided in section 16.81. 6 b. The agreement must be in writing. 7 c. The agreement must be for at least two years, but not 8 more than five years. The agreement may be renewed by the 9 eligible taxpayer and qualified beginning farmer for a term of 10 at least two years, but not more than five years. 11 d. The agreement shall not include a lease or rental of 12 equipment intended as a security. 13 e. The agreement cannot be assigned and the agricultural 14 land subject to the agreement shall not be subleased. 15 f. The agricultural assets shall not be leased or rented at 16 a rate that is substantially higher or lower than the market 17 rate for similar agricultural assets leased or rented within 18 the same community. 19 4. The agreement may be amended after the authority issues 20 an eligibility certificate without changing the eligibility 21 status of the taxpayer. However, the underlying lease for 22 agricultural land may only be amended without submitting a new 23 application, if any of the following apply: 24 a. The terms of the amended lease are more favorable to the 25 qualified beginning farmer, including but not limited to the 26 rent payment being reduced. 27 b. A party has changed their name. 28 c. The owner of an agricultural asset is changed to the 29 owner’s estate. 30 5. An eligible taxpayer or qualified beginning farmer may 31 terminate an agreement as provided in the agreement or by law. 32 The eligible taxpayer must notify the agricultural development 33 division of the termination within thirty days of the date of 34 termination. 35 -6- LSB 1882HV (2) 88 da/jh 6/ 16

H.F. 647 Sec. 11. NEW SECTION . 16.81 Beginning farmer tax credit 1 —— application. 2 1. The deadline for submitting an application to the 3 agricultural development division to claim a beginning farmer 4 tax credit is August 1 of each year. The application shall be 5 for a period that is not longer than the term of the lease. 6 2. The division shall charge an application fee not to 7 exceed three hundred dollars regardless of the type or length 8 of agricultural lease agreement. Any amount received by the 9 division shall be considered repayment receipts as defined in 10 section 8.2. 11 3. The agricultural development board shall review and 12 approve an application for a tax credit as provided by rules 13 adopted by the board. The application must include a copy of 14 the agricultural lease agreement. The division may require 15 that the parties to an agreement provide additional information 16 as determined relevant by the board. The board shall review 17 an application which includes the renewal of an agreement to 18 determine that the parties to the renewed agreement meet the 19 same qualifications as required for an original application. 20 4. The board shall approve all beginning farmer tax credit 21 applications on a first-come, first-served basis until the 22 limit in section 16.82A is met. The board shall review and 23 may approve an application regardless of whether the eligible 24 taxpayer has previously been allowed a tax credit under this 25 section, section 175.37 as it existed prior to January 1, 2015, 26 or section 16.80 as it existed prior to January 1, 2018. 27 5. The division shall estimate the amount of the tax credit 28 under the agreement using the following methods: 29 a. In the case of an agreement on a fixed basis, in which 30 an eligible taxpayer receives a fixed cash rent payment, the 31 estimated amount of the tax credit equals five percent of the 32 amount of the fixed cash rent payment. 33 b. In the case of an agreement on a commodity share basis, 34 in which an eligible taxpayer receives as a rent payment a 35 -7- LSB 1882HV (2) 88 da/jh 7/ 16

H.F. 647 percentage of the commodity produced, the estimated amount of 1 the tax credit shall be based on an equation established by 2 rule adopted by the board. If the agreement is on a crop share 3 basis, the board shall use data compiled by the United States 4 department of agriculture. The estimated amount of tax credit 5 equals fifteen percent of the amount that the eligible taxpayer 6 would receive as a rent payment from the sale of the eligible 7 taxpayer’s share of the crop in the harvest year. The equation 8 established by the board to estimate the rent payment shall 9 include all of the following factors: 10 (1) The past ten-year average per bushel yield for the 11 same type of grain as produced under the agreement in the same 12 county where the leased agricultural land is located excluding 13 the years of highest and lowest per bushel yields. 14 (2) The per bushel state price established for the same 15 type of grain harvested as described in subparagraph (1). 16 Price information shall be averaged from the past five years 17 excluding the years of the highest and lowest per bushel state 18 price. 19 c. For an agreement made on a flexible basis in which an 20 eligible taxpayer receives a rent payment consisting of a fixed 21 cash payment and an amount subject to adjustment according to a 22 risk-sharing arrangement, or receives a rent payment consisting 23 of an amount subject to adjustment according to a risk-sharing 24 arrangement, the estimated amount of the tax credit equals the 25 sum of the following amounts: 26 (1) To the extent that a portion of the amount of the 27 rent payment is calculated on a fixed basis as described in 28 paragraph “a” , that portion of the estimated tax credit equals 29 five percent of the fixed cash payment in the same manner as 30 provided in paragraph “a” . 31 (2) To the extent that a portion of the amount of the rent 32 payment is calculated on a commodity share basis as described 33 in paragraph “b” , that portion of the estimated tax credit 34 equals fifteen percent of the amount that the eligible taxpayer 35 -8- LSB 1882HV (2) 88 da/jh 8/ 16

H.F. 647 would receive from the sale of the eligible taxpayer’s share of 1 the commodity in the same manner as provided in paragraph “b” . 2 (3) (a) To the extent that the amount of the rent payment 3 may be adjusted after taking into account all risk-sharing 4 factors provided in the agreement, the estimated tax credit 5 equals fifteen percent of the highest adjusted amount that 6 the eligible taxpayer could receive not counting any amount 7 previously calculated when adding the amounts in subparagraphs 8 (1) and (2). 9 (b) As used in subparagraph division (a), “risk-sharing 10 factor” means an occurrence or lack of occurrence, that may 11 affect the commodity’s production or profitability as provided 12 in the agreement, and which may include but is not limited to 13 production costs, per acre crop yield, gross revenue, or market 14 price. 15 (c) The board shall adopt rules establishing criteria for 16 commonly used risk-sharing factors and adjustment limits. 17 6. After the board has approved an application, all of the 18 following apply: 19 a. The authority shall issue a beginning farmer tax credit 20 eligibility certification to an eligible taxpayer as provided 21 in section 16.82A. 22 b. An eligible taxpayer may claim the tax credit each tax 23 year as provided in section 16.82. 24 7. Any financial, contractual, or legal authorization 25 records provided to the authority, including the division, 26 shall be kept confidential and are not subject to chapter 22. 27 Sec. 12. NEW SECTION . 16.82 Beginning farmer tax credit 28 —— allowance. 29 1. A beginning farmer tax credit is authorized under the 30 beginning farmer tax credit program as provided in section 31 16.78. The beginning farmer tax credit is allowed against 32 the taxes imposed in chapter 422, division II, as provided in 33 section 422.11E, and in chapter 422, division III, as provided 34 in section 422.33, subsection 21, to facilitate the transfer of 35 -9- LSB 1882HV (2) 88 da/jh 9/ 16

H.F. 647 agricultural assets from an eligible taxpayer to a qualifying 1 beginning farmer participating in the program. 2 2. An individual may claim a beginning farmer tax credit 3 under this section of a partnership, limited liability company, 4 S corporation, estate, or trust electing to have income 5 taxed directly to the individual. The amount claimed by the 6 individual shall be based upon the pro rata share of the 7 individual’s earnings from the partnership, limited liability 8 company, S corporation, estate, or trust. 9 3. For an agricultural lease agreement made on a fixed basis 10 as described in section 16.81, the eligible taxpayer may claim 11 a tax credit equal to five percent of the gross amount paid to 12 the eligible taxpayer under the agreement for each tax year 13 that the tax credit is allowed. 14 4. For an agreement made on a commodity share basis as 15 described in section 16.81, the eligible taxpayer may claim a 16 tax credit equal to fifteen percent of the gross amount paid 17 to the eligible taxpayer from the sale of the share of crops or 18 livestock received by the eligible taxpayer under the agreement 19 for each tax year that the tax credit is allowed or until all 20 the income from the agreement is realized by the eligible 21 taxpayer. 22 5. For an agreement made on a flexible basis as described 23 in section 16.81, the eligible taxpayer may claim a tax credit 24 equal to the sum of the following amounts: 25 a. To the extent that the agreement provides that a 26 portion of the payment is a fixed cash payment as described 27 in subsection 3, the eligible taxpayer may claim a tax credit 28 equal to five percent of the amount of the rent payment paid 29 to the eligible taxpayer under the agreement for each tax year 30 that the tax credit is allowed. 31 b. To the extent that the agreement provides that a portion 32 of the payment is calculated on a commodity share basis as 33 described in subsection 4, the eligible taxpayer may claim 34 a tax credit equal to fifteen percent of the amount paid to 35 -10- LSB 1882HV (2) 88 da/jh 10/ 16

H.F. 647 the eligible taxpayer from the sale of the share of crops 1 or livestock received under the agreement for each tax year 2 that the tax credit is allowed until all the income from the 3 agreement is realized by the eligible taxpayer. 4 c. (1) To the extent that the agreement provides that 5 the payment under the agreement is adjusted after taking into 6 account all risk-sharing factors provided in the agreement, 7 the estimated tax credit shall equal fifteen percent of the 8 adjusted amount received under the agreement. 9 (2) As used in subparagraph (1), “risk-sharing factor” means 10 the same as defined in section 16.81, subsection 5, paragraph 11 “c” , subparagraph (3), subparagraph division (a). 12 6. The division shall provide the department of revenue 13 with a list of certified taxpayers and persons who have been 14 decertified due to lease termination by January 31. The list 15 shall include the estimated amount of the tax credit and the 16 type of agreement. 17 7. The amount of the tax credit claimed shall not exceed 18 fifty thousand dollars in any tax year. 19 8. The amount of the tax credit shall be reduced by the 20 percent ownership interest of the qualifying beginning farmer 21 in the agricultural asset. 22 9. A tax credit in excess of the eligible taxpayer’s tax 23 liability for the tax year may be credited to the tax liability 24 for the following ten tax years or until depleted, whichever is 25 earlier. A tax credit shall not be carried back to a tax year 26 prior to the tax year in which the eligible taxpayer redeems 27 the tax credit. 28 10. A tax credit shall not be transferable to any other 29 person other than the taxpayer’s estate. 30 11. If an agreement is terminated by the eligible taxpayer, 31 all of the following shall apply: 32 a. Any properly claimed tax credit for income received 33 pursuant to an agreement shall be allowed, but no additional 34 tax credits may be claimed in future tax years under the 35 -11- LSB 1882HV (2) 88 da/jh 11/ 16

H.F. 647 program. The eligible taxpayer may apply for and be issued 1 another beginning farmer tax credit certificate under a new 2 agreement for the same agricultural assets as provided in this 3 section. 4 b. If the agricultural development board determines 5 that the eligible taxpayer is at fault for the termination, 6 the beginning farmer tax credit that had been allowed for 7 that tax year shall be disallowed and the amount shall be 8 considered a tax payment due. If an eligible taxpayer does not 9 immediately notify the agricultural development division of the 10 termination, the eligible taxpayer shall be conclusively deemed 11 at fault for the termination. 12 Sec. 13. NEW SECTION . 16.82A Beginning farmer tax credit 13 eligibility certification —— amount and availability. 14 1. The estimated amount of beginning farmer tax credits 15 that may be approved by the agricultural development board 16 under the beginning farmer tax credit program shall not in the 17 aggregate exceed a limit of twelve million dollars in each tax 18 year. The estimated amount of the approved tax credits shall 19 be determined by the board after reviewing applications as 20 provided in section 16.81 and arriving at estimated amounts for 21 the approved applications aggregated for purposes of meeting 22 the program limits. 23 2. The authority shall issue the certificate to an eligible 24 taxpayer for the length of the agreement, including until all 25 income is realized by the eligible taxpayer from the agreement 26 but not later than December 15 in the year that the board 27 receives the application under section 16.81. 28 3. The eligibility certification shall be valid for the 29 estate of the eligible taxpayer. 30 Sec. 14. NEW SECTION . 422.11E Beginning farmer tax credit 31 program. 32 The taxes imposed under this division, less the credits 33 allowed under section 422.12, shall be reduced by a beginning 34 farmer tax credit as allowed under chapter 16, subchapter VIII, 35 -12- LSB 1882HV (2) 88 da/jh 12/ 16

H.F. 647 part 5, subpart B. 1 Sec. 15. Section 422.33, subsection 21, Code 2019, is 2 amended to read as follows: 3 21. The taxes imposed under this division shall be reduced 4 by an agricultural assets transfer a beginning farmer tax 5 credit as allowed under section 16.80 chapter 16, subchapter 6 VIII, part 5, subpart B . 7 Sec. 16. REPEAL. Sections 16.80 and 422.11M, Code 2019, 8 are repealed. 9 Sec. 17. APPLICABILITY OF PRIOR TAX CREDITS —— APPROVED 10 APPLICATIONS AND CERTIFICATES. 11 1. Notwithstanding any provision of this Act to the 12 contrary, on or after the effective date of this Act any 13 agricultural asset transfer tax credit application approved 14 under section 16.80 as that section existed on or before 15 December 31, 2018, for which tax credit certificates have not 16 been issued shall be approved for the beginning farmer tax 17 credit program as provided in this Act. The Iowa finance 18 authority shall issue an eligibility certification for the 19 remainder of the agricultural lease term as if the taxpayer 20 and beginning farmer had applied for the beginning farmer tax 21 credit. The taxpayer shall be allowed to claim a beginning 22 farmer tax credit in the same manner as an eligible taxpayer 23 may claim a beginning farmer tax credit as provided in this 24 Act. 25 2. Any application which was submitted for the agricultural 26 assets transfer tax credit pursuant to section 16.80 as 27 that section existed on December 31, 2018, for the tax year 28 beginning January 1, 2019, shall be deemed to be a new pending 29 application for the beginning farmer tax credit as enacted in 30 this Act. The date the new application was received shall be 31 deemed to be the same date that the pending application for the 32 agricultural asset transfer tax credit was received. 33 Sec. 18. APPLICABILITY OF PRIOR TAX CREDITS —— CONTINUANCE 34 OF CARRYOVER PROVISIONS. For any tax year commencing in 35 -13- LSB 1882HV (2) 88 da/jh 13/ 16

H.F. 647 calendar years 2014 through 2018, a tax credit that could 1 have been first issued, awarded, or allowed and claimed under 2 sections 16.75 through 16.82 as those sections existed on 3 December 31, 2017, or under section 16.80 as that section 4 existed on December 31, 2018, may be credited to the tax 5 liability of that taxpayer for ten tax years following the tax 6 year for which the eligible taxpayer could have first claimed 7 the tax credit, or until depleted, whichever is earlier. 8 Sec. 19. EFFECTIVE DATE. This Act, being deemed of 9 immediate importance, takes effect upon enactment. 10 Sec. 20. RETROACTIVE APPLICABILITY. This Act applies 11 retroactively to January 1, 2019, for tax years beginning on 12 or after that date. 13 EXPLANATION 14 The inclusion of this explanation does not constitute agreement with 15 the explanation’s substance by the members of the general assembly. 16 TAXPAYERS AND FARMERS QUALIFYING TO PARTICIPATE IN THE 17 BEGINNING FARMER TAX PROGRAM. This bill creates a beginning 18 farmer tax credit program which replaces the agricultural 19 assets transfer tax credit under the jurisdiction of the Iowa 20 finance authority (IFA). Under the program, an eligible 21 taxpayer (taxpayer) who holds agricultural assets (agricultural 22 land, depreciable agricultural property, crops, or livestock) 23 and who assists a qualified beginning farmer (farmer) acquire 24 agricultural assets by a form of specified legal arrangement 25 is entitled to claim a tax credit against the taxpayer’s 26 individual or corporate income tax liability. Specifically, 27 the taxpayer must be eligible to hold agricultural land 28 generally under Iowa’s corporate farming law (e.g., as an 29 individual, partnership, family farm corporation, or family 30 farm limited liability company). The taxpayer must not have 31 been at fault for terminating a prior agreement in which the 32 taxpayer was able to claim a tax credit. The taxpayer must 33 enter into an agricultural lease agreement (agreement) with 34 the farmer who must be an individual, partnership, family farm 35 -14- LSB 1882HV (2) 88 da/jh 14/ 16

H.F. 647 corporation, or family farm limited liability company. In 1 addition, the farmer must be a resident of this state; have 2 sufficient education, training, or experience in farming; 3 have access to adequate working capital and production items; 4 and not own more than a 10 percent ownership interest in an 5 agricultural asset included in the agreement. 6 BEGINNING FARMER TAX CREDIT. The tax credit is calculated 7 based on the type of rent payment arrangement agreed to 8 by the parties, which is either on a cash basis in which a 9 fixed payment is made or a commodity share basis in which the 10 taxpayer takes a percentage of the crop or livestock produced. 11 The tax credit also takes into account special risk-sharing 12 arrangements in which the parties agree to adjust the rent 13 amount based on some future happening (e.g., crop yield). For 14 an agreement which includes a rent payable on a cash basis, 15 the tax credit amount equals 5 percent of the gross amount 16 paid to the taxpayer under the agreement. For an agreement 17 which includes rent payable on a commodity share basis, the 18 tax credit amount equals 15 percent of the amount paid to 19 the eligible taxpayer from crops or livestock sold under the 20 agreement. In the case of a flexible arrangement in which 21 some risk is shared between the parties, the tax credit amount 22 equals 15 percent of the amount paid to the taxpayer as a 23 percentage of the gross value of the commodity. A tax credit 24 cannot exceed $50,000 in any tax year. 25 APPLICATIONS AND CERTIFICATES. The board is required to 26 review and approve applications for the tax credit. As part 27 of this process the division must calculate the amount of the 28 tax credit that may be awarded to that applicant. The division 29 must approve all applications on a first-come, first-served 30 basis and issue tax credit certificates to approved taxpayers. 31 IFA is allowed to issue up to $12 million in tax credit 32 certificates each tax year, an increase from $6 million under 33 the agricultural assets transfer tax credit. 34 APPLICABILITY OF PRIOR TAX CREDITS —— APPROVED APPLICATIONS 35 -15- LSB 1882HV (2) 88 da/jh 15/ 16

H.F. 647 AND CERTIFICATIONS. The bill provides that any approved 1 application for the agricultural asset transfer tax credit is 2 deemed an approved application under the beginning farmer tax 3 credit program. 4 APPLICABILITY OF PRIOR TAX CREDITS —— CONTINUANCE OF 5 CARRYOVER PROVISIONS. The bill allows a taxpayer who claimed 6 a tax credit under the former version of the beginning farmer 7 tax credit (the agricultural assets transfer tax credit and an 8 associated, now repealed custom farming contract tax credit) 9 may continue to carry over the respective tax credits for the 10 remaining 10 years or the depletion of the tax credit. 11 BACKGROUND. The agricultural assets transfer tax credit 12 was first established in 2006 (2006 Iowa Acts, chapter 1161) 13 and has been subsequently amended. Another form of a tax 14 credit assisting beginning farmers, referred to as the custom 15 farming contract tax credit, was established in 2013 (2013 Iowa 16 Acts, chapter 125). Both tax credits were under the beginning 17 farmer tax credit program and administered by the agricultural 18 development board (board) acting as the agricultural 19 development authority and subject to a limit of $12 million. 20 The program was transferred to IFA (2013 Iowa Acts, chapter 21 100, and 2014 Iowa Acts, chapter 1080). Amendments to the 22 agricultural assets transfer tax credit and the custom farming 23 contract tax credit were repealed on December 31, 2017 (2013 24 Iowa Acts, chapter 125), except for a provision which extended 25 the tax credit carryover from 5 to 10 years. The funding limit 26 was restored to its present $6 million limit. 27 EFFECTIVE AND RETROACTIVE APPLICABILITY. The bill takes 28 effect upon enactment and applies retroactively to January 1, 29 2019, to tax years beginning on or after that date. 30 -16- LSB 1882HV (2) 88 da/jh 16/ 16