S.F. 444 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 1882SV (2) 88 da/jh 1/ 17

S.F. 444 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 1882SV (2) 88 da/jh 2/ 17

S.F. 444 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 1882SV (2) 88 da/jh 3/ 17

S.F. 444 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 1882SV (2) 88 da/jh 4/ 17

S.F. 444 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 1882SV (2) 88 da/jh 5/ 17

S.F. 444 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 1882SV (2) 88 da/jh 6/ 17

S.F. 444 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. a. The division shall assess and collect application 7 fees as follows: 8 (1) For an application that includes an agricultural 9 lease agreement for the lease of one hundred acres or less of 10 agricultural land, a fee of three hundred dollars. 11 (2) For an application that includes an agreement for the 12 lease of more than one hundred acres, but not more than two 13 hundred fifty acres of agricultural land, a fee of four hundred 14 dollars. 15 (3) For an application that includes an agreement for the 16 lease of more than two hundred fifty acres of agricultural 17 land, a fee of five hundred dollars. 18 b. Any amount of fees collected by the division under 19 paragraph “a” shall be considered repayment receipts as defined 20 in section 8.2. 21 3. The agricultural development board shall review and 22 approve an application for a tax credit as provided by rules 23 adopted by the board. The application must include a copy of 24 the agricultural lease agreement. The division may require 25 that the parties to an agreement provide additional information 26 as determined relevant by the board. The board shall review 27 an application which includes the renewal of an agreement to 28 determine that the parties to the renewed agreement meet the 29 same qualifications as required for an original application. 30 4. The board shall approve all beginning farmer tax credit 31 applications that meet the requirements provided in this 32 subpart on a first-come, first-served basis until the limit in 33 section 16.82A is met. The board shall review and may approve 34 an application regardless of whether the eligible taxpayer 35 -7- LSB 1882SV (2) 88 da/jh 7/ 17

S.F. 444 has previously been allowed a tax credit under this section, 1 section 175.37 as it existed prior to January 1, 2015, or 2 section 16.80 as it existed prior to January 1, 2018. 3 5. The division shall estimate the amount of the tax credit 4 under the agreement using the following methods: 5 a. In the case of an agreement on a fixed basis, in which 6 an eligible taxpayer receives a fixed cash rent payment, the 7 estimated amount of the tax credit equals five percent of the 8 amount of the fixed cash rent payment. 9 b. In the case of an agreement on a commodity share basis, 10 in which an eligible taxpayer receives as a rent payment a 11 percentage of the commodity produced, the estimated amount of 12 the tax credit shall be based on an equation established by 13 rule adopted by the board. If the agreement is on a crop share 14 basis, the board shall use data compiled by the United States 15 department of agriculture. The estimated amount of tax credit 16 equals fifteen percent of the amount that the eligible taxpayer 17 would receive as a rent payment from the sale of the eligible 18 taxpayer’s share of the crop in the harvest year. The equation 19 established by the board to estimate the rent payment shall 20 include all of the following factors: 21 (1) The past ten-year average per bushel yield for the 22 same type of grain as produced under the agreement in the same 23 county where the leased agricultural land is located excluding 24 the years of highest and lowest per bushel yields. 25 (2) The per bushel state price established for the same 26 type of grain harvested as described in subparagraph (1). 27 Price information shall be averaged from the past five years 28 excluding the years of the highest and lowest per bushel state 29 price. 30 c. For an agreement made on a flexible basis in which an 31 eligible taxpayer receives a rent payment consisting of a fixed 32 cash payment and an amount subject to adjustment according to a 33 risk-sharing arrangement, or receives a rent payment consisting 34 of an amount subject to adjustment according to a risk-sharing 35 -8- LSB 1882SV (2) 88 da/jh 8/ 17

S.F. 444 arrangement, the estimated amount of the tax credit equals the 1 sum of the following amounts: 2 (1) To the extent that a portion of the amount of the 3 rent payment is calculated on a fixed basis as described in 4 paragraph “a” , that portion of the estimated tax credit equals 5 five percent of the fixed cash payment in the same manner as 6 provided in paragraph “a” . 7 (2) To the extent that a portion of the amount of the rent 8 payment is calculated on a commodity share basis as described 9 in paragraph “b” , that portion of the estimated tax credit 10 equals fifteen percent of the amount that the eligible taxpayer 11 would receive from the sale of the eligible taxpayer’s share of 12 the commodity in the same manner as provided in paragraph “b” . 13 (3) (a) To the extent that the amount of the rent payment 14 may be adjusted after taking into account all risk-sharing 15 factors provided in the agreement, the estimated tax credit 16 equals fifteen percent of the highest adjusted amount that 17 the eligible taxpayer could receive not counting any amount 18 previously calculated when adding the amounts in subparagraphs 19 (1) and (2). 20 (b) As used in subparagraph division (a), “risk-sharing 21 factor” means an occurrence or lack of occurrence, that may 22 affect the commodity’s production or profitability as provided 23 in the agreement, and which may include but is not limited to 24 production costs, per acre crop yield, gross revenue, or market 25 price. 26 (c) The board shall adopt rules establishing criteria for 27 commonly used risk-sharing factors and adjustment limits. 28 6. After the board has approved an application, all of the 29 following apply: 30 a. The authority shall issue a beginning farmer tax credit 31 eligibility certification to an eligible taxpayer as provided 32 in section 16.82A. 33 b. An eligible taxpayer may claim the tax credit each tax 34 year as provided in section 16.82. 35 -9- LSB 1882SV (2) 88 da/jh 9/ 17

S.F. 444 7. Any financial, contractual, or legal authorization 1 records provided to the authority, including the division, 2 shall be kept confidential and are not subject to chapter 22. 3 Sec. 12. NEW SECTION . 16.82 Beginning farmer tax credit 4 —— allowance. 5 1. A beginning farmer tax credit is authorized under the 6 beginning farmer tax credit program as provided in section 7 16.78. The beginning farmer tax credit is allowed against 8 the taxes imposed in chapter 422, division II, as provided in 9 section 422.11E, and in chapter 422, division III, as provided 10 in section 422.33, subsection 21, to facilitate the transfer of 11 agricultural assets from an eligible taxpayer to a qualifying 12 beginning farmer participating in the program. 13 2. An individual may claim a beginning farmer tax credit 14 under this section of a partnership, limited liability company, 15 S corporation, estate, or trust electing to have income 16 taxed directly to the individual. The amount claimed by the 17 individual shall be based upon the pro rata share of the 18 individual’s earnings from the partnership, limited liability 19 company, S corporation, estate, or trust. 20 3. For an agricultural lease agreement made on a fixed basis 21 as described in section 16.81, the eligible taxpayer may claim 22 a tax credit equal to five percent of the gross amount paid to 23 the eligible taxpayer under the agreement for each tax year 24 that the tax credit is allowed. 25 4. For an agreement made on a commodity share basis as 26 described in section 16.81, the eligible taxpayer may claim a 27 tax credit equal to fifteen percent of the gross amount paid 28 to the eligible taxpayer from the sale of the share of crops or 29 livestock received by the eligible taxpayer under the agreement 30 for each tax year that the tax credit is allowed or until all 31 the income from the agreement is realized by the eligible 32 taxpayer. 33 5. For an agreement made on a flexible basis as described 34 in section 16.81, the eligible taxpayer may claim a tax credit 35 -10- LSB 1882SV (2) 88 da/jh 10/ 17

S.F. 444 equal to the sum of the following amounts: 1 a. To the extent that the agreement provides that a 2 portion of the payment is a fixed cash payment as described 3 in subsection 3, the eligible taxpayer may claim a tax credit 4 equal to five percent of the amount of the rent payment paid 5 to the eligible taxpayer under the agreement for each tax year 6 that the tax credit is allowed. 7 b. To the extent that the agreement provides that a portion 8 of the payment is calculated on a commodity share basis as 9 described in subsection 4, the eligible taxpayer may claim 10 a tax credit equal to fifteen percent of the amount paid to 11 the eligible taxpayer from the sale of the share of crops 12 or livestock received under the agreement for each tax year 13 that the tax credit is allowed until all the income from the 14 agreement is realized by the eligible taxpayer. 15 c. (1) To the extent that the agreement provides that 16 the payment under the agreement is adjusted after taking into 17 account all risk-sharing factors provided in the agreement, 18 the estimated tax credit shall equal fifteen percent of the 19 adjusted amount received under the agreement. 20 (2) As used in subparagraph (1), “risk-sharing factor” means 21 the same as defined in section 16.81, subsection 5, paragraph 22 “c” , subparagraph (3), subparagraph division (a). 23 6. The division shall provide the department of revenue 24 with a list of certified taxpayers and persons who have been 25 decertified due to lease termination by January 31. The list 26 shall include the estimated amount of the tax credit and the 27 type of agreement. 28 7. The amount of the tax credit claimed shall not exceed 29 fifty thousand dollars in any tax year. 30 8. The amount of the tax credit shall be reduced by the 31 percent ownership interest of the qualifying beginning farmer 32 in the agricultural asset. 33 9. A tax credit in excess of the eligible taxpayer’s tax 34 liability for the tax year may be credited to the tax liability 35 -11- LSB 1882SV (2) 88 da/jh 11/ 17

S.F. 444 for the following ten tax years or until depleted, whichever is 1 earlier. A tax credit shall not be carried back to a tax year 2 prior to the tax year in which the eligible taxpayer redeems 3 the tax credit. 4 10. A tax credit shall not be transferable to any other 5 person other than the taxpayer’s estate. 6 11. If an agreement is terminated by the eligible taxpayer, 7 all of the following shall apply: 8 a. Any properly claimed tax credit for income received 9 pursuant to an agreement shall be allowed, but no additional 10 tax credits may be claimed in future tax years under the 11 program. The eligible taxpayer may apply for and be issued 12 another beginning farmer tax credit certificate under a new 13 agreement for the same agricultural assets as provided in this 14 section. 15 b. If the agricultural development board determines 16 that the eligible taxpayer is at fault for the termination, 17 the beginning farmer tax credit that had been allowed for 18 that tax year shall be disallowed and the amount shall be 19 considered a tax payment due. If an eligible taxpayer does not 20 immediately notify the agricultural development division of the 21 termination, the eligible taxpayer shall be conclusively deemed 22 at fault for the termination. 23 Sec. 13. NEW SECTION . 16.82A Beginning farmer tax credit 24 eligibility certification —— amount and availability. 25 1. The estimated amount of beginning farmer tax credits 26 that may be approved by the agricultural development board 27 under the beginning farmer tax credit program shall not in the 28 aggregate exceed a limit of twelve million dollars in each tax 29 year. The estimated amount of the approved tax credits shall 30 be determined by the board after reviewing applications as 31 provided in section 16.81 and arriving at estimated amounts for 32 the approved applications aggregated for purposes of meeting 33 the program limits. 34 2. The authority shall issue the certificate to an eligible 35 -12- LSB 1882SV (2) 88 da/jh 12/ 17

S.F. 444 taxpayer for the length of the agreement, including until all 1 income is realized by the eligible taxpayer from the agreement 2 but not later than December 15 in the year that the board 3 receives the application under section 16.81. 4 3. The eligibility certification shall be valid for the 5 estate of the eligible taxpayer. 6 Sec. 14. NEW SECTION . 422.11E Beginning farmer tax credit 7 program. 8 The taxes imposed under this division, less the credits 9 allowed under section 422.12, shall be reduced by a beginning 10 farmer tax credit as allowed under chapter 16, subchapter VIII, 11 part 5, subpart B. 12 Sec. 15. Section 422.33, subsection 21, Code 2019, is 13 amended to read as follows: 14 21. The taxes imposed under this division shall be reduced 15 by an agricultural assets transfer a beginning farmer tax 16 credit as allowed under section 16.80 chapter 16, subchapter 17 VIII, part 5, subpart B . 18 Sec. 16. REPEAL. Sections 16.80 and 422.11M, Code 2019, 19 are repealed. 20 Sec. 17. APPLICABILITY OF PRIOR TAX CREDITS —— APPROVED 21 APPLICATIONS AND CERTIFICATES. 22 1. Notwithstanding any provision of this Act to the 23 contrary, on or after the effective date of this Act any 24 agricultural asset transfer tax credit application approved 25 under section 16.80 as that section existed on or before 26 December 31, 2018, for which tax credit certificates have not 27 been issued shall be approved for the beginning farmer tax 28 credit program as provided in this Act. The Iowa finance 29 authority shall issue an eligibility certification for the 30 remainder of the agricultural lease term as if the taxpayer 31 and beginning farmer had applied for the beginning farmer tax 32 credit. The taxpayer shall be allowed to claim a beginning 33 farmer tax credit in the same manner as an eligible taxpayer 34 may claim a beginning farmer tax credit as provided in this 35 -13- LSB 1882SV (2) 88 da/jh 13/ 17

S.F. 444 Act. 1 2. Any application which was submitted for the agricultural 2 assets transfer tax credit pursuant to section 16.80 as 3 that section existed on December 31, 2018, for the tax year 4 beginning January 1, 2019, shall be deemed to be a new pending 5 application for the beginning farmer tax credit as enacted in 6 this Act. The date the new application was received shall be 7 deemed to be the same date that the pending application for the 8 agricultural asset transfer tax credit was received. 9 Sec. 18. APPLICABILITY OF PRIOR TAX CREDITS —— CONTINUANCE 10 OF CARRYOVER PROVISIONS. For any tax year commencing in 11 calendar years 2014 through 2018, a tax credit that could 12 have been first issued, awarded, or allowed and claimed under 13 sections 16.75 through 16.82 as those sections existed on 14 December 31, 2017, or under section 16.80 as that section 15 existed on December 31, 2018, may be credited to the tax 16 liability of that taxpayer for ten tax years following the tax 17 year for which the eligible taxpayer could have first claimed 18 the tax credit, or until depleted, whichever is earlier. 19 Sec. 19. EFFECTIVE DATE. This Act, being deemed of 20 immediate importance, takes effect upon enactment. 21 Sec. 20. RETROACTIVE APPLICABILITY. This Act applies 22 retroactively to January 1, 2019, for tax years beginning on 23 or after that date. 24 EXPLANATION 25 The inclusion of this explanation does not constitute agreement with 26 the explanation’s substance by the members of the general assembly. 27 TAXPAYERS AND FARMERS QUALIFYING TO PARTICIPATE IN THE 28 BEGINNING FARMER TAX PROGRAM. This bill creates a beginning 29 farmer tax credit program which replaces the agricultural 30 assets transfer tax credit under the jurisdiction of the Iowa 31 finance authority (IFA). Under the program, an eligible 32 taxpayer (taxpayer) who holds agricultural assets (agricultural 33 land, depreciable agricultural property, crops, or livestock) 34 and who assists a qualified beginning farmer (farmer) acquire 35 -14- LSB 1882SV (2) 88 da/jh 14/ 17

S.F. 444 agricultural assets by a form of specified legal arrangement 1 is entitled to claim a tax credit against the taxpayer’s 2 individual or corporate income tax liability. Specifically, 3 the taxpayer must be eligible to hold agricultural land 4 generally under Iowa’s corporate farming law (e.g., as an 5 individual, partnership, family farm corporation, or family 6 farm limited liability company). The taxpayer must not have 7 been at fault for terminating a prior agreement in which the 8 taxpayer was able to claim a tax credit. The taxpayer must 9 enter into an agricultural lease agreement (agreement) with 10 the farmer who must be an individual, partnership, family farm 11 corporation, or family farm limited liability company. In 12 addition, the farmer must be a resident of this state; have 13 sufficient education, training, or experience in farming; 14 have access to adequate working capital and production items; 15 and not own more than a 10 percent ownership interest in an 16 agricultural asset included in the agreement. 17 BEGINNING FARMER TAX CREDIT. The tax credit is calculated 18 based on the type of rent payment arrangement agreed to 19 by the parties, which is either on a cash basis in which a 20 fixed payment is made or a commodity share basis in which the 21 taxpayer takes a percentage of the crop or livestock produced. 22 The tax credit also takes into account special risk-sharing 23 arrangements in which the parties agree to adjust the rent 24 amount based on some future happening (e.g., crop yield). For 25 an agreement which includes a rent payable on a cash basis, 26 the tax credit amount equals 5 percent of the gross amount 27 paid to the taxpayer under the agreement. For an agreement 28 which includes rent payable on a commodity share basis, the 29 tax credit amount equals 15 percent of the amount paid to 30 the eligible taxpayer from crops or livestock sold under the 31 agreement. In the case of a flexible arrangement in which 32 some risk is shared between the parties, the tax credit amount 33 equals 15 percent of the amount paid to the taxpayer as a 34 percentage of the gross value of the commodity. A tax credit 35 -15- LSB 1882SV (2) 88 da/jh 15/ 17

S.F. 444 cannot exceed $50,000 in any tax year. 1 APPLICATIONS AND CERTIFICATES. The board is required to 2 review and approve applications for the tax credit. As part 3 of this process the division must calculate the amount of 4 the tax credit that may be awarded to that applicant. The 5 division must assess and collect an application fee based on 6 the number of acres of agricultural land subject to the lease. 7 The division must approve all applications on a first-come, 8 first-served basis and issue tax credit certificates to 9 approved taxpayers. IFA is allowed to issue up to $12 million 10 in tax credit certificates each tax year, an increase from $6 11 million under the agricultural assets transfer tax credit. 12 APPLICABILITY OF PRIOR TAX CREDITS —— APPROVED APPLICATIONS 13 AND CERTIFICATIONS. The bill provides that any approved 14 application for the agricultural asset transfer tax credit is 15 deemed an approved application under the beginning farmer tax 16 credit program. 17 APPLICABILITY OF PRIOR TAX CREDITS —— CONTINUANCE OF 18 CARRYOVER PROVISIONS. The bill allows a taxpayer who claimed 19 a tax credit under the former version of the beginning farmer 20 tax credit (the agricultural assets transfer tax credit and an 21 associated, now repealed custom farming contract tax credit) 22 may continue to carry over the respective tax credits for the 23 remaining 10 years or the depletion of the tax credit. 24 BACKGROUND. The agricultural assets transfer tax credit 25 was first established in 2006 (2006 Iowa Acts, chapter 1161) 26 and has been subsequently amended. Another form of a tax 27 credit assisting beginning farmers, referred to as the custom 28 farming contract tax credit, was established in 2013 (2013 Iowa 29 Acts, chapter 125). Both tax credits were under the beginning 30 farmer tax credit program and administered by the agricultural 31 development board (board) acting as the agricultural 32 development authority and subject to a limit of $12 million. 33 The program was transferred to IFA (2013 Iowa Acts, chapter 34 100, and 2014 Iowa Acts, chapter 1080). Amendments to the 35 -16- LSB 1882SV (2) 88 da/jh 16/ 17

S.F. 444 agricultural assets transfer tax credit and the custom farming 1 contract tax credit were repealed on December 31, 2017 (2013 2 Iowa Acts, chapter 125), except for a provision which extended 3 the tax credit carryover from 5 to 10 years. The funding limit 4 was restored to its present $6 million limit. 5 EFFECTIVE AND RETROACTIVE APPLICABILITY. The bill takes 6 effect upon enactment and applies retroactively to January 1, 7 2019, to tax years beginning on or after that date. 8 -17- LSB 1882SV (2) 88 da/jh 17/ 17