SF 291 (LSB 2382XS (1) 89)

SENATE FILE 291

BY  KINNEY

A BILL FOR

An Act relating to the beginning farmer tax credit program, by modifying participation and lease agreement requirements and tax credit amounts, and including effective date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 16.58, subsections 1, 2, and 3, Code 2021, are amended to read as follows:
   1.  “Agricultural assets” asset” means agricultural land with or without an agricultural improvement, depreciable agricultural property, crops, or livestock.
   2.  “Agricultural improvements” improvement” means any improvements, including buildings, structures, or fixtures suitable for use in farming which are, if located on any size parcel of agricultural land.
   3.  “Agricultural land” means land suitable for use in farming, any portion of which may include an agricultural improvement.
    Sec. 2.  Section 16.79A, subsection 1, Code 2021, is amended to read as follows:
   1.  a.  A beginning farmer tax credit is allowed only for agricultural assets that are subject to an agricultural lease agreement entered into by an eligible taxpayer and a qualifying beginning farmer participating in the beginning farmer tax credit program established pursuant to section 16.78.
   b.  The tax credit is allowed regardless of whether the principle agricultural asset is soil, pasture, or a building or other structure used in farming.
    Sec. 3.  Section 16.79A, subsection 3, paragraph c, Code 2021, is amended to read as follows:
   c.  The agreement must be for at least two years, but not more than five years. The agreement may be renewed any number of times by the eligible taxpayer and qualified beginning farmer for a term of at least two years, but not more than five years.  However, an eligible taxpayer shall not participate in the program for more than fifteen years.
    Sec. 4.  Section 16.81, subsection 4, Code 2021, is amended by striking the subsection.
    Sec. 5.  Section 16.81, subsection 6, Code 2021, is amended to read as follows:
   6.  The authority shall approve all beginning farmer tax credit applications that meet the requirements of this subpart and make tax credit awards on a first-come, first-served basis, subject to the limitations in section 16.82A.  The authority shall not disapprove an application or fail to award a tax credit to an eligible taxpayer merely because the eligible taxpayer had entered into a different agreement with a qualified beginning farmer and the authority approved an application to make a tax credit award to the eligible taxpayer for the same or different tax year.
    Sec. 6.  Section 16.82, subsection 5, Code 2021, is amended to read as follows:
   5.  The amount of tax credits that may be awarded to an eligible taxpayer for any one year under all agreements an agreement shall not exceed fifty thousand dollars.
    Sec. 7.  BEGINNING FARMER TAX CREDIT PROGRAM —— FORMER PERIOD OF PARTICIPATION EXTENDED.  An eligible taxpayer first participating in the beginning farmer tax credit program on or after January 1, 2019, as provided in 2019 Iowa Acts, chapter 161, for a tax year beginning on or after that date, may participate in the program for not more than fifteen years in the same manner as provided in section 16.79A, as amended by this Act.
    Sec. 8.  EFFECTIVE DATE.  This Act takes effect January 1, 2022.
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 provides for the participation of an eligible taxpayer (taxpayer) and qualified beginning farmer (beginning farmer) in the beginning farmer tax credit program (program) (Code section 16.81(4)). Under the program, a tax credit is awarded to a taxpayer who transfers agricultural assets to a beginning farmer by agricultural lease agreement (agreement). The transferred agricultural assets include agricultural land and improvements, as well as depreciable agricultural property. The agreement must be approved by the Iowa finance authority (authority) (Code section 16.79A) who issues a tax credit certificate to the taxpayer on an annual basis for the period of the agreement (Code section 16.81).
   LEASE OF AGRICULTURAL LAND WHICH INCLUDES IMPROVEMENTS (BUILDINGS). The bill provides that the agreement may provide for lease of any size parcel of agricultural land and an improvement such as a building (amended Code section 16.58(1), (2), and (3)). The principal agricultural asset transferred in the agreement may be agricultural land or that part of the agricultural land which is a building or other structure used in farming (amended Code section 16.79A(1)).
   PARTICIPATION IN THE PROGRAM —— FROM 10 TO 15 YEARS.  The bill increases from 10 to 15 the number of years that a taxpayer may participate in the program (amended Code section 16.79A(3)). The extended years of participation apply retroactively to a taxpayer previously approved by the authority to participate in the program.
   PARTICIPATION IN THE PROGRAM —— TAX CREDIT CERTIFICATES AND AWARDS. The bill provides that a taxpayer may claim multiple tax credits under the program (amended Code sections 16.79A(3) and 16.81(6)) so long as each tax credit is based on an agreement approved by the authority (amended Code section 16.81(6)). It also provides that the current $50,000 limitation on tax credits that can be claimed by a taxpayer applies to each rather than all such agreements (amended Code section 16.82(5)).
   BACKGROUND. Generally, in order to qualify as a beginning farmer, a person must have a low or moderate net worth, be able to successfully engage in farming, and promise to materially participate in the farming operation (Code sections 16.58(6) and (10), and 16.79(2)). The amount of the tax credit depends upon the type of payment arrangement provided in the agreement, including a fixed amount (5 percent of cash rent payment) or some form or risk-sharing between the parties (15 percent of the market price of the commodity produced on the leasehold). A taxpayer may claim the tax credit in the applicable tax year up to the taxpayer’s liability. Any amount of the unused tax credit may be applied to reduce the taxpayer’s liability for each of the following 10 years until depleted, whichever comes first; and cannot be refunded (Code section 16.82(7)).
   EFFECTIVE DATE. The bill takes effect on January 1, 2022.