H.F. 2711 Section 1. Section 16.58, subsections 1, 9, and 11, Code 1 2024, are amended to read as follows: 2 1. “Agricultural assets” means agricultural land, 3 agricultural improvements, depreciable agricultural property, 4 including agricultural commodities such as crops , or livestock , 5 or agricultural products processed from those agricultural 6 commodities . 7 9. “Farming” means the cultivation use of agricultural 8 land for the production of agricultural commodities including 9 agricultural crops, the raising of livestock or poultry , ; the 10 production of eggs , ; the production of milk , ; the production 11 of syrup or honey; the production of vegetables, fruit , 12 or other horticultural crops ; , grazing, the production of 13 livestock, aquaculture , ; hydroponics , ; the production of forest 14 products , ; or other activities designated by rules adopted by 15 the authority by rules subject to pursuant to chapter 17A . 16 11. “Production item” includes tools, machinery, or 17 equipment principally used to produce crops or livestock an 18 agricultural commodity . 19 Sec. 2. Section 16.58, Code 2024, is amended by adding the 20 following new subsections: 21 NEW SUBSECTION . 1A. “Agricultural development board” means 22 the agricultural development board created in section 16.2C. 23 NEW SUBSECTION . 6A. “Department” means the department of 24 revenue created in section 421.2. 25 Sec. 3. Section 16.77, subsections 1 and 3, Code 2024, are 26 amended by striking the subsections. 27 Sec. 4. Section 16.82A, subsection 2, Code 2024, is amended 28 to read as follows: 29 2. The amount of beginning farmer tax credits that may be 30 awarded by the authority in any one calendar year under the 31 beginning farmer tax credit program shall not in the aggregate 32 exceed a limit of twelve six million dollars. Tax credits 33 shall be awarded by the authority not later than December 34 15 of each calendar year after the agricultural development 35 -1- LSB 6162YH (6) 90 da/jh 1/ 10

H.F. 2711 board reviews applications as provided in section 16.81 and 1 the authority determines tax credit amounts for the approved 2 applications as provided in section 16.82 , aggregated for 3 purposes of meeting the annual program award limits. 4 Sec. 5. NEW SECTION . 16.85 Definitions. 5 As used in this subpart, unless the context otherwise 6 requires: 7 1. “Eligible taxpayer” means a taxpayer who may participate 8 in the specialty food beginning farmer tax credit program, 9 including by meeting all the criteria as provided in section 10 16.87. 11 2. “Food animal” means an animal belonging to the bovine, 12 caprine, ovine, or porcine species; a turkey, chicken, or other 13 type of poultry; a farm deer as defined in section 170.1; a 14 fish or other aquatic organism confined in private waters for 15 human consumption; or a bee as defined in section 160.1A. 16 3. “Food commodity” means any of the following: 17 a. A food animal that is to be slaughtered or harvested for 18 food processing. 19 b. An item regularly generated by a food animal, including 20 milk, eggs, or honey, that has been collected for food 21 processing. 22 c. Whole produce, including vegetables or fruit, sap, whole 23 nuts, or whole produce, including vegetables or fruit, that has 24 been harvested for food processing. 25 4. “Food processing” means to prepare a food product 26 for sale on a retail basis, including by doing any of the 27 following: 28 a. Removing debris from a food commodity, including by 29 washing it. 30 b. Changing the form, state, or physical characteristics 31 of a food commodity, including by cutting, trimming, deboning 32 or defeathering, churning, freezing or chilling, heating, 33 pasteurizing, shelling, husking, drying, filtering, fermenting, 34 distilling, or eviscerating it. 35 -2- LSB 6162YH (6) 90 da/jh 2/ 10

H.F. 2711 c. Storing or packaging the food commodity, including by 1 canning, jarring, boxing, or otherwise enclosing it. 2 5. a. “Food product” means a food commodity that has been 3 processed for sale on a retail basis for human consumption. 4 b. “Food product” includes cuts of meat or poultry, milk, 5 eggs, syrup, honey, vegetables, fruit, or nuts. 6 6. “Program” means the specialty food beginning farmer tax 7 credit program created pursuant to section 16.78. 8 7. “Tax credit” means the specialty food beginning farmer 9 tax credit allowed under section 16.89. 10 Sec. 6. NEW SECTION . 16.86 Administration. 11 1. A specialty food beginning farmer tax credit program is 12 created under the control of the authority. 13 2. The authority and the department shall cooperate in 14 administering the program. The department shall have all 15 rulemaking powers necessary to administer its responsibilities 16 under this subpart as it does under chapter 422. 17 3. To every extent practicable, the authority shall 18 administer the program in a manner that provides specialty food 19 beginning farmers access to agricultural land used in producing 20 a food commodity and food processing. 21 4. The authority and the department shall each adopt 22 rules in accordance with chapter 17A as necessary for the 23 administration of their respective responsibilities under this 24 subpart. The eligibility requirements for eligible taxpayers 25 as provided in the rules shall not be more stringent than 26 provided in this subpart. 27 5. The authority shall provide for the preparation or 28 revision and publication or distribution of forms necessary 29 to administer their responsibilities under this subpart. The 30 authority shall make an effort to invite participation by 31 specialty food beginning farmers, including those engaged in 32 the production and processing of organic foods under chapter 33 190C. 34 Sec. 7. NEW SECTION . 16.87 Eligibility criteria. 35 -3- LSB 6162YH (6) 90 da/jh 3/ 10

H.F. 2711 A taxpayer is eligible to participate in the program if the 1 taxpayer meets all of the following requirements: 2 1. The taxpayer must be able to legally acquire agricultural 3 land in this state pursuant to chapter 9H or 9I. The taxpayer 4 must also not be a person who may legally acquire agricultural 5 land exclusively because of an exception provided in one of 6 those chapters or in a provision of another chapter of this 7 Code including but not limited to chapter 10, 10D, or 501, or 8 section 15E.207. 9 2. The taxpayer must be a beginning farmer engaged in the 10 production of a food commodity or food product for direct 11 sale or for processing by one or more Iowa-based businesses 12 for wholesale or retail marketing or who is engaged in the 13 management of food animals for the production of food products 14 processed on site or at a facility that is eligible for the 15 choose Iowa promotional program, the value-added agriculture 16 grant program, the dairy innovation program, or the butchery 17 innovation and revitalization program. 18 3. The taxpayer must not have been at fault for previously 19 terminating participation in the program or a similar program 20 in which the taxpayer was allowed to claim a tax credit. 21 4. The taxpayer must not be a party to a pending 22 administrative or judicial action, including a contested case 23 proceeding under chapter 17A, relating to an alleged violation 24 involving an animal feeding operation as regulated by the 25 department of natural resources, regardless of whether the 26 pending action is brought by the department or the attorney 27 general. 28 5. The taxpayer must not be classified as a habitual 29 violator for a violation of state law involving an animal 30 feeding operation as regulated by the department of natural 31 resources under chapter 459. 32 6. The taxpayer must have access to adequate working capital 33 and production items. 34 7. The taxpayer must materially and substantially 35 -4- LSB 6162YH (6) 90 da/jh 4/ 10

H.F. 2711 participate in the specialized farming operation. If the 1 beginning farmer is a partnership, family farm corporation, 2 or family farm limited liability company, at least one of the 3 partners, shareholders, or members who is not a minor must 4 materially and substantially participate in the specialty food 5 farming operation. 6 8. The taxpayer must have sufficient education, training, 7 or experience in farming. If the taxpayer is a partnership, 8 at least one partner who is not a minor must have sufficient 9 education, training, or experience in farming. If the taxpayer 10 is a family farm corporation, at least one shareholder who 11 is not a minor must have sufficient education, training, or 12 experience in farming. If the taxpayer is a family farm 13 limited liability company, at least one member who is not a 14 minor must have sufficient education, training, or experience 15 in farming. 16 Sec. 8. NEW SECTION . 16.88 Application. 17 1. The authority shall adopt rules establishing a deadline 18 for persons to apply to participate in the program. The 19 authority shall require that the applicant provide all 20 information as determined relevant by the authority in order to 21 process the application. Any financial, contractual, or legal 22 authorization records provided to the authority shall be kept 23 confidential and are not subject to chapter 22. 24 2. The authority may impose, assess, and collect 25 application fees and shall adopt rules as necessary to 26 administer this subsection, including by providing for 27 different rates for those fees. The amount of application 28 fees collected by the authority shall be considered repayment 29 receipts as defined in section 8.2. 30 3. The agricultural development board shall review and 31 recommend approval or disapproval of an application to the 32 authority as provided by rules adopted by the authority. 33 4. An applicant may be provided priority based on soil 34 conservation and water quality practices installed on the 35 -5- LSB 6162YH (6) 90 da/jh 5/ 10

H.F. 2711 agricultural land. 1 Sec. 9. NEW SECTION . 16.89 Allowance. 2 1. The tax credit authorized under the program is allowed 3 against the taxes imposed in chapter 422, subchapter II, as 4 provided in section 422.11E, and in chapter 422, subchapter 5 III, as provided in section 422.33, subsection 21. 6 2. The amount of the tax credit shall equal the following: 7 a. Thirty percent of the purchase price of agricultural land 8 not to exceed forty acres paid by the eligible taxpayer, if the 9 agricultural land is to be a principal part of a specialty food 10 farming operation. 11 b. Thirty percent of the purchase price of machinery or 12 equipment paid by the eligible taxpayer, if the machinery or 13 equipment is used as a principal part of a specialty food 14 farming operation. 15 c. Fifty percent of payments made to an accredited 16 educational institution recognized by the authority for 17 education or continuing education that prepares a specialty 18 food beginning farmer for managing or assisting in the 19 operation of a specialty food farm operation. 20 3. A tax credit in excess of the eligible taxpayer’s tax 21 liability for the tax year is refundable. The tax credit may 22 be credited to the tax liability for the following ten tax 23 years or until depleted, whichever is earlier. A tax credit 24 shall not be carried back to a tax year prior to the tax year in 25 which the eligible taxpayer redeems the tax credit. 26 Sec. 10. NEW SECTION . 16.89A Limits. 27 1. The amount of a tax credit that may be awarded to an 28 eligible taxpayer for any twelve-month period shall not exceed 29 fifty thousand dollars. 30 2. The total amount that the authority may award all 31 eligible taxpayers during a twelve-month period shall not 32 exceed the maximum amount of six million dollars. The 33 authority shall award each eligible taxpayer the full amount of 34 the eligible taxpayer’s tax credit without proration until the 35 -6- LSB 6162YH (6) 90 da/jh 6/ 10

H.F. 2711 maximum amount is reached. 1 Sec. 11. NEW SECTION . 16.89B Tax credit certificate. 2 1. The tax credit shall be for a twelve-month period 3 beginning and ending as determined by rules adopted by the 4 authority. 5 2. The tax credit certificate shall contain information 6 required by the department. 7 3. The tax credit certificate, unless rescinded by the 8 authority, shall be accepted by the department of revenue as 9 payment for taxes imposed in chapter 422, subchapter II, as 10 provided in section 422.11E, and in chapter 422, subchapter 11 III, as provided in section 422.33, subsection 21. 12 4. A tax credit certificate may be transferred to any 13 person. Within ninety days of transfer, the transferee shall 14 submit the transferred tax credit certificate to the department 15 together with information required by the department. 16 5. Within thirty days of receiving the transferred tax 17 credit certificate and the transferee’s statement, the 18 department shall issue one or more replacement tax credit 19 certificates to the transferee. Each replacement tax credit 20 certificate must contain the information required for the 21 original tax credit certificate and must have the same 22 expiration date that appeared in the transferred tax credit 23 certificate. A tax credit certificate amount that is less than 24 a minimum amount established by rule adopted by the department 25 shall not be transferable. 26 6. A tax credit shall not be claimed by a transferee until 27 a replacement tax credit certificate identifying the transferee 28 as the proper holder has been issued. The transferee may use 29 the amount of the tax credit transferred for any tax year the 30 original transferor could have claimed the tax credit. Any 31 consideration received for the transfer of the tax credit shall 32 not be included as income under chapter 422, subchapters II, 33 III, and V. Any consideration paid for the transfer of the tax 34 credit shall not be deducted from income under chapter 422, 35 -7- LSB 6162YH (6) 90 da/jh 7/ 10

H.F. 2711 subchapters II, III, and V. 1 7. A tax credit is not refundable. 2 Sec. 12. Section 422.11E, Code 2024, is amended to read as 3 follows: 4 422.11E Beginning farmer tax credit program. 5 The taxes imposed under this subchapter , less the credits 6 allowed under section 422.12 , shall be reduced by a any of the 7 following: 8 1. A beginning farmer tax credit as allowed under chapter 9 16, subchapter VIII, part 5, subpart B . 10 2. A specialized beginning farmer tax credit as allowed 11 under chapter 16, subchapter VIII, part 5, subpart C. 12 Sec. 13. Section 422.33, subsection 21, Code 2024, is 13 amended to read as follows: 14 21. The taxes imposed under this subchapter shall be reduced 15 by a any of the following: 16 a. A beginning farmer tax credit as allowed under chapter 17 16, subchapter VIII, part 5, subpart B . 18 b. A specialized beginning farmer tax credit as allowed 19 under chapter 16, subchapter VIII, part 5, subpart C. 20 EXPLANATION 21 The inclusion of this explanation does not constitute agreement with 22 the explanation’s substance by the members of the general assembly. 23 BACKGROUND. This bill amends provisions in Code chapter 16 24 providing for a number of development programs administered by 25 the Iowa finance authority (IFA). Subchapter VIII provides 26 for agricultural development programs under the supervision 27 of the agricultural development division and agricultural 28 development board. A number of the agricultural development 29 programs support beginning farmers with low or moderate net 30 worth to acquire agricultural land for farming. The beginning 31 farmer tax credit program creates a tax credit against the 32 tax liability of the owner of agricultural land entering 33 into a lease with a beginning farmer for agricultural land, 34 equipment, and commodities such as crops or livestock. The 35 -8- LSB 6162YH (6) 90 da/jh 8/ 10

H.F. 2711 taxpayer may be either an individual or a business entity 1 that can hold agricultural land under Code chapter 9H, Iowa’s 2 corporate farming law. A taxpayer participating in the program 3 is issued a tax credit certificate. The amount of the tax 4 credit is calculated differently based on the type of rent 5 payment arrangement described in the agreement and a taxpayer 6 is not eligible to claim a tax credit of more than $50,000 in 7 a tax year. The agricultural development board is required 8 to review applications subject to IFA’s approval. A fee is 9 imposed for processing applications. A taxpayer is issued 10 a tax credit certificate by the department of revenue (DOR) 11 which may be redeemed by the taxpayer. The tax credit may be 12 carried forward but not carried back and is not refundable. 13 Tax credits are awarded to all taxpayers whose applications 14 have been approved during a calendar year so long as the amount 15 of all awards does not exceed the $12 million aggregate award 16 limitation. 17 BILL’S PROVISIONS. The bill establishes a specialty food 18 beginning farmer tax credit program based on the current 19 beginning farmer tax credit program. In this case, the tax 20 credit may be claimed by a beginning farmer engaged in a 21 specialty food farming operation rather than a landlord. The 22 specialty beginning farmer must be engaged in producing a 23 food commodity and may be engaged in processing that food 24 commodity into a food product. The food commodity includes 25 food animals used for meat or poultry or associated items such 26 as milk or eggs. It may also include fruit, vegetables, nuts, 27 or honey. Like the beginning farmer tax credit program, this 28 program is administered by the authority and the department. 29 The bill provides similar eligibility requirements applied 30 to a beginning farmer engaged in specialty production 31 or processing. IFA is required to establish application 32 requirements, including the establishment of fees. The 33 amount of the tax credit equals 30 percent of the purchase 34 price of the agricultural land, 30 percent of the purchase 35 -9- LSB 6162YH (6) 90 da/jh 9/ 10

H.F. 2711 price of equipment or machinery, and 50 percent of payments 1 made to an accredited educational institution that prepares 2 a beginning farmer for managing a specialty farm operation 3 or related food processing operation. The amount of the tax 4 credit cannot exceed $50,000 per any 12-month period and the 5 total amount that may be awarded for all claims cannot exceed 6 $6 million in any 12-month period. The $12 million used to 7 support the beginning farmer tax credit program is reduced by 8 half so that the programs share half of the current total. 9 IFA must award each eligible taxpayer the full amount of the 10 eligible taxpayer’s tax credit without proration until the 11 maximum amount is reached. The eligible taxpayer is issued 12 a tax certificate which may be transferred to a new holder 13 under certain conditions. The eligible taxpayer, but not a 14 transferee, may claim the tax credit as a refund. 15 -10- LSB 6162YH (6) 90 da/jh 10/ 10