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Senate Study Bill 1181 - IntroducedA Bill ForAn Act 1providing for a beginning farmer tax credit program,
2providing for fees, and including effective date and
3retroactive applicability provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 2.48, subsection 3, paragraph e,
2subparagraph (1), Code 2019, is amended to read as follows:
3(1) The agricultural assets transfer beginning farmer
4 tax credit program as provided in section 16.80 chapter 16,
5subchapter VIII, part 5, subpart B.
6 Sec. 2. Section 16.2B, subsection 3, paragraph b, Code 2019,
7is amended to read as follows:
8b. Obtain agricultural assets transfer Claim the beginning
9farmer tax credits, including tax credit certificates issued
10 pursuant to subchapter VIII, part 5, subpart B.
11 Sec. 3. Section 16.2C, subsection 2, Code 2019, is amended
12to read as follows:
132. The agricultural development board is created to
14exercise all powers and perform all duties necessary to
15administer subchapter VIII according to policies established
16by the authority. The authority shall establish policies
17and practices for the division and oversee its operations.
18The authority may review or approve decisions affecting the
19division or administration of subchapter VIII, including
20decisions of the agricultural development board.
21 Sec. 4. Section 16.58, subsections 6 and 9, Code 2019, are
22amended to read as follows:
236. “Beginning farmer” means an individual, partnership,
24family farm corporation, or family farm limited liability
25company, with a low or moderate net worth that engages
26in farming or wishes to engage in farming and meets the
27eligibility requirements of the applicable program as provided
28in this subchapter.
299. “Farming” means the cultivation of land for the
30production of agricultural crops, the raising of poultry, the
31production of eggs, the production of milk, the production of
32fruit or other horticultural crops, grazing, the production of
33livestock, aquaculture, hydroponics, the production of forest
34products, or other activities designated by the authority by
35 rules adopted by the agricultural development board subject to
-1-1chapter 17A.
2 Sec. 5. Section 16.59, subsection 4, Code 2019, is amended
3to read as follows:
44. For a family farm limited liability company, an aggregate
5net worth of all members, including each member’s ownership
6interest in the family farm limited liability company, and
7each member’s spouse and minor children of not greater than
8twice the low or moderate net worth. However, the aggregate
9net worth of each member and that member’s spouse and minor
10children shall not exceed the low or moderate net worth.
11 Sec. 6. Section 16.75, subsection 3, Code 2019, is amended
12by adding the following new paragraph:
13 NEW PARAGRAPH. h. The beginning farmer has a low or
14moderate net worth.
15 Sec. 7. NEW SECTION. 16.77 Definitions.
16As used in this subpart B, unless the context otherwise
17requires:
181. “Agricultural development board” or “board” means the
19agricultural development board created in section 16.2C.
202. “Agricultural development division” or “division” means
21the agricultural development division created within the
22authority pursuant to section 16.2B.
233. “Agricultural lease agreement” or “agreement” means an
24agreement for the transfer of agricultural assets, that must at
25least include a lease of agricultural land, from an eligible
26taxpayer to a qualified beginning farmer as provided in section
2716.79A.
284. “Eligible taxpayer” means a taxpayer who may participate
29in the beginning farmer tax credit program, including by
30meeting all the criteria as provided in section 16.79.
315. “Program” means the beginning farmer tax credit program
32created pursuant to section 16.78.
336. “Qualified beginning farmer” means a beginning farmer who
34meets the requirements to participate in a beginning farmer tax
35credit program as provided in section 16.79.
-2- 17. “Tax credit” means the beginning farmer tax credit
2allowed under section 16.82.
3 Sec. 8. NEW SECTION. 16.78 Beginning farmer tax credit
4program — establishment and administration.
51. A beginning farmer tax credit program is established
6under the control of the agricultural development board.
72. To every extent practicable, the board shall administer
8the program in a manner that encourages participation by
9eligible taxpayers and qualifying beginning farmers for the
10primary purposes of providing beginning farmers access to
11farmland and enhancing the stability of the beginning farmer’s
12farming business.
133. The board shall adopt rules in accordance with chapter
1417A as necessary for the administration of this subpart. The
15eligibility requirements for taxpayers and the qualifications
16for beginning farmers as provided in the rules shall not be
17more stringent than provided in this subpart.
184. The board shall approve the preparation or revision and
19publication or distribution of forms necessary to administer
20this subpart.
215. The department of revenue shall cooperate with the
22authority, including the division, in administering the
23program.
24 Sec. 9. NEW SECTION. 16.79 Beginning farmer tax credit
25program — eligibility criteria.
261. A taxpayer is eligible to participate in the beginning
27farmer tax credit program if the taxpayer meets all of the
28following requirements:
29a. The taxpayer is a person who may acquire or otherwise
30obtain or lease agricultural land in this state pursuant to
31chapter 9H or 9I. However, the taxpayer must not be a person
32who may acquire or otherwise obtain or lease agricultural
33land exclusively because of an exception provided in one of
34those chapters or in a provision of another chapter of this
35Code including but not limited to chapter 10, 10D, or 501, or
-3-1section 15E.207.
2b. The taxpayer has entered into an agricultural lease
3agreement with a qualified beginning farmer to lease
4agricultural land as provided in section 16.79A.
5c. The taxpayer has not been at fault for terminating a
6prior agreement under the program or another agreement in which
7the taxpayer was allowed to claim a tax credit under section
8175.37 as it existed prior to January 1, 2015, or section 16.80
9as it existed prior to January 1, 2018.
10d. If the agreement includes the lease of a confinement
11feeding operation structure as defined in section 459.102, the
12taxpayer is not a party to a pending administrative or judicial
13action, including a contested case proceeding under chapter
1417A, relating to an alleged violation involving an animal
15feeding operation as regulated by the department of natural
16resources, regardless of whether the pending action is brought
17by the department or the attorney general.
18e. The taxpayer is not classified as a habitual violator for
19a violation of state law involving an animal feeding operation
20as regulated by the department of natural resources under
21chapter 459.
222. A farmer is a qualified beginning farmer eligible to
23participate in the program by meeting all of the following
24criteria:
25a. Is a resident of the state. If the beginning farmer is a
26partnership, all partners must be residents of the state. If a
27beginning farmer is a family farm corporation, all shareholders
28must be residents of the state. If the beginning farmer is
29a family farm limited liability company, all members must be
30residents of the state.
31b. Has sufficient education, training, or experience in
32farming. If the beginning farmer is a partnership, at least
33one partner who is not a minor must have sufficient education,
34training, or experience in farming. If the beginning farmer is
35a family farm corporation, at least one shareholder who is not
-4-1a minor must have sufficient education, training, or experience
2in farming. If the beginning farmer is a family farm limited
3liability company, at least one member who is not a minor must
4have sufficient education, training, or experience in farming.
5The individual who is the partner, shareholder, or member
6meeting the requirements of this paragraph shall also meet the
7criteria described in paragraph “e”. The eligible taxpayer
8claiming the beginning farmer tax credit shall not be a partner
9of a partnership, shareholder of a family farm corporation, or
10member of a family farm limited liability company leasing the
11agricultural asset.
12c. Has access to adequate working capital and production
13items.
14d. Will materially and substantially participate in
15farming. If the beginning farmer is a partnership, family
16farm corporation, or family farm limited liability company,
17at least one of the partners, shareholders, or members who is
18not a minor must materially and substantially participate in
19farming. The individual who is the partner, shareholder, or
20member meeting the requirements of this paragraph shall also
21meet the criteria described in paragraph “e”.
22e. Has owned and operated a farming business for ten years
23or less at the time of application. Time spent as an employee
24in another person’s farm business is excluded from the ten-year
25limitation.
26f. Does not own more than a ten percent ownership interest
27in an agricultural asset included in the agreement.
28 Sec. 10. NEW SECTION. 16.79A Agricultural lease agreement.
291. A beginning farmer tax credit is allowed only for
30agricultural assets that are subject to an agricultural lease
31agreement entered into by an eligible taxpayer and a qualifying
32beginning farmer participating in the beginning farmer tax
33credit program established pursuant to section 16.78.
342. The agreement must include the lease of agricultural
35land located in this state, including any improvements, and may
-5-1provide for the rental of agricultural equipment as defined in
2section 322F.1.
33. a. The agreement must include provisions which describe
4the consideration paid for the agreement in a manner that
5allows the agricultural development board to estimate the value
6of the lease as provided in section 16.81.
7b. The agreement must be in writing.
8c. The agreement must be for at least two years, but not
9more than five years. The agreement may be renewed by the
10eligible taxpayer and qualified beginning farmer for a term of
11at least two years, but not more than five years.
12d. The agreement shall not include a lease or rental of
13equipment intended as a security.
14e. The agreement cannot be assigned and the agricultural
15land subject to the agreement shall not be subleased.
16f. The agricultural assets shall not be leased or rented at
17a rate that is substantially higher or lower than the market
18rate for similar agricultural assets leased or rented within
19the same community.
204. The agreement may be amended after the authority issues
21an eligibility certificate without changing the eligibility
22status of the taxpayer. However, the underlying lease for
23agricultural land may only be amended without submitting a new
24application, if any of the following apply:
25a. The terms of the amended lease are more favorable to the
26qualified beginning farmer, including but not limited to the
27rent payment being reduced.
28b. A party has changed their name.
29c. The owner of an agricultural asset is changed to the
30owner’s estate.
315. An eligible taxpayer or qualified beginning farmer may
32terminate an agreement as provided in the agreement or by law.
33The eligible taxpayer must notify the agricultural development
34division of the termination within thirty days of the date of
35termination.
-6-1 Sec. 11. NEW SECTION. 16.81 Beginning farmer tax credit
2— application.
31. The deadline for submitting an application to the
4agricultural development division to claim a beginning farmer
5tax credit is August 1 of each year. The application shall be
6for a period that is not longer than the term of the lease.
72. The division shall charge an application fee not to
8exceed three hundred dollars regardless of the type or length
9of agricultural lease agreement. Any amount received by the
10division shall be considered repayment receipts as defined in
11section 8.2.
123. The agricultural development board shall review and
13approve an application for a tax credit as provided by rules
14adopted by the board. The application must include a copy of
15the agricultural lease agreement. The division may require
16that the parties to an agreement provide additional information
17as determined relevant by the board. The board shall review
18an application which includes the renewal of an agreement to
19determine that the parties to the renewed agreement meet the
20same qualifications as required for an original application.
214. The board shall approve all beginning farmer tax credit
22applications on a first-come, first-served basis until the
23limit in section 16.82A is met. The board shall review and
24may approve an application regardless of whether the eligible
25taxpayer has previously been allowed a tax credit under this
26section, section 175.37 as it existed prior to January 1, 2015,
27or section 16.80 as it existed prior to January 1, 2018.
285. The division shall estimate the amount of the tax credit
29under the agreement using the following methods:
30a. In the case of an agreement on a fixed basis, in which
31an eligible taxpayer receives a fixed cash rent payment, the
32estimated amount of the tax credit equals five percent of the
33amount of the fixed cash rent payment.
34b. In the case of an agreement on a commodity share basis,
35in which an eligible taxpayer receives as a rent payment a
-7-1percentage of the commodity produced, the estimated amount of
2the tax credit shall be based on an equation established by
3rule adopted by the board. If the agreement is on a crop share
4basis, the board shall use data compiled by the United States
5department of agriculture. The estimated amount of tax credit
6equals fifteen percent of the amount that the eligible taxpayer
7would receive as a rent payment from the sale of the eligible
8taxpayer’s share of the crop in the harvest year. The equation
9established by the board to estimate the rent payment shall
10include all of the following factors:
11(1) The past ten-year average per bushel yield for the
12same type of grain as produced under the agreement in the same
13county where the leased agricultural land is located excluding
14the years of highest and lowest per bushel yields.
15(2) The per bushel state price established for the same
16type of grain harvested as described in subparagraph (1).
17Price information shall be averaged from the past five years
18excluding the years of the highest and lowest per bushel state
19price.
20c. For an agreement made on a flexible basis in which an
21eligible taxpayer receives a rent payment consisting of a fixed
22cash payment and an amount subject to adjustment according to a
23risk-sharing arrangement, or receives a rent payment consisting
24of an amount subject to adjustment according to a risk-sharing
25arrangement, the estimated amount of the tax credit equals the
26sum of the following amounts:
27(1) To the extent that a portion of the amount of the
28rent payment is calculated on a fixed basis as described in
29paragraph “a”, that portion of the estimated tax credit equals
30five percent of the fixed cash payment in the same manner as
31provided in paragraph “a”.
32(2) To the extent that a portion of the amount of the rent
33payment is calculated on a commodity share basis as described
34in paragraph “b”, that portion of the estimated tax credit
35equals fifteen percent of the amount that the eligible taxpayer
-8-1would receive from the sale of the eligible taxpayer’s share of
2the commodity in the same manner as provided in paragraph “b”.
3(3) (a) To the extent that the amount of the rent payment
4may be adjusted after taking into account all risk-sharing
5factors provided in the agreement, the estimated tax credit
6equals fifteen percent of the highest adjusted amount that
7the eligible taxpayer could receive not counting any amount
8previously calculated when adding the amounts in subparagraphs
9(1) and (2).
10(b) As used in subparagraph division (a), “risk-sharing
11factor” means an occurrence or lack of occurrence, that may
12affect the commodity’s production or profitability as provided
13in the agreement, and which may include but is not limited to
14production costs, per acre crop yield, gross revenue, or market
15price.
16(c) The board shall adopt rules establishing criteria for
17commonly used risk-sharing factors and adjustment limits.
186. After the board has approved an application, all of the
19following apply:
20a. The authority shall issue a beginning farmer tax credit
21eligibility certification to an eligible taxpayer as provided
22in section 16.82A.
23b. An eligible taxpayer may claim the tax credit each tax
24year as provided in section 16.82.
257. Any financial, contractual, or legal authorization
26records provided to the authority, including the division,
27shall be kept confidential and are not subject to chapter 22.
28 Sec. 12. NEW SECTION. 16.82 Beginning farmer tax credit
29— allowance.
301. A beginning farmer tax credit is authorized under the
31beginning farmer tax credit program as provided in section
3216.78. The beginning farmer tax credit is allowed against
33the taxes imposed in chapter 422, division II, as provided in
34section 422.11E, and in chapter 422, division III, as provided
35in section 422.33, subsection 21, to facilitate the transfer of
-9-1agricultural assets from an eligible taxpayer to a qualifying
2beginning farmer participating in the program.
32. An individual may claim a beginning farmer tax credit
4under this section of a partnership, limited liability company,
5S corporation, estate, or trust electing to have income
6taxed directly to the individual. The amount claimed by the
7individual shall be based upon the pro rata share of the
8individual’s earnings from the partnership, limited liability
9company, S corporation, estate, or trust.
103. For an agricultural lease agreement made on a fixed basis
11as described in section 16.81, the eligible taxpayer may claim
12a tax credit equal to five percent of the gross amount paid to
13the eligible taxpayer under the agreement for each tax year
14that the tax credit is allowed.
154. For an agreement made on a commodity share basis as
16described in section 16.81, the eligible taxpayer may claim a
17tax credit equal to fifteen percent of the gross amount paid
18to the eligible taxpayer from the sale of the share of crops or
19livestock received by the eligible taxpayer under the agreement
20for each tax year that the tax credit is allowed or until all
21the income from the agreement is realized by the eligible
22taxpayer.
235. For an agreement made on a flexible basis as described
24in section 16.81, the eligible taxpayer may claim a tax credit
25equal to the sum of the following amounts:
26a. To the extent that the agreement provides that a
27portion of the payment is a fixed cash payment as described
28in subsection 3, the eligible taxpayer may claim a tax credit
29equal to five percent of the amount of the rent payment paid
30to the eligible taxpayer under the agreement for each tax year
31that the tax credit is allowed.
32b. To the extent that the agreement provides that a portion
33of the payment is calculated on a commodity share basis as
34described in subsection 4, the eligible taxpayer may claim
35a tax credit equal to fifteen percent of the amount paid to
-10-1the eligible taxpayer from the sale of the share of crops
2or livestock received under the agreement for each tax year
3that the tax credit is allowed until all the income from the
4agreement is realized by the eligible taxpayer.
5c. (1) To the extent that the agreement provides that
6the payment under the agreement is adjusted after taking into
7account all risk-sharing factors provided in the agreement,
8the estimated tax credit shall equal fifteen percent of the
9adjusted amount received under the agreement.
10(2) As used in subparagraph (1), “risk-sharing factor” means
11the same as defined in section 16.81, subsection 5, paragraph
12“c”, subparagraph (3), subparagraph division (a).
136. The division shall provide the department of revenue
14with a list of certified taxpayers and persons who have been
15decertified due to lease termination by January 31. The list
16shall include the estimated amount of the tax credit and the
17type of agreement.
187. The amount of the tax credit claimed shall not exceed
19fifty thousand dollars in any tax year.
208. The amount of the tax credit shall be reduced by the
21percent ownership interest of the qualifying beginning farmer
22in the agricultural asset.
239. A tax credit in excess of the eligible taxpayer’s tax
24liability for the tax year may be credited to the tax liability
25for the following ten tax years or until depleted, whichever is
26earlier. A tax credit shall not be carried back to a tax year
27prior to the tax year in which the eligible taxpayer redeems
28the tax credit.
2910. A tax credit shall not be transferable to any other
30person other than the taxpayer’s estate.
3111. If an agreement is terminated by the eligible taxpayer,
32all of the following shall apply:
33a. Any properly claimed tax credit for income received
34pursuant to an agreement shall be allowed, but no additional
35tax credits may be claimed in future tax years under the
-11-1program. The eligible taxpayer may apply for and be issued
2another beginning farmer tax credit certificate under a new
3agreement for the same agricultural assets as provided in this
4section.
5b. If the agricultural development board determines
6that the eligible taxpayer is at fault for the termination,
7the beginning farmer tax credit that had been allowed for
8that tax year shall be disallowed and the amount shall be
9considered a tax payment due. If an eligible taxpayer does not
10immediately notify the agricultural development division of the
11termination, the eligible taxpayer shall be conclusively deemed
12at fault for the termination.
13 Sec. 13. NEW SECTION. 16.82A Beginning farmer tax credit
14eligibility certification — amount and availability.
151. The estimated amount of beginning farmer tax credits
16that may be approved by the agricultural development board
17under the beginning farmer tax credit program shall not in the
18aggregate exceed a limit of twelve million dollars in each tax
19year. The estimated amount of the approved tax credits shall
20be determined by the board after reviewing applications as
21provided in section 16.81 and arriving at estimated amounts for
22the approved applications aggregated for purposes of meeting
23the program limits.
242. The authority shall issue the certificate to an eligible
25taxpayer for the length of the agreement, including until all
26income is realized by the eligible taxpayer from the agreement
27but not later than December 15 in the year that the board
28receives the application under section 16.81.
293. The eligibility certification shall be valid for the
30estate of the eligible taxpayer.
31 Sec. 14. NEW SECTION. 422.11E Beginning farmer tax credit
32program.
33The taxes imposed under this division, less the credits
34allowed under section 422.12, shall be reduced by a beginning
35farmer tax credit as allowed under chapter 16, subchapter VIII,
-12-1part 5, subpart B.
2 Sec. 15. Section 422.33, subsection 21, Code 2019, is
3amended to read as follows:
421. The taxes imposed under this division shall be reduced
5by an agricultural assets transfer a beginning farmer tax
6credit as allowed under section 16.80 chapter 16, subchapter
7VIII, part 5, subpart B.
8 Sec. 16. REPEAL. Sections 16.80 and 422.11M, Code 2019,
9are repealed.
10 Sec. 17. APPLICABILITY OF PRIOR TAX CREDITS — APPROVED
11APPLICATIONS AND CERTIFICATES.
121. Notwithstanding any provision of this Act to the
13contrary, on or after the effective date of this Act any
14agricultural asset transfer tax credit application approved
15under section 16.80 as that section existed on or before
16December 31, 2018, for which tax credit certificates have not
17been issued shall be approved for the beginning farmer tax
18credit program as provided in this Act. The Iowa finance
19authority shall issue an eligibility certification for the
20remainder of the agricultural lease term as if the taxpayer
21and beginning farmer had applied for the beginning farmer tax
22credit. The taxpayer shall be allowed to claim a beginning
23farmer tax credit in the same manner as an eligible taxpayer
24may claim a beginning farmer tax credit as provided in this
25Act.
262. Any application which was submitted for the agricultural
27assets transfer tax credit pursuant to section 16.80 as
28that section existed on December 31, 2018, for the tax year
29beginning January 1, 2019, shall be deemed to be a new pending
30application for the beginning farmer tax credit as enacted in
31this Act. The date the new application was received shall be
32deemed to be the same date that the pending application for the
33agricultural asset transfer tax credit was received.
34 Sec. 18. APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE
35OF CARRYOVER PROVISIONS. For any tax year commencing in
-13-1calendar years 2014 through 2018, a tax credit that could
2have been first issued, awarded, or allowed and claimed under
3sections 16.75 through 16.82 as those sections existed on
4December 31, 2017, or under section 16.80 as that section
5existed on December 31, 2018, may be credited to the tax
6liability of that taxpayer for ten tax years following the tax
7year for which the eligible taxpayer could have first claimed
8the tax credit, or until depleted, whichever is earlier.
9 Sec. 19. EFFECTIVE DATE. This Act, being deemed of
10immediate importance, takes effect upon enactment.
11 Sec. 20. RETROACTIVE APPLICABILITY. This Act applies
12retroactively to January 1, 2019, for tax years beginning on
13or after that date.
14EXPLANATION
15The inclusion of this explanation does not constitute agreement with
16the explanation’s substance by the members of the general assembly.
17TAXPAYERS AND FARMERS QUALIFYING TO PARTICIPATE IN THE
18BEGINNING FARMER TAX PROGRAM. This bill creates a beginning
19farmer tax credit program which replaces the agricultural
20assets transfer tax credit under the jurisdiction of the Iowa
21finance authority (IFA). Under the program, an eligible
22taxpayer (taxpayer) who holds agricultural assets (agricultural
23land, depreciable agricultural property, crops, or livestock)
24and who assists a qualified beginning farmer (farmer) acquire
25agricultural assets by a form of specified legal arrangement
26is entitled to claim a tax credit against the taxpayer’s
27individual or corporate income tax liability. Specifically,
28the taxpayer must be eligible to hold agricultural land
29generally under Iowa’s corporate farming law (e.g., as an
30individual, partnership, family farm corporation, or family
31farm limited liability company). The taxpayer must not have
32been at fault for terminating a prior agreement in which the
33taxpayer was able to claim a tax credit. The taxpayer must
34enter into an agricultural lease agreement (agreement) with
35the farmer who must be an individual, partnership, family farm
-14-1corporation, or family farm limited liability company. In
2addition, the farmer must be a resident of this state; have
3sufficient education, training, or experience in farming;
4have access to adequate working capital and production items;
5and not own more than a 10 percent ownership interest in an
6agricultural asset included in the agreement.
7BEGINNING FARMER TAX CREDIT. The tax credit is calculated
8based on the type of rent payment arrangement agreed to
9by the parties, which is either on a cash basis in which a
10fixed payment is made or a commodity share basis in which the
11taxpayer takes a percentage of the crop or livestock produced.
12The tax credit also takes into account special risk-sharing
13arrangements in which the parties agree to adjust the rent
14amount based on some future happening (e.g., crop yield). For
15an agreement which includes a rent payable on a cash basis,
16the tax credit amount equals 5 percent of the gross amount
17paid to the taxpayer under the agreement. For an agreement
18which includes rent payable on a commodity share basis, the
19tax credit amount equals 15 percent of the amount paid to
20the eligible taxpayer from crops or livestock sold under the
21agreement. In the case of a flexible arrangement in which
22some risk is shared between the parties, the tax credit amount
23equals 15 percent of the amount paid to the taxpayer as a
24percentage of the gross value of the commodity. A tax credit
25cannot exceed $50,000 in any tax year.
26APPLICATIONS AND CERTIFICATES. The board is required to
27review and approve applications for the tax credit. As part
28of this process the division must calculate the amount of the
29tax credit that may be awarded to that applicant. The division
30must approve all applications on a first-come, first-served
31basis and issue tax credit certificates to approved taxpayers.
32IFA is allowed to issue up to $12 million in tax credit
33certificates each tax year, an increase from $6 million under
34the agricultural assets transfer tax credit.
35APPLICABILITY OF PRIOR TAX CREDITS — APPROVED APPLICATIONS
-15-1AND CERTIFICATIONS. The bill provides that any approved
2application for the agricultural asset transfer tax credit is
3deemed an approved application under the beginning farmer tax
4credit program.
5APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE OF
6CARRYOVER PROVISIONS. The bill allows a taxpayer who claimed
7a tax credit under the former version of the beginning farmer
8tax credit (the agricultural assets transfer tax credit and an
9associated, now repealed custom farming contract tax credit)
10may continue to carry over the respective tax credits for the
11remaining 10 years or the depletion of the tax credit.
12BACKGROUND. The agricultural assets transfer tax credit
13was first established in 2006 (2006 Iowa Acts, chapter 1161)
14and has been subsequently amended. Another form of a tax
15credit assisting beginning farmers, referred to as the custom
16farming contract tax credit, was established in 2013 (2013 Iowa
17Acts, chapter 125). Both tax credits were under the beginning
18farmer tax credit program and administered by the agricultural
19development board (board) acting as the agricultural
20development authority and subject to a limit of $12 million.
21The program was transferred to IFA (2013 Iowa Acts, chapter
22100, and 2014 Iowa Acts, chapter 1080). Amendments to the
23agricultural assets transfer tax credit and the custom farming
24contract tax credit were repealed on December 31, 2017 (2013
25Iowa Acts, chapter 125), except for a provision which extended
26the tax credit carryover from 5 to 10 years. The funding limit
27was restored to its present $6 million limit.
28EFFECTIVE AND RETROACTIVE APPLICABILITY. The bill takes
29effect upon enactment and applies retroactively to January 1,
302019, to tax years beginning on or after that date.
-16-da/jh
2providing for fees, and including effective date and
3retroactive applicability provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 2.48, subsection 3, paragraph e,
2subparagraph (1), Code 2019, is amended to read as follows:
3(1) The agricultural assets transfer beginning farmer
4 tax credit program as provided in section 16.80 chapter 16,
5subchapter VIII, part 5, subpart B.
6 Sec. 2. Section 16.2B, subsection 3, paragraph b, Code 2019,
7is amended to read as follows:
8b. Obtain agricultural assets transfer Claim the beginning
9farmer tax credits, including tax credit certificates issued
10 pursuant to subchapter VIII, part 5, subpart B.
11 Sec. 3. Section 16.2C, subsection 2, Code 2019, is amended
12to read as follows:
132. The agricultural development board is created to
14exercise all powers and perform all duties necessary to
15administer subchapter VIII according to policies established
16by the authority. The authority shall establish policies
17and practices for the division and oversee its operations.
18The authority may review or approve decisions affecting the
19division or administration of subchapter VIII, including
20decisions of the agricultural development board.
21 Sec. 4. Section 16.58, subsections 6 and 9, Code 2019, are
22amended to read as follows:
236. “Beginning farmer” means an individual, partnership,
24family farm corporation, or family farm limited liability
25company, with a low or moderate net worth that engages
26in farming or wishes to engage in farming and meets the
27eligibility requirements of the applicable program as provided
28in this subchapter.
299. “Farming” means the cultivation of land for the
30production of agricultural crops, the raising of poultry, the
31production of eggs, the production of milk, the production of
32fruit or other horticultural crops, grazing, the production of
33livestock, aquaculture, hydroponics, the production of forest
34products, or other activities designated by the authority by
35 rules adopted by the agricultural development board subject to
-1-1chapter 17A.
2 Sec. 5. Section 16.59, subsection 4, Code 2019, is amended
3to read as follows:
44. For a family farm limited liability company, an aggregate
5net worth of all members, including each member’s ownership
6interest in the family farm limited liability company, and
7each member’s spouse and minor children of not greater than
8twice the low or moderate net worth. However, the aggregate
9net worth of each member and that member’s spouse and minor
10children shall not exceed the low or moderate net worth.
11 Sec. 6. Section 16.75, subsection 3, Code 2019, is amended
12by adding the following new paragraph:
13 NEW PARAGRAPH. h. The beginning farmer has a low or
14moderate net worth.
15 Sec. 7. NEW SECTION. 16.77 Definitions.
16As used in this subpart B, unless the context otherwise
17requires:
181. “Agricultural development board” or “board” means the
19agricultural development board created in section 16.2C.
202. “Agricultural development division” or “division” means
21the agricultural development division created within the
22authority pursuant to section 16.2B.
233. “Agricultural lease agreement” or “agreement” means an
24agreement for the transfer of agricultural assets, that must at
25least include a lease of agricultural land, from an eligible
26taxpayer to a qualified beginning farmer as provided in section
2716.79A.
284. “Eligible taxpayer” means a taxpayer who may participate
29in the beginning farmer tax credit program, including by
30meeting all the criteria as provided in section 16.79.
315. “Program” means the beginning farmer tax credit program
32created pursuant to section 16.78.
336. “Qualified beginning farmer” means a beginning farmer who
34meets the requirements to participate in a beginning farmer tax
35credit program as provided in section 16.79.
-2- 17. “Tax credit” means the beginning farmer tax credit
2allowed under section 16.82.
3 Sec. 8. NEW SECTION. 16.78 Beginning farmer tax credit
4program — establishment and administration.
51. A beginning farmer tax credit program is established
6under the control of the agricultural development board.
72. To every extent practicable, the board shall administer
8the program in a manner that encourages participation by
9eligible taxpayers and qualifying beginning farmers for the
10primary purposes of providing beginning farmers access to
11farmland and enhancing the stability of the beginning farmer’s
12farming business.
133. The board shall adopt rules in accordance with chapter
1417A as necessary for the administration of this subpart. The
15eligibility requirements for taxpayers and the qualifications
16for beginning farmers as provided in the rules shall not be
17more stringent than provided in this subpart.
184. The board shall approve the preparation or revision and
19publication or distribution of forms necessary to administer
20this subpart.
215. The department of revenue shall cooperate with the
22authority, including the division, in administering the
23program.
24 Sec. 9. NEW SECTION. 16.79 Beginning farmer tax credit
25program — eligibility criteria.
261. A taxpayer is eligible to participate in the beginning
27farmer tax credit program if the taxpayer meets all of the
28following requirements:
29a. The taxpayer is a person who may acquire or otherwise
30obtain or lease agricultural land in this state pursuant to
31chapter 9H or 9I. However, the taxpayer must not be a person
32who may acquire or otherwise obtain or lease agricultural
33land exclusively because of an exception provided in one of
34those chapters or in a provision of another chapter of this
35Code including but not limited to chapter 10, 10D, or 501, or
-3-1section 15E.207.
2b. The taxpayer has entered into an agricultural lease
3agreement with a qualified beginning farmer to lease
4agricultural land as provided in section 16.79A.
5c. The taxpayer has not been at fault for terminating a
6prior agreement under the program or another agreement in which
7the taxpayer was allowed to claim a tax credit under section
8175.37 as it existed prior to January 1, 2015, or section 16.80
9as it existed prior to January 1, 2018.
10d. If the agreement includes the lease of a confinement
11feeding operation structure as defined in section 459.102, the
12taxpayer is not a party to a pending administrative or judicial
13action, including a contested case proceeding under chapter
1417A, relating to an alleged violation involving an animal
15feeding operation as regulated by the department of natural
16resources, regardless of whether the pending action is brought
17by the department or the attorney general.
18e. The taxpayer is not classified as a habitual violator for
19a violation of state law involving an animal feeding operation
20as regulated by the department of natural resources under
21chapter 459.
222. A farmer is a qualified beginning farmer eligible to
23participate in the program by meeting all of the following
24criteria:
25a. Is a resident of the state. If the beginning farmer is a
26partnership, all partners must be residents of the state. If a
27beginning farmer is a family farm corporation, all shareholders
28must be residents of the state. If the beginning farmer is
29a family farm limited liability company, all members must be
30residents of the state.
31b. Has sufficient education, training, or experience in
32farming. If the beginning farmer is a partnership, at least
33one partner who is not a minor must have sufficient education,
34training, or experience in farming. If the beginning farmer is
35a family farm corporation, at least one shareholder who is not
-4-1a minor must have sufficient education, training, or experience
2in farming. If the beginning farmer is a family farm limited
3liability company, at least one member who is not a minor must
4have sufficient education, training, or experience in farming.
5The individual who is the partner, shareholder, or member
6meeting the requirements of this paragraph shall also meet the
7criteria described in paragraph “e”. The eligible taxpayer
8claiming the beginning farmer tax credit shall not be a partner
9of a partnership, shareholder of a family farm corporation, or
10member of a family farm limited liability company leasing the
11agricultural asset.
12c. Has access to adequate working capital and production
13items.
14d. Will materially and substantially participate in
15farming. If the beginning farmer is a partnership, family
16farm corporation, or family farm limited liability company,
17at least one of the partners, shareholders, or members who is
18not a minor must materially and substantially participate in
19farming. The individual who is the partner, shareholder, or
20member meeting the requirements of this paragraph shall also
21meet the criteria described in paragraph “e”.
22e. Has owned and operated a farming business for ten years
23or less at the time of application. Time spent as an employee
24in another person’s farm business is excluded from the ten-year
25limitation.
26f. Does not own more than a ten percent ownership interest
27in an agricultural asset included in the agreement.
28 Sec. 10. NEW SECTION. 16.79A Agricultural lease agreement.
291. A beginning farmer tax credit is allowed only for
30agricultural assets that are subject to an agricultural lease
31agreement entered into by an eligible taxpayer and a qualifying
32beginning farmer participating in the beginning farmer tax
33credit program established pursuant to section 16.78.
342. The agreement must include the lease of agricultural
35land located in this state, including any improvements, and may
-5-1provide for the rental of agricultural equipment as defined in
2section 322F.1.
33. a. The agreement must include provisions which describe
4the consideration paid for the agreement in a manner that
5allows the agricultural development board to estimate the value
6of the lease as provided in section 16.81.
7b. The agreement must be in writing.
8c. The agreement must be for at least two years, but not
9more than five years. The agreement may be renewed by the
10eligible taxpayer and qualified beginning farmer for a term of
11at least two years, but not more than five years.
12d. The agreement shall not include a lease or rental of
13equipment intended as a security.
14e. The agreement cannot be assigned and the agricultural
15land subject to the agreement shall not be subleased.
16f. The agricultural assets shall not be leased or rented at
17a rate that is substantially higher or lower than the market
18rate for similar agricultural assets leased or rented within
19the same community.
204. The agreement may be amended after the authority issues
21an eligibility certificate without changing the eligibility
22status of the taxpayer. However, the underlying lease for
23agricultural land may only be amended without submitting a new
24application, if any of the following apply:
25a. The terms of the amended lease are more favorable to the
26qualified beginning farmer, including but not limited to the
27rent payment being reduced.
28b. A party has changed their name.
29c. The owner of an agricultural asset is changed to the
30owner’s estate.
315. An eligible taxpayer or qualified beginning farmer may
32terminate an agreement as provided in the agreement or by law.
33The eligible taxpayer must notify the agricultural development
34division of the termination within thirty days of the date of
35termination.
-6-1 Sec. 11. NEW SECTION. 16.81 Beginning farmer tax credit
2— application.
31. The deadline for submitting an application to the
4agricultural development division to claim a beginning farmer
5tax credit is August 1 of each year. The application shall be
6for a period that is not longer than the term of the lease.
72. The division shall charge an application fee not to
8exceed three hundred dollars regardless of the type or length
9of agricultural lease agreement. Any amount received by the
10division shall be considered repayment receipts as defined in
11section 8.2.
123. The agricultural development board shall review and
13approve an application for a tax credit as provided by rules
14adopted by the board. The application must include a copy of
15the agricultural lease agreement. The division may require
16that the parties to an agreement provide additional information
17as determined relevant by the board. The board shall review
18an application which includes the renewal of an agreement to
19determine that the parties to the renewed agreement meet the
20same qualifications as required for an original application.
214. The board shall approve all beginning farmer tax credit
22applications on a first-come, first-served basis until the
23limit in section 16.82A is met. The board shall review and
24may approve an application regardless of whether the eligible
25taxpayer has previously been allowed a tax credit under this
26section, section 175.37 as it existed prior to January 1, 2015,
27or section 16.80 as it existed prior to January 1, 2018.
285. The division shall estimate the amount of the tax credit
29under the agreement using the following methods:
30a. In the case of an agreement on a fixed basis, in which
31an eligible taxpayer receives a fixed cash rent payment, the
32estimated amount of the tax credit equals five percent of the
33amount of the fixed cash rent payment.
34b. In the case of an agreement on a commodity share basis,
35in which an eligible taxpayer receives as a rent payment a
-7-1percentage of the commodity produced, the estimated amount of
2the tax credit shall be based on an equation established by
3rule adopted by the board. If the agreement is on a crop share
4basis, the board shall use data compiled by the United States
5department of agriculture. The estimated amount of tax credit
6equals fifteen percent of the amount that the eligible taxpayer
7would receive as a rent payment from the sale of the eligible
8taxpayer’s share of the crop in the harvest year. The equation
9established by the board to estimate the rent payment shall
10include all of the following factors:
11(1) The past ten-year average per bushel yield for the
12same type of grain as produced under the agreement in the same
13county where the leased agricultural land is located excluding
14the years of highest and lowest per bushel yields.
15(2) The per bushel state price established for the same
16type of grain harvested as described in subparagraph (1).
17Price information shall be averaged from the past five years
18excluding the years of the highest and lowest per bushel state
19price.
20c. For an agreement made on a flexible basis in which an
21eligible taxpayer receives a rent payment consisting of a fixed
22cash payment and an amount subject to adjustment according to a
23risk-sharing arrangement, or receives a rent payment consisting
24of an amount subject to adjustment according to a risk-sharing
25arrangement, the estimated amount of the tax credit equals the
26sum of the following amounts:
27(1) To the extent that a portion of the amount of the
28rent payment is calculated on a fixed basis as described in
29paragraph “a”, that portion of the estimated tax credit equals
30five percent of the fixed cash payment in the same manner as
31provided in paragraph “a”.
32(2) To the extent that a portion of the amount of the rent
33payment is calculated on a commodity share basis as described
34in paragraph “b”, that portion of the estimated tax credit
35equals fifteen percent of the amount that the eligible taxpayer
-8-1would receive from the sale of the eligible taxpayer’s share of
2the commodity in the same manner as provided in paragraph “b”.
3(3) (a) To the extent that the amount of the rent payment
4may be adjusted after taking into account all risk-sharing
5factors provided in the agreement, the estimated tax credit
6equals fifteen percent of the highest adjusted amount that
7the eligible taxpayer could receive not counting any amount
8previously calculated when adding the amounts in subparagraphs
9(1) and (2).
10(b) As used in subparagraph division (a), “risk-sharing
11factor” means an occurrence or lack of occurrence, that may
12affect the commodity’s production or profitability as provided
13in the agreement, and which may include but is not limited to
14production costs, per acre crop yield, gross revenue, or market
15price.
16(c) The board shall adopt rules establishing criteria for
17commonly used risk-sharing factors and adjustment limits.
186. After the board has approved an application, all of the
19following apply:
20a. The authority shall issue a beginning farmer tax credit
21eligibility certification to an eligible taxpayer as provided
22in section 16.82A.
23b. An eligible taxpayer may claim the tax credit each tax
24year as provided in section 16.82.
257. Any financial, contractual, or legal authorization
26records provided to the authority, including the division,
27shall be kept confidential and are not subject to chapter 22.
28 Sec. 12. NEW SECTION. 16.82 Beginning farmer tax credit
29— allowance.
301. A beginning farmer tax credit is authorized under the
31beginning farmer tax credit program as provided in section
3216.78. The beginning farmer tax credit is allowed against
33the taxes imposed in chapter 422, division II, as provided in
34section 422.11E, and in chapter 422, division III, as provided
35in section 422.33, subsection 21, to facilitate the transfer of
-9-1agricultural assets from an eligible taxpayer to a qualifying
2beginning farmer participating in the program.
32. An individual may claim a beginning farmer tax credit
4under this section of a partnership, limited liability company,
5S corporation, estate, or trust electing to have income
6taxed directly to the individual. The amount claimed by the
7individual shall be based upon the pro rata share of the
8individual’s earnings from the partnership, limited liability
9company, S corporation, estate, or trust.
103. For an agricultural lease agreement made on a fixed basis
11as described in section 16.81, the eligible taxpayer may claim
12a tax credit equal to five percent of the gross amount paid to
13the eligible taxpayer under the agreement for each tax year
14that the tax credit is allowed.
154. For an agreement made on a commodity share basis as
16described in section 16.81, the eligible taxpayer may claim a
17tax credit equal to fifteen percent of the gross amount paid
18to the eligible taxpayer from the sale of the share of crops or
19livestock received by the eligible taxpayer under the agreement
20for each tax year that the tax credit is allowed or until all
21the income from the agreement is realized by the eligible
22taxpayer.
235. For an agreement made on a flexible basis as described
24in section 16.81, the eligible taxpayer may claim a tax credit
25equal to the sum of the following amounts:
26a. To the extent that the agreement provides that a
27portion of the payment is a fixed cash payment as described
28in subsection 3, the eligible taxpayer may claim a tax credit
29equal to five percent of the amount of the rent payment paid
30to the eligible taxpayer under the agreement for each tax year
31that the tax credit is allowed.
32b. To the extent that the agreement provides that a portion
33of the payment is calculated on a commodity share basis as
34described in subsection 4, the eligible taxpayer may claim
35a tax credit equal to fifteen percent of the amount paid to
-10-1the eligible taxpayer from the sale of the share of crops
2or livestock received under the agreement for each tax year
3that the tax credit is allowed until all the income from the
4agreement is realized by the eligible taxpayer.
5c. (1) To the extent that the agreement provides that
6the payment under the agreement is adjusted after taking into
7account all risk-sharing factors provided in the agreement,
8the estimated tax credit shall equal fifteen percent of the
9adjusted amount received under the agreement.
10(2) As used in subparagraph (1), “risk-sharing factor” means
11the same as defined in section 16.81, subsection 5, paragraph
12“c”, subparagraph (3), subparagraph division (a).
136. The division shall provide the department of revenue
14with a list of certified taxpayers and persons who have been
15decertified due to lease termination by January 31. The list
16shall include the estimated amount of the tax credit and the
17type of agreement.
187. The amount of the tax credit claimed shall not exceed
19fifty thousand dollars in any tax year.
208. The amount of the tax credit shall be reduced by the
21percent ownership interest of the qualifying beginning farmer
22in the agricultural asset.
239. A tax credit in excess of the eligible taxpayer’s tax
24liability for the tax year may be credited to the tax liability
25for the following ten tax years or until depleted, whichever is
26earlier. A tax credit shall not be carried back to a tax year
27prior to the tax year in which the eligible taxpayer redeems
28the tax credit.
2910. A tax credit shall not be transferable to any other
30person other than the taxpayer’s estate.
3111. If an agreement is terminated by the eligible taxpayer,
32all of the following shall apply:
33a. Any properly claimed tax credit for income received
34pursuant to an agreement shall be allowed, but no additional
35tax credits may be claimed in future tax years under the
-11-1program. The eligible taxpayer may apply for and be issued
2another beginning farmer tax credit certificate under a new
3agreement for the same agricultural assets as provided in this
4section.
5b. If the agricultural development board determines
6that the eligible taxpayer is at fault for the termination,
7the beginning farmer tax credit that had been allowed for
8that tax year shall be disallowed and the amount shall be
9considered a tax payment due. If an eligible taxpayer does not
10immediately notify the agricultural development division of the
11termination, the eligible taxpayer shall be conclusively deemed
12at fault for the termination.
13 Sec. 13. NEW SECTION. 16.82A Beginning farmer tax credit
14eligibility certification — amount and availability.
151. The estimated amount of beginning farmer tax credits
16that may be approved by the agricultural development board
17under the beginning farmer tax credit program shall not in the
18aggregate exceed a limit of twelve million dollars in each tax
19year. The estimated amount of the approved tax credits shall
20be determined by the board after reviewing applications as
21provided in section 16.81 and arriving at estimated amounts for
22the approved applications aggregated for purposes of meeting
23the program limits.
242. The authority shall issue the certificate to an eligible
25taxpayer for the length of the agreement, including until all
26income is realized by the eligible taxpayer from the agreement
27but not later than December 15 in the year that the board
28receives the application under section 16.81.
293. The eligibility certification shall be valid for the
30estate of the eligible taxpayer.
31 Sec. 14. NEW SECTION. 422.11E Beginning farmer tax credit
32program.
33The taxes imposed under this division, less the credits
34allowed under section 422.12, shall be reduced by a beginning
35farmer tax credit as allowed under chapter 16, subchapter VIII,
-12-1part 5, subpart B.
2 Sec. 15. Section 422.33, subsection 21, Code 2019, is
3amended to read as follows:
421. The taxes imposed under this division shall be reduced
5by an agricultural assets transfer a beginning farmer tax
6credit as allowed under section 16.80 chapter 16, subchapter
7VIII, part 5, subpart B.
8 Sec. 16. REPEAL. Sections 16.80 and 422.11M, Code 2019,
9are repealed.
10 Sec. 17. APPLICABILITY OF PRIOR TAX CREDITS — APPROVED
11APPLICATIONS AND CERTIFICATES.
121. Notwithstanding any provision of this Act to the
13contrary, on or after the effective date of this Act any
14agricultural asset transfer tax credit application approved
15under section 16.80 as that section existed on or before
16December 31, 2018, for which tax credit certificates have not
17been issued shall be approved for the beginning farmer tax
18credit program as provided in this Act. The Iowa finance
19authority shall issue an eligibility certification for the
20remainder of the agricultural lease term as if the taxpayer
21and beginning farmer had applied for the beginning farmer tax
22credit. The taxpayer shall be allowed to claim a beginning
23farmer tax credit in the same manner as an eligible taxpayer
24may claim a beginning farmer tax credit as provided in this
25Act.
262. Any application which was submitted for the agricultural
27assets transfer tax credit pursuant to section 16.80 as
28that section existed on December 31, 2018, for the tax year
29beginning January 1, 2019, shall be deemed to be a new pending
30application for the beginning farmer tax credit as enacted in
31this Act. The date the new application was received shall be
32deemed to be the same date that the pending application for the
33agricultural asset transfer tax credit was received.
34 Sec. 18. APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE
35OF CARRYOVER PROVISIONS. For any tax year commencing in
-13-1calendar years 2014 through 2018, a tax credit that could
2have been first issued, awarded, or allowed and claimed under
3sections 16.75 through 16.82 as those sections existed on
4December 31, 2017, or under section 16.80 as that section
5existed on December 31, 2018, may be credited to the tax
6liability of that taxpayer for ten tax years following the tax
7year for which the eligible taxpayer could have first claimed
8the tax credit, or until depleted, whichever is earlier.
9 Sec. 19. EFFECTIVE DATE. This Act, being deemed of
10immediate importance, takes effect upon enactment.
11 Sec. 20. RETROACTIVE APPLICABILITY. This Act applies
12retroactively to January 1, 2019, for tax years beginning on
13or after that date.
14EXPLANATION
15The inclusion of this explanation does not constitute agreement with
16the explanation’s substance by the members of the general assembly.
17TAXPAYERS AND FARMERS QUALIFYING TO PARTICIPATE IN THE
18BEGINNING FARMER TAX PROGRAM. This bill creates a beginning
19farmer tax credit program which replaces the agricultural
20assets transfer tax credit under the jurisdiction of the Iowa
21finance authority (IFA). Under the program, an eligible
22taxpayer (taxpayer) who holds agricultural assets (agricultural
23land, depreciable agricultural property, crops, or livestock)
24and who assists a qualified beginning farmer (farmer) acquire
25agricultural assets by a form of specified legal arrangement
26is entitled to claim a tax credit against the taxpayer’s
27individual or corporate income tax liability. Specifically,
28the taxpayer must be eligible to hold agricultural land
29generally under Iowa’s corporate farming law (e.g., as an
30individual, partnership, family farm corporation, or family
31farm limited liability company). The taxpayer must not have
32been at fault for terminating a prior agreement in which the
33taxpayer was able to claim a tax credit. The taxpayer must
34enter into an agricultural lease agreement (agreement) with
35the farmer who must be an individual, partnership, family farm
-14-1corporation, or family farm limited liability company. In
2addition, the farmer must be a resident of this state; have
3sufficient education, training, or experience in farming;
4have access to adequate working capital and production items;
5and not own more than a 10 percent ownership interest in an
6agricultural asset included in the agreement.
7BEGINNING FARMER TAX CREDIT. The tax credit is calculated
8based on the type of rent payment arrangement agreed to
9by the parties, which is either on a cash basis in which a
10fixed payment is made or a commodity share basis in which the
11taxpayer takes a percentage of the crop or livestock produced.
12The tax credit also takes into account special risk-sharing
13arrangements in which the parties agree to adjust the rent
14amount based on some future happening (e.g., crop yield). For
15an agreement which includes a rent payable on a cash basis,
16the tax credit amount equals 5 percent of the gross amount
17paid to the taxpayer under the agreement. For an agreement
18which includes rent payable on a commodity share basis, the
19tax credit amount equals 15 percent of the amount paid to
20the eligible taxpayer from crops or livestock sold under the
21agreement. In the case of a flexible arrangement in which
22some risk is shared between the parties, the tax credit amount
23equals 15 percent of the amount paid to the taxpayer as a
24percentage of the gross value of the commodity. A tax credit
25cannot exceed $50,000 in any tax year.
26APPLICATIONS AND CERTIFICATES. The board is required to
27review and approve applications for the tax credit. As part
28of this process the division must calculate the amount of the
29tax credit that may be awarded to that applicant. The division
30must approve all applications on a first-come, first-served
31basis and issue tax credit certificates to approved taxpayers.
32IFA is allowed to issue up to $12 million in tax credit
33certificates each tax year, an increase from $6 million under
34the agricultural assets transfer tax credit.
35APPLICABILITY OF PRIOR TAX CREDITS — APPROVED APPLICATIONS
-15-1AND CERTIFICATIONS. The bill provides that any approved
2application for the agricultural asset transfer tax credit is
3deemed an approved application under the beginning farmer tax
4credit program.
5APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE OF
6CARRYOVER PROVISIONS. The bill allows a taxpayer who claimed
7a tax credit under the former version of the beginning farmer
8tax credit (the agricultural assets transfer tax credit and an
9associated, now repealed custom farming contract tax credit)
10may continue to carry over the respective tax credits for the
11remaining 10 years or the depletion of the tax credit.
12BACKGROUND. The agricultural assets transfer tax credit
13was first established in 2006 (2006 Iowa Acts, chapter 1161)
14and has been subsequently amended. Another form of a tax
15credit assisting beginning farmers, referred to as the custom
16farming contract tax credit, was established in 2013 (2013 Iowa
17Acts, chapter 125). Both tax credits were under the beginning
18farmer tax credit program and administered by the agricultural
19development board (board) acting as the agricultural
20development authority and subject to a limit of $12 million.
21The program was transferred to IFA (2013 Iowa Acts, chapter
22100, and 2014 Iowa Acts, chapter 1080). Amendments to the
23agricultural assets transfer tax credit and the custom farming
24contract tax credit were repealed on December 31, 2017 (2013
25Iowa Acts, chapter 125), except for a provision which extended
26the tax credit carryover from 5 to 10 years. The funding limit
27was restored to its present $6 million limit.
28EFFECTIVE AND RETROACTIVE APPLICABILITY. The bill takes
29effect upon enactment and applies retroactively to January 1,
302019, to tax years beginning on or after that date.
-16-da/jh