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Senate File 444 - 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. a. The division shall assess and collect application
8fees as follows:
9(1) For an application that includes an agricultural
10lease agreement for the lease of one hundred acres or less of
11agricultural land, a fee of three hundred dollars.
12(2) For an application that includes an agreement for the
13lease of more than one hundred acres, but not more than two
14hundred fifty acres of agricultural land, a fee of four hundred
15dollars.
16(3) For an application that includes an agreement for the
17lease of more than two hundred fifty acres of agricultural
18land, a fee of five hundred dollars.
19b. Any amount of fees collected by the division under
20paragraph “a” shall be considered repayment receipts as defined
21in section 8.2.
223. The agricultural development board shall review and
23approve an application for a tax credit as provided by rules
24adopted by the board. The application must include a copy of
25the agricultural lease agreement. The division may require
26that the parties to an agreement provide additional information
27as determined relevant by the board. The board shall review
28an application which includes the renewal of an agreement to
29determine that the parties to the renewed agreement meet the
30same qualifications as required for an original application.
314. The board shall approve all beginning farmer tax credit
32applications that meet the requirements provided in this
33subpart on a first-come, first-served basis until the limit in
34section 16.82A is met. The board shall review and may approve
35an application regardless of whether the eligible taxpayer
-7-1has previously been allowed a tax credit under this section,
2section 175.37 as it existed prior to January 1, 2015, or
3section 16.80 as it existed prior to January 1, 2018.
45. The division shall estimate the amount of the tax credit
5under the agreement using the following methods:
6a. In the case of an agreement on a fixed basis, in which
7an eligible taxpayer receives a fixed cash rent payment, the
8estimated amount of the tax credit equals five percent of the
9amount of the fixed cash rent payment.
10b. In the case of an agreement on a commodity share basis,
11in which an eligible taxpayer receives as a rent payment a
12percentage of the commodity produced, the estimated amount of
13the tax credit shall be based on an equation established by
14rule adopted by the board. If the agreement is on a crop share
15basis, the board shall use data compiled by the United States
16department of agriculture. The estimated amount of tax credit
17equals fifteen percent of the amount that the eligible taxpayer
18would receive as a rent payment from the sale of the eligible
19taxpayer’s share of the crop in the harvest year. The equation
20established by the board to estimate the rent payment shall
21include all of the following factors:
22(1) The past ten-year average per bushel yield for the
23same type of grain as produced under the agreement in the same
24county where the leased agricultural land is located excluding
25the years of highest and lowest per bushel yields.
26(2) The per bushel state price established for the same
27type of grain harvested as described in subparagraph (1).
28Price information shall be averaged from the past five years
29excluding the years of the highest and lowest per bushel state
30price.
31c. For an agreement made on a flexible basis in which an
32eligible taxpayer receives a rent payment consisting of a fixed
33cash payment and an amount subject to adjustment according to a
34risk-sharing arrangement, or receives a rent payment consisting
35of an amount subject to adjustment according to a risk-sharing
-8-1arrangement, the estimated amount of the tax credit equals the
2sum of the following amounts:
3(1) To the extent that a portion of the amount of the
4rent payment is calculated on a fixed basis as described in
5paragraph “a”, that portion of the estimated tax credit equals
6five percent of the fixed cash payment in the same manner as
7provided in paragraph “a”.
8(2) To the extent that a portion of the amount of the rent
9payment is calculated on a commodity share basis as described
10in paragraph “b”, that portion of the estimated tax credit
11equals fifteen percent of the amount that the eligible taxpayer
12would receive from the sale of the eligible taxpayer’s share of
13the commodity in the same manner as provided in paragraph “b”.
14(3) (a) To the extent that the amount of the rent payment
15may be adjusted after taking into account all risk-sharing
16factors provided in the agreement, the estimated tax credit
17equals fifteen percent of the highest adjusted amount that
18the eligible taxpayer could receive not counting any amount
19previously calculated when adding the amounts in subparagraphs
20(1) and (2).
21(b) As used in subparagraph division (a), “risk-sharing
22factor” means an occurrence or lack of occurrence, that may
23affect the commodity’s production or profitability as provided
24in the agreement, and which may include but is not limited to
25production costs, per acre crop yield, gross revenue, or market
26price.
27(c) The board shall adopt rules establishing criteria for
28commonly used risk-sharing factors and adjustment limits.
296. After the board has approved an application, all of the
30following apply:
31a. The authority shall issue a beginning farmer tax credit
32eligibility certification to an eligible taxpayer as provided
33in section 16.82A.
34b. An eligible taxpayer may claim the tax credit each tax
35year as provided in section 16.82.
-9- 17. Any financial, contractual, or legal authorization
2records provided to the authority, including the division,
3shall be kept confidential and are not subject to chapter 22.
4 Sec. 12. NEW SECTION. 16.82 Beginning farmer tax credit
5— allowance.
61. A beginning farmer tax credit is authorized under the
7beginning farmer tax credit program as provided in section
816.78. The beginning farmer tax credit is allowed against
9the taxes imposed in chapter 422, division II, as provided in
10section 422.11E, and in chapter 422, division III, as provided
11in section 422.33, subsection 21, to facilitate the transfer of
12agricultural assets from an eligible taxpayer to a qualifying
13beginning farmer participating in the program.
142. An individual may claim a beginning farmer tax credit
15under this section of a partnership, limited liability company,
16S corporation, estate, or trust electing to have income
17taxed directly to the individual. The amount claimed by the
18individual shall be based upon the pro rata share of the
19individual’s earnings from the partnership, limited liability
20company, S corporation, estate, or trust.
213. For an agricultural lease agreement made on a fixed basis
22as described in section 16.81, the eligible taxpayer may claim
23a tax credit equal to five percent of the gross amount paid to
24the eligible taxpayer under the agreement for each tax year
25that the tax credit is allowed.
264. For an agreement made on a commodity share basis as
27described in section 16.81, the eligible taxpayer may claim a
28tax credit equal to fifteen percent of the gross amount paid
29to the eligible taxpayer from the sale of the share of crops or
30livestock received by the eligible taxpayer under the agreement
31for each tax year that the tax credit is allowed or until all
32the income from the agreement is realized by the eligible
33taxpayer.
345. For an agreement made on a flexible basis as described
35in section 16.81, the eligible taxpayer may claim a tax credit
-10-1equal to the sum of the following amounts:
2a. To the extent that the agreement provides that a
3portion of the payment is a fixed cash payment as described
4in subsection 3, the eligible taxpayer may claim a tax credit
5equal to five percent of the amount of the rent payment paid
6to the eligible taxpayer under the agreement for each tax year
7that the tax credit is allowed.
8b. To the extent that the agreement provides that a portion
9of the payment is calculated on a commodity share basis as
10described in subsection 4, the eligible taxpayer may claim
11a tax credit equal to fifteen percent of the amount paid to
12the eligible taxpayer from the sale of the share of crops
13or livestock received under the agreement for each tax year
14that the tax credit is allowed until all the income from the
15agreement is realized by the eligible taxpayer.
16c. (1) To the extent that the agreement provides that
17the payment under the agreement is adjusted after taking into
18account all risk-sharing factors provided in the agreement,
19the estimated tax credit shall equal fifteen percent of the
20adjusted amount received under the agreement.
21(2) As used in subparagraph (1), “risk-sharing factor” means
22the same as defined in section 16.81, subsection 5, paragraph
23“c”, subparagraph (3), subparagraph division (a).
246. The division shall provide the department of revenue
25with a list of certified taxpayers and persons who have been
26decertified due to lease termination by January 31. The list
27shall include the estimated amount of the tax credit and the
28type of agreement.
297. The amount of the tax credit claimed shall not exceed
30fifty thousand dollars in any tax year.
318. The amount of the tax credit shall be reduced by the
32percent ownership interest of the qualifying beginning farmer
33in the agricultural asset.
349. A tax credit in excess of the eligible taxpayer’s tax
35liability for the tax year may be credited to the tax liability
-11-1for the following ten tax years or until depleted, whichever is
2earlier. A tax credit shall not be carried back to a tax year
3prior to the tax year in which the eligible taxpayer redeems
4the tax credit.
510. A tax credit shall not be transferable to any other
6person other than the taxpayer’s estate.
711. If an agreement is terminated by the eligible taxpayer,
8all of the following shall apply:
9a. Any properly claimed tax credit for income received
10pursuant to an agreement shall be allowed, but no additional
11tax credits may be claimed in future tax years under the
12program. The eligible taxpayer may apply for and be issued
13another beginning farmer tax credit certificate under a new
14agreement for the same agricultural assets as provided in this
15section.
16b. If the agricultural development board determines
17that the eligible taxpayer is at fault for the termination,
18the beginning farmer tax credit that had been allowed for
19that tax year shall be disallowed and the amount shall be
20considered a tax payment due. If an eligible taxpayer does not
21immediately notify the agricultural development division of the
22termination, the eligible taxpayer shall be conclusively deemed
23at fault for the termination.
24 Sec. 13. NEW SECTION. 16.82A Beginning farmer tax credit
25eligibility certification — amount and availability.
261. The estimated amount of beginning farmer tax credits
27that may be approved by the agricultural development board
28under the beginning farmer tax credit program shall not in the
29aggregate exceed a limit of twelve million dollars in each tax
30year. The estimated amount of the approved tax credits shall
31be determined by the board after reviewing applications as
32provided in section 16.81 and arriving at estimated amounts for
33the approved applications aggregated for purposes of meeting
34the program limits.
352. The authority shall issue the certificate to an eligible
-12-1taxpayer for the length of the agreement, including until all
2income is realized by the eligible taxpayer from the agreement
3but not later than December 15 in the year that the board
4receives the application under section 16.81.
53. The eligibility certification shall be valid for the
6estate of the eligible taxpayer.
7 Sec. 14. NEW SECTION. 422.11E Beginning farmer tax credit
8program.
9The taxes imposed under this division, less the credits
10allowed under section 422.12, shall be reduced by a beginning
11farmer tax credit as allowed under chapter 16, subchapter VIII,
12part 5, subpart B.
13 Sec. 15. Section 422.33, subsection 21, Code 2019, is
14amended to read as follows:
1521. The taxes imposed under this division shall be reduced
16by an agricultural assets transfer a beginning farmer tax
17credit as allowed under section 16.80 chapter 16, subchapter
18VIII, part 5, subpart B.
19 Sec. 16. REPEAL. Sections 16.80 and 422.11M, Code 2019,
20are repealed.
21 Sec. 17. APPLICABILITY OF PRIOR TAX CREDITS — APPROVED
22APPLICATIONS AND CERTIFICATES.
231. Notwithstanding any provision of this Act to the
24contrary, on or after the effective date of this Act any
25agricultural asset transfer tax credit application approved
26under section 16.80 as that section existed on or before
27December 31, 2018, for which tax credit certificates have not
28been issued shall be approved for the beginning farmer tax
29credit program as provided in this Act. The Iowa finance
30authority shall issue an eligibility certification for the
31remainder of the agricultural lease term as if the taxpayer
32and beginning farmer had applied for the beginning farmer tax
33credit. The taxpayer shall be allowed to claim a beginning
34farmer tax credit in the same manner as an eligible taxpayer
35may claim a beginning farmer tax credit as provided in this
-13-1Act.
22. Any application which was submitted for the agricultural
3assets transfer tax credit pursuant to section 16.80 as
4that section existed on December 31, 2018, for the tax year
5beginning January 1, 2019, shall be deemed to be a new pending
6application for the beginning farmer tax credit as enacted in
7this Act. The date the new application was received shall be
8deemed to be the same date that the pending application for the
9agricultural asset transfer tax credit was received.
10 Sec. 18. APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE
11OF CARRYOVER PROVISIONS. For any tax year commencing in
12calendar years 2014 through 2018, a tax credit that could
13have been first issued, awarded, or allowed and claimed under
14sections 16.75 through 16.82 as those sections existed on
15December 31, 2017, or under section 16.80 as that section
16existed on December 31, 2018, may be credited to the tax
17liability of that taxpayer for ten tax years following the tax
18year for which the eligible taxpayer could have first claimed
19the tax credit, or until depleted, whichever is earlier.
20 Sec. 19. EFFECTIVE DATE. This Act, being deemed of
21immediate importance, takes effect upon enactment.
22 Sec. 20. RETROACTIVE APPLICABILITY. This Act applies
23retroactively to January 1, 2019, for tax years beginning on
24or after that date.
25EXPLANATION
26The inclusion of this explanation does not constitute agreement with
27the explanation’s substance by the members of the general assembly.
28TAXPAYERS AND FARMERS QUALIFYING TO PARTICIPATE IN THE
29BEGINNING FARMER TAX PROGRAM. This bill creates a beginning
30farmer tax credit program which replaces the agricultural
31assets transfer tax credit under the jurisdiction of the Iowa
32finance authority (IFA). Under the program, an eligible
33taxpayer (taxpayer) who holds agricultural assets (agricultural
34land, depreciable agricultural property, crops, or livestock)
35and who assists a qualified beginning farmer (farmer) acquire
-14-1agricultural assets by a form of specified legal arrangement
2is entitled to claim a tax credit against the taxpayer’s
3individual or corporate income tax liability. Specifically,
4the taxpayer must be eligible to hold agricultural land
5generally under Iowa’s corporate farming law (e.g., as an
6individual, partnership, family farm corporation, or family
7farm limited liability company). The taxpayer must not have
8been at fault for terminating a prior agreement in which the
9taxpayer was able to claim a tax credit. The taxpayer must
10enter into an agricultural lease agreement (agreement) with
11the farmer who must be an individual, partnership, family farm
12corporation, or family farm limited liability company. In
13addition, the farmer must be a resident of this state; have
14sufficient education, training, or experience in farming;
15have access to adequate working capital and production items;
16and not own more than a 10 percent ownership interest in an
17agricultural asset included in the agreement.
18BEGINNING FARMER TAX CREDIT. The tax credit is calculated
19based on the type of rent payment arrangement agreed to
20by the parties, which is either on a cash basis in which a
21fixed payment is made or a commodity share basis in which the
22taxpayer takes a percentage of the crop or livestock produced.
23The tax credit also takes into account special risk-sharing
24arrangements in which the parties agree to adjust the rent
25amount based on some future happening (e.g., crop yield). For
26an agreement which includes a rent payable on a cash basis,
27the tax credit amount equals 5 percent of the gross amount
28paid to the taxpayer under the agreement. For an agreement
29which includes rent payable on a commodity share basis, the
30tax credit amount equals 15 percent of the amount paid to
31the eligible taxpayer from crops or livestock sold under the
32agreement. In the case of a flexible arrangement in which
33some risk is shared between the parties, the tax credit amount
34equals 15 percent of the amount paid to the taxpayer as a
35percentage of the gross value of the commodity. A tax credit
-15-1cannot exceed $50,000 in any tax year.
2APPLICATIONS AND CERTIFICATES. The board is required to
3review and approve applications for the tax credit. As part
4of this process the division must calculate the amount of
5the tax credit that may be awarded to that applicant. The
6division must assess and collect an application fee based on
7the number of acres of agricultural land subject to the lease.
8The division must approve all applications on a first-come,
9first-served basis and issue tax credit certificates to
10approved taxpayers. IFA is allowed to issue up to $12 million
11in tax credit certificates each tax year, an increase from $6
12million under the agricultural assets transfer tax credit.
13APPLICABILITY OF PRIOR TAX CREDITS — APPROVED APPLICATIONS
14AND CERTIFICATIONS. The bill provides that any approved
15application for the agricultural asset transfer tax credit is
16deemed an approved application under the beginning farmer tax
17credit program.
18APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE OF
19CARRYOVER PROVISIONS. The bill allows a taxpayer who claimed
20a tax credit under the former version of the beginning farmer
21tax credit (the agricultural assets transfer tax credit and an
22associated, now repealed custom farming contract tax credit)
23may continue to carry over the respective tax credits for the
24remaining 10 years or the depletion of the tax credit.
25BACKGROUND. The agricultural assets transfer tax credit
26was first established in 2006 (2006 Iowa Acts, chapter 1161)
27and has been subsequently amended. Another form of a tax
28credit assisting beginning farmers, referred to as the custom
29farming contract tax credit, was established in 2013 (2013 Iowa
30Acts, chapter 125). Both tax credits were under the beginning
31farmer tax credit program and administered by the agricultural
32development board (board) acting as the agricultural
33development authority and subject to a limit of $12 million.
34The program was transferred to IFA (2013 Iowa Acts, chapter
35100, and 2014 Iowa Acts, chapter 1080). Amendments to the
-16-1agricultural assets transfer tax credit and the custom farming
2contract tax credit were repealed on December 31, 2017 (2013
3Iowa Acts, chapter 125), except for a provision which extended
4the tax credit carryover from 5 to 10 years. The funding limit
5was restored to its present $6 million limit.
6EFFECTIVE AND RETROACTIVE APPLICABILITY. The bill takes
7effect upon enactment and applies retroactively to January 1,
82019, to tax years beginning on or after that date.
-17-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. a. The division shall assess and collect application
8fees as follows:
9(1) For an application that includes an agricultural
10lease agreement for the lease of one hundred acres or less of
11agricultural land, a fee of three hundred dollars.
12(2) For an application that includes an agreement for the
13lease of more than one hundred acres, but not more than two
14hundred fifty acres of agricultural land, a fee of four hundred
15dollars.
16(3) For an application that includes an agreement for the
17lease of more than two hundred fifty acres of agricultural
18land, a fee of five hundred dollars.
19b. Any amount of fees collected by the division under
20paragraph “a” shall be considered repayment receipts as defined
21in section 8.2.
223. The agricultural development board shall review and
23approve an application for a tax credit as provided by rules
24adopted by the board. The application must include a copy of
25the agricultural lease agreement. The division may require
26that the parties to an agreement provide additional information
27as determined relevant by the board. The board shall review
28an application which includes the renewal of an agreement to
29determine that the parties to the renewed agreement meet the
30same qualifications as required for an original application.
314. The board shall approve all beginning farmer tax credit
32applications that meet the requirements provided in this
33subpart on a first-come, first-served basis until the limit in
34section 16.82A is met. The board shall review and may approve
35an application regardless of whether the eligible taxpayer
-7-1has previously been allowed a tax credit under this section,
2section 175.37 as it existed prior to January 1, 2015, or
3section 16.80 as it existed prior to January 1, 2018.
45. The division shall estimate the amount of the tax credit
5under the agreement using the following methods:
6a. In the case of an agreement on a fixed basis, in which
7an eligible taxpayer receives a fixed cash rent payment, the
8estimated amount of the tax credit equals five percent of the
9amount of the fixed cash rent payment.
10b. In the case of an agreement on a commodity share basis,
11in which an eligible taxpayer receives as a rent payment a
12percentage of the commodity produced, the estimated amount of
13the tax credit shall be based on an equation established by
14rule adopted by the board. If the agreement is on a crop share
15basis, the board shall use data compiled by the United States
16department of agriculture. The estimated amount of tax credit
17equals fifteen percent of the amount that the eligible taxpayer
18would receive as a rent payment from the sale of the eligible
19taxpayer’s share of the crop in the harvest year. The equation
20established by the board to estimate the rent payment shall
21include all of the following factors:
22(1) The past ten-year average per bushel yield for the
23same type of grain as produced under the agreement in the same
24county where the leased agricultural land is located excluding
25the years of highest and lowest per bushel yields.
26(2) The per bushel state price established for the same
27type of grain harvested as described in subparagraph (1).
28Price information shall be averaged from the past five years
29excluding the years of the highest and lowest per bushel state
30price.
31c. For an agreement made on a flexible basis in which an
32eligible taxpayer receives a rent payment consisting of a fixed
33cash payment and an amount subject to adjustment according to a
34risk-sharing arrangement, or receives a rent payment consisting
35of an amount subject to adjustment according to a risk-sharing
-8-1arrangement, the estimated amount of the tax credit equals the
2sum of the following amounts:
3(1) To the extent that a portion of the amount of the
4rent payment is calculated on a fixed basis as described in
5paragraph “a”, that portion of the estimated tax credit equals
6five percent of the fixed cash payment in the same manner as
7provided in paragraph “a”.
8(2) To the extent that a portion of the amount of the rent
9payment is calculated on a commodity share basis as described
10in paragraph “b”, that portion of the estimated tax credit
11equals fifteen percent of the amount that the eligible taxpayer
12would receive from the sale of the eligible taxpayer’s share of
13the commodity in the same manner as provided in paragraph “b”.
14(3) (a) To the extent that the amount of the rent payment
15may be adjusted after taking into account all risk-sharing
16factors provided in the agreement, the estimated tax credit
17equals fifteen percent of the highest adjusted amount that
18the eligible taxpayer could receive not counting any amount
19previously calculated when adding the amounts in subparagraphs
20(1) and (2).
21(b) As used in subparagraph division (a), “risk-sharing
22factor” means an occurrence or lack of occurrence, that may
23affect the commodity’s production or profitability as provided
24in the agreement, and which may include but is not limited to
25production costs, per acre crop yield, gross revenue, or market
26price.
27(c) The board shall adopt rules establishing criteria for
28commonly used risk-sharing factors and adjustment limits.
296. After the board has approved an application, all of the
30following apply:
31a. The authority shall issue a beginning farmer tax credit
32eligibility certification to an eligible taxpayer as provided
33in section 16.82A.
34b. An eligible taxpayer may claim the tax credit each tax
35year as provided in section 16.82.
-9- 17. Any financial, contractual, or legal authorization
2records provided to the authority, including the division,
3shall be kept confidential and are not subject to chapter 22.
4 Sec. 12. NEW SECTION. 16.82 Beginning farmer tax credit
5— allowance.
61. A beginning farmer tax credit is authorized under the
7beginning farmer tax credit program as provided in section
816.78. The beginning farmer tax credit is allowed against
9the taxes imposed in chapter 422, division II, as provided in
10section 422.11E, and in chapter 422, division III, as provided
11in section 422.33, subsection 21, to facilitate the transfer of
12agricultural assets from an eligible taxpayer to a qualifying
13beginning farmer participating in the program.
142. An individual may claim a beginning farmer tax credit
15under this section of a partnership, limited liability company,
16S corporation, estate, or trust electing to have income
17taxed directly to the individual. The amount claimed by the
18individual shall be based upon the pro rata share of the
19individual’s earnings from the partnership, limited liability
20company, S corporation, estate, or trust.
213. For an agricultural lease agreement made on a fixed basis
22as described in section 16.81, the eligible taxpayer may claim
23a tax credit equal to five percent of the gross amount paid to
24the eligible taxpayer under the agreement for each tax year
25that the tax credit is allowed.
264. For an agreement made on a commodity share basis as
27described in section 16.81, the eligible taxpayer may claim a
28tax credit equal to fifteen percent of the gross amount paid
29to the eligible taxpayer from the sale of the share of crops or
30livestock received by the eligible taxpayer under the agreement
31for each tax year that the tax credit is allowed or until all
32the income from the agreement is realized by the eligible
33taxpayer.
345. For an agreement made on a flexible basis as described
35in section 16.81, the eligible taxpayer may claim a tax credit
-10-1equal to the sum of the following amounts:
2a. To the extent that the agreement provides that a
3portion of the payment is a fixed cash payment as described
4in subsection 3, the eligible taxpayer may claim a tax credit
5equal to five percent of the amount of the rent payment paid
6to the eligible taxpayer under the agreement for each tax year
7that the tax credit is allowed.
8b. To the extent that the agreement provides that a portion
9of the payment is calculated on a commodity share basis as
10described in subsection 4, the eligible taxpayer may claim
11a tax credit equal to fifteen percent of the amount paid to
12the eligible taxpayer from the sale of the share of crops
13or livestock received under the agreement for each tax year
14that the tax credit is allowed until all the income from the
15agreement is realized by the eligible taxpayer.
16c. (1) To the extent that the agreement provides that
17the payment under the agreement is adjusted after taking into
18account all risk-sharing factors provided in the agreement,
19the estimated tax credit shall equal fifteen percent of the
20adjusted amount received under the agreement.
21(2) As used in subparagraph (1), “risk-sharing factor” means
22the same as defined in section 16.81, subsection 5, paragraph
23“c”, subparagraph (3), subparagraph division (a).
246. The division shall provide the department of revenue
25with a list of certified taxpayers and persons who have been
26decertified due to lease termination by January 31. The list
27shall include the estimated amount of the tax credit and the
28type of agreement.
297. The amount of the tax credit claimed shall not exceed
30fifty thousand dollars in any tax year.
318. The amount of the tax credit shall be reduced by the
32percent ownership interest of the qualifying beginning farmer
33in the agricultural asset.
349. A tax credit in excess of the eligible taxpayer’s tax
35liability for the tax year may be credited to the tax liability
-11-1for the following ten tax years or until depleted, whichever is
2earlier. A tax credit shall not be carried back to a tax year
3prior to the tax year in which the eligible taxpayer redeems
4the tax credit.
510. A tax credit shall not be transferable to any other
6person other than the taxpayer’s estate.
711. If an agreement is terminated by the eligible taxpayer,
8all of the following shall apply:
9a. Any properly claimed tax credit for income received
10pursuant to an agreement shall be allowed, but no additional
11tax credits may be claimed in future tax years under the
12program. The eligible taxpayer may apply for and be issued
13another beginning farmer tax credit certificate under a new
14agreement for the same agricultural assets as provided in this
15section.
16b. If the agricultural development board determines
17that the eligible taxpayer is at fault for the termination,
18the beginning farmer tax credit that had been allowed for
19that tax year shall be disallowed and the amount shall be
20considered a tax payment due. If an eligible taxpayer does not
21immediately notify the agricultural development division of the
22termination, the eligible taxpayer shall be conclusively deemed
23at fault for the termination.
24 Sec. 13. NEW SECTION. 16.82A Beginning farmer tax credit
25eligibility certification — amount and availability.
261. The estimated amount of beginning farmer tax credits
27that may be approved by the agricultural development board
28under the beginning farmer tax credit program shall not in the
29aggregate exceed a limit of twelve million dollars in each tax
30year. The estimated amount of the approved tax credits shall
31be determined by the board after reviewing applications as
32provided in section 16.81 and arriving at estimated amounts for
33the approved applications aggregated for purposes of meeting
34the program limits.
352. The authority shall issue the certificate to an eligible
-12-1taxpayer for the length of the agreement, including until all
2income is realized by the eligible taxpayer from the agreement
3but not later than December 15 in the year that the board
4receives the application under section 16.81.
53. The eligibility certification shall be valid for the
6estate of the eligible taxpayer.
7 Sec. 14. NEW SECTION. 422.11E Beginning farmer tax credit
8program.
9The taxes imposed under this division, less the credits
10allowed under section 422.12, shall be reduced by a beginning
11farmer tax credit as allowed under chapter 16, subchapter VIII,
12part 5, subpart B.
13 Sec. 15. Section 422.33, subsection 21, Code 2019, is
14amended to read as follows:
1521. The taxes imposed under this division shall be reduced
16by an agricultural assets transfer a beginning farmer tax
17credit as allowed under section 16.80 chapter 16, subchapter
18VIII, part 5, subpart B.
19 Sec. 16. REPEAL. Sections 16.80 and 422.11M, Code 2019,
20are repealed.
21 Sec. 17. APPLICABILITY OF PRIOR TAX CREDITS — APPROVED
22APPLICATIONS AND CERTIFICATES.
231. Notwithstanding any provision of this Act to the
24contrary, on or after the effective date of this Act any
25agricultural asset transfer tax credit application approved
26under section 16.80 as that section existed on or before
27December 31, 2018, for which tax credit certificates have not
28been issued shall be approved for the beginning farmer tax
29credit program as provided in this Act. The Iowa finance
30authority shall issue an eligibility certification for the
31remainder of the agricultural lease term as if the taxpayer
32and beginning farmer had applied for the beginning farmer tax
33credit. The taxpayer shall be allowed to claim a beginning
34farmer tax credit in the same manner as an eligible taxpayer
35may claim a beginning farmer tax credit as provided in this
-13-1Act.
22. Any application which was submitted for the agricultural
3assets transfer tax credit pursuant to section 16.80 as
4that section existed on December 31, 2018, for the tax year
5beginning January 1, 2019, shall be deemed to be a new pending
6application for the beginning farmer tax credit as enacted in
7this Act. The date the new application was received shall be
8deemed to be the same date that the pending application for the
9agricultural asset transfer tax credit was received.
10 Sec. 18. APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE
11OF CARRYOVER PROVISIONS. For any tax year commencing in
12calendar years 2014 through 2018, a tax credit that could
13have been first issued, awarded, or allowed and claimed under
14sections 16.75 through 16.82 as those sections existed on
15December 31, 2017, or under section 16.80 as that section
16existed on December 31, 2018, may be credited to the tax
17liability of that taxpayer for ten tax years following the tax
18year for which the eligible taxpayer could have first claimed
19the tax credit, or until depleted, whichever is earlier.
20 Sec. 19. EFFECTIVE DATE. This Act, being deemed of
21immediate importance, takes effect upon enactment.
22 Sec. 20. RETROACTIVE APPLICABILITY. This Act applies
23retroactively to January 1, 2019, for tax years beginning on
24or after that date.
25EXPLANATION
26The inclusion of this explanation does not constitute agreement with
27the explanation’s substance by the members of the general assembly.
28TAXPAYERS AND FARMERS QUALIFYING TO PARTICIPATE IN THE
29BEGINNING FARMER TAX PROGRAM. This bill creates a beginning
30farmer tax credit program which replaces the agricultural
31assets transfer tax credit under the jurisdiction of the Iowa
32finance authority (IFA). Under the program, an eligible
33taxpayer (taxpayer) who holds agricultural assets (agricultural
34land, depreciable agricultural property, crops, or livestock)
35and who assists a qualified beginning farmer (farmer) acquire
-14-1agricultural assets by a form of specified legal arrangement
2is entitled to claim a tax credit against the taxpayer’s
3individual or corporate income tax liability. Specifically,
4the taxpayer must be eligible to hold agricultural land
5generally under Iowa’s corporate farming law (e.g., as an
6individual, partnership, family farm corporation, or family
7farm limited liability company). The taxpayer must not have
8been at fault for terminating a prior agreement in which the
9taxpayer was able to claim a tax credit. The taxpayer must
10enter into an agricultural lease agreement (agreement) with
11the farmer who must be an individual, partnership, family farm
12corporation, or family farm limited liability company. In
13addition, the farmer must be a resident of this state; have
14sufficient education, training, or experience in farming;
15have access to adequate working capital and production items;
16and not own more than a 10 percent ownership interest in an
17agricultural asset included in the agreement.
18BEGINNING FARMER TAX CREDIT. The tax credit is calculated
19based on the type of rent payment arrangement agreed to
20by the parties, which is either on a cash basis in which a
21fixed payment is made or a commodity share basis in which the
22taxpayer takes a percentage of the crop or livestock produced.
23The tax credit also takes into account special risk-sharing
24arrangements in which the parties agree to adjust the rent
25amount based on some future happening (e.g., crop yield). For
26an agreement which includes a rent payable on a cash basis,
27the tax credit amount equals 5 percent of the gross amount
28paid to the taxpayer under the agreement. For an agreement
29which includes rent payable on a commodity share basis, the
30tax credit amount equals 15 percent of the amount paid to
31the eligible taxpayer from crops or livestock sold under the
32agreement. In the case of a flexible arrangement in which
33some risk is shared between the parties, the tax credit amount
34equals 15 percent of the amount paid to the taxpayer as a
35percentage of the gross value of the commodity. A tax credit
-15-1cannot exceed $50,000 in any tax year.
2APPLICATIONS AND CERTIFICATES. The board is required to
3review and approve applications for the tax credit. As part
4of this process the division must calculate the amount of
5the tax credit that may be awarded to that applicant. The
6division must assess and collect an application fee based on
7the number of acres of agricultural land subject to the lease.
8The division must approve all applications on a first-come,
9first-served basis and issue tax credit certificates to
10approved taxpayers. IFA is allowed to issue up to $12 million
11in tax credit certificates each tax year, an increase from $6
12million under the agricultural assets transfer tax credit.
13APPLICABILITY OF PRIOR TAX CREDITS — APPROVED APPLICATIONS
14AND CERTIFICATIONS. The bill provides that any approved
15application for the agricultural asset transfer tax credit is
16deemed an approved application under the beginning farmer tax
17credit program.
18APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE OF
19CARRYOVER PROVISIONS. The bill allows a taxpayer who claimed
20a tax credit under the former version of the beginning farmer
21tax credit (the agricultural assets transfer tax credit and an
22associated, now repealed custom farming contract tax credit)
23may continue to carry over the respective tax credits for the
24remaining 10 years or the depletion of the tax credit.
25BACKGROUND. The agricultural assets transfer tax credit
26was first established in 2006 (2006 Iowa Acts, chapter 1161)
27and has been subsequently amended. Another form of a tax
28credit assisting beginning farmers, referred to as the custom
29farming contract tax credit, was established in 2013 (2013 Iowa
30Acts, chapter 125). Both tax credits were under the beginning
31farmer tax credit program and administered by the agricultural
32development board (board) acting as the agricultural
33development authority and subject to a limit of $12 million.
34The program was transferred to IFA (2013 Iowa Acts, chapter
35100, and 2014 Iowa Acts, chapter 1080). Amendments to the
-16-1agricultural assets transfer tax credit and the custom farming
2contract tax credit were repealed on December 31, 2017 (2013
3Iowa Acts, chapter 125), except for a provision which extended
4the tax credit carryover from 5 to 10 years. The funding limit
5was restored to its present $6 million limit.
6EFFECTIVE AND RETROACTIVE APPLICABILITY. The bill takes
7effect upon enactment and applies retroactively to January 1,
82019, to tax years beginning on or after that date.
-17-da/jh