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House File 768 - EnrolledAn Actrelating to agricultural development, by providing for
the Iowa finance authority, a beginning farmer tax credit
program, fees, and including effective date and retroactive
applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
Section 1. Section 2.48, subsection 3, paragraph e,
subparagraph (1), Code 2019, is amended to read as follows:
(1) The agricultural assets transfer beginning farmer
tax credit program as provided in section 16.80 chapter 16,
subchapter VIII, part 5, subpart B.
Sec. 2. Section 16.2, subsection 1, unnumbered paragraph 1,
Code 2019, is amended to read as follows:
An Iowa finance authority board of directors is created. The
powers of the authority are vested in and shall be exercised
by the board. The authority includes nine members appointed
by the governor subject to confirmation by the senate. The
authority also includes one ex officio voting member who must
be designated by the agricultural development board created in
section 16.2C and be a member of that board.
Sec. 3. Section 16.2, subsections 2 and 3, Code 2019, are
amended to read as follows:
2. Members The members of the authority shall be appointed
by the governor shall serve for staggered terms of six years
beginning and ending as provided in section 69.19. A person
appointed by the governor to fill a vacancy shall serve only
for the unexpired portion of the term. A member is eligible
for reappointment. The ex officio voting member designated by
the agricultural development board shall serve at the pleasure
of that board. A member of the authority may be removed from
office by the governor for misfeasance, malfeasance, or willful
neglect of duty or other just cause, after notice and hearing,
unless the notice and hearing is expressly waived in writing.
3. Five Six members of the authority constitute a quorum and
the affirmative vote of a majority of the appointed members is
necessary for any substantive action taken by the authority.
The majority shall not include any member who has a conflict of
interest and a statement by a member of a conflict of interest
shall be conclusive for this purpose. A vacancy in the
membership does not impair the right of a quorum to exercise
all rights and perform all duties of the authority.
-1- Sec. 4. Section 16.2B, subsection 3, paragraph b, Code 2019,
is amended to read as follows:
b. Obtain agricultural assets transfer Claim beginning
farmer tax credits, including tax credit certificates issued
pursuant to subchapter VIII, part 5, subpart B.
Sec. 5. Section 16.59, subsection 4, Code 2019, is amended
to read as follows:
4. For a family farm limited liability company, an aggregate
net worth of all members, including each member’s ownership
interest in the family farm limited liability company, and
each member’s spouse and minor children of not greater than
twice the low or moderate net worth. However, the aggregate
net worth of each member and that member’s spouse and minor
children shall not exceed the low or moderate net worth.
Sec. 6. NEW SECTION. 16.77 Definitions.
As used in this subpart B, unless the context otherwise
requires:
1. “Agricultural development board” means the agricultural
development board created in section 16.2C.
2. “Agricultural lease agreement” or “agreement” means an
agreement for the transfer of agricultural assets, that must at
least include a lease of agricultural land, from an eligible
taxpayer to a qualified beginning farmer as provided in section
16.79A.
3. “Department” means the department of revenue.
4. “Eligible taxpayer” means a taxpayer who may participate
in the beginning farmer tax credit program, including by
meeting all the criteria as provided in section 16.79.
5. “Program” means the beginning farmer tax credit program
created pursuant to section 16.78.
6. “Qualified beginning farmer” means a beginning farmer
as defined in section 16.58 who meets the requirements to
participate in a beginning farmer tax credit program as
provided in section 16.79.
7. “Tax credit” means the beginning farmer tax credit
-2-allowed under section 16.82.
Sec. 7. NEW SECTION. 16.78 Beginning farmer tax credit
program — establishment and administration.
1. A beginning farmer tax credit program is established
under the control of the authority.
2. The authority and the department shall cooperate in
administering the program. The department shall have all
rulemaking powers necessary to administer its responsibilities
under this subpart as it does under chapter 422.
3. To every extent practicable, the authority shall
administer the program in a manner that encourages
participation by eligible taxpayers and qualifying beginning
farmers for the primary purposes of providing beginning farmers
access to farmland and enhancing the stability of the beginning
farmer’s farming business.
4. The authority and the department shall each adopt
rules in accordance with chapter 17A as necessary for the
administration of their respective responsibilities under this
subpart. The eligibility requirements for taxpayers and the
qualifications for beginning farmers as provided in the rules
shall not be more stringent than provided in this subpart.
5. The authority shall provide for the preparation or
revision and publication or distribution of forms necessary to
administer their responsibilities under this subpart.
Sec. 8. NEW SECTION. 16.79 Beginning farmer tax credit
program — eligibility criteria.
1. A taxpayer is eligible to participate in the beginning
farmer tax credit program if the taxpayer meets all of the
following requirements:
a. The taxpayer is a person who may acquire or otherwise
obtain or lease agricultural land in this state pursuant to
chapter 9H or 9I. However, the taxpayer must not be a person
who may acquire or otherwise obtain or lease agricultural
land exclusively because of an exception provided in one of
those chapters or in a provision of another chapter of this
-3-Code including but not limited to chapter 10, 10D, or 501, or
section 15E.207.
b. The taxpayer has entered into an agricultural lease
agreement with a qualified beginning farmer to lease
agricultural land as provided in section 16.79A.
c. The taxpayer has not been at fault for terminating a
prior agreement under the program or another agreement in which
the taxpayer was allowed to claim a tax credit under section
175.37 as it existed prior to January 1, 2015, or section 16.80
as it existed prior to January 1, 2018.
d. If the agreement includes the lease of a confinement
feeding operation structure as defined in section 459.102, the
taxpayer is not a party to a pending administrative or judicial
action, including a contested case proceeding under chapter
17A, relating to an alleged violation involving an animal
feeding operation as regulated by the department of natural
resources, regardless of whether the pending action is brought
by the department or the attorney general.
e. The taxpayer is not classified as a habitual violator for
a violation of state law involving an animal feeding operation
as regulated by the department of natural resources under
chapter 459.
f. The taxpayer is not a partner of a partnership,
shareholder of a family farm corporation, or member of a
family farm limited liability company that is the lessee of
an agricultural asset that is part of an agricultural lease
agreement.
2. A beginning farmer is a qualified beginning farmer
eligible to participate in the program by meeting all of the
following criteria:
a. Is a resident of the state. If the beginning farmer is a
partnership, all partners must be residents of the state. If a
beginning farmer is a family farm corporation, all shareholders
must be residents of the state. If the beginning farmer is
a family farm limited liability company, all members must be
-4-residents of the state.
b. Has sufficient education, training, or experience in
farming. If the beginning farmer is a partnership, at least
one partner who is not a minor must have sufficient education,
training, or experience in farming. If the beginning farmer is
a family farm corporation, at least one shareholder who is not
a minor must have sufficient education, training, or experience
in farming. If the beginning farmer is a family farm limited
liability company, at least one member who is not a minor must
have sufficient education, training, or experience in farming.
c. Has access to adequate working capital and production
items.
d. Will materially and substantially participate in
farming. If the beginning farmer is a partnership, family farm
corporation, or family farm limited liability company, at least
one of the partners, shareholders, or members who is not a
minor must materially and substantially participate in farming.
e. Does not own more than a ten percent ownership interest
in an agricultural asset included in the agreement.
Sec. 9. NEW SECTION. 16.79A Agricultural lease agreement.
1. A beginning farmer tax credit is allowed only for
agricultural assets that are subject to an agricultural lease
agreement entered into by an eligible taxpayer and a qualifying
beginning farmer participating in the beginning farmer tax
credit program established pursuant to section 16.78.
2. The agreement must include the lease of agricultural
land located in this state, including any improvements, and may
provide for the rental of agricultural equipment as defined in
section 322F.1.
3. a. The agreement must include provisions which describe
the consideration paid for the agreement in a manner that
allows the authority to calculate the value of the lease in
order to determine the tax credit amount as provided in section
16.82.
b. The agreement must be in writing.
-5- c. The agreement must be for at least two years, but not
more than five years. The agreement may be renewed by the
eligible taxpayer and qualified beginning farmer for a term of
at least two years, but not more than five years.
d. The agreement shall not include a lease or rental of
equipment intended as a security.
e. The agreement cannot be assigned and the agricultural
land subject to the agreement shall not be subleased.
f. (1) The agricultural assets shall not be leased or
rented at a rate that is substantially higher than the market
rate for similar agricultural assets leased or rented within
the same community.
(2) As used in subparagraph (1), when referring to an
agricultural asset that is cropland, “substantially higher”
means not more than thirty percent above the average cash rent
paid for cropland rented in the same county according to the
most recent cash rent survey for cropland published by a unit
of Iowa state university of science and technology recognized
by the authority.
4. a. The agreement may be amended after the authority
approves an application and makes a tax credit award without
changing the eligibility status of the taxpayer, except as
provided in paragraph “b”.
b. The underlying lease for agricultural land may only be
amended without submitting a new application if any of the
following apply:
(1) The terms of the amended lease are more favorable to the
qualified beginning farmer, including but not limited to the
rent payment being reduced.
(2) A party has changed their name.
(3) The owner of an agricultural asset is changed to the
owner’s estate or trust upon the eligible taxpayer’s death.
c. If an amendment to an agreement changes the total amount
that will be paid to the eligible taxpayer under the agreement,
the eligible taxpayer shall notify the authority in a manner
-6-and form prescribed by the authority within thirty days of the
date the amendment is executed by the parties.
(1) If the amendment will reduce the total amount paid to
the eligible taxpayer under the agreement, the authority shall
recalculate and reduce the eligible taxpayer’s tax credit award
under section 16.82A.
(2) If the amendment will increase the total amount paid to
the eligible taxpayer under the agreement, the tax credit award
shall not be increased unless the eligible taxpayer submits an
amended application to the authority in the manner and form
prescribed by the authority and that meets the requirements of
section 16.81. If the amended application is approved under
section 16.81, the authority may increase the amount of the tax
credit award. The increased amount of the tax credit award
shall be subject to the aggregate award limitation in section
16.82A for the calendar year in which the increased award is
made.
(3) This paragraph “c” does not apply to an amendment to an
agreement that requires a new application under paragraph “b” in
order to be valid.
5. An eligible taxpayer or qualified beginning farmer may
terminate an agreement as provided in the agreement or by
law. The eligible taxpayer must notify the authority of the
termination within thirty days of the date of termination in
the manner and form prescribed by the authority.
Sec. 10. NEW SECTION. 16.81 Beginning farmer tax credit
— application.
1. The deadline for submitting an application to the
authority to claim a beginning farmer tax credit is August 1 of
each year. The application shall be for a period that is not
longer than the term of the lease.
2. a. The authority shall impose, assess, and collect
application fees on an interim basis until December 31, 2021.
The amount of an application fee shall not be more than the
following:
-7- (1) For an application that includes an agreement for the
lease of one hundred acres or less of agricultural land, a fee
of three hundred dollars.
(2) For an application that includes an agreement for the
lease of more than one hundred acres, but not more than two
hundred fifty acres of agricultural land, a fee of four hundred
dollars.
(3) For an application that includes an agreement for the
lease of more than two hundred fifty acres of agricultural
land, a fee of five hundred dollars.
(4) For an amendment to an agreement that is part of an
application that has been previously approved, a fee of one
hundred dollars.
b. Any amount of fees collected by the authority under this
subsection shall be considered repayment receipts as defined
in section 8.2.
c. This subsection is repealed on January 1, 2022.
3. a. The authority shall impose, assess, and collect
application fees and shall adopt rules as necessary to
administer this subsection, including by providing for the rate
of those fees.
b. The authority may establish different rates based on
separate categories of applications or agricultural lease
agreements as determined relevant by the authority.
c. The authority shall calculate the rates of the
application fees to be effective for each successive
twelve-month period. The total amount of application fees
collected by the authority for that period shall not be more
than the authority’s estimate of the total amount of revenues
necessary to administer the provisions of this subpart based
on the expected revenue to be collected from the application
fees and the expected costs to be incurred by the authority
in administering the provisions of this subpart during that
period. The authority may adjust the rates throughout that
period as the authority determines necessary to comply with
-8-this paragraph.
d. The amount of application fees collected by the authority
under this subsection shall be considered repayment receipts as
defined in section 8.2.
e. (1) The rules described in this subsection shall first
take effect immediately after the repeal of subsection 2.
(2) This paragraph “e” is repealed immediately after the
rules described in this subsection take effect.
4. An eligible taxpayer shall not participate in the
beginning farmer tax credit program for more than ten years,
and shall not receive more than ten tax credit certificates
under the program.
5. The agricultural development board shall review and
recommend approval of an application for a tax credit as
provided by rules adopted by the authority. The application
must include a copy of the agricultural lease agreement. The
authority may require that the parties to an agreement provide
additional information as determined relevant by the authority.
6. The authority shall approve all beginning farmer tax
credit applications that meet the requirements of this subpart
and make tax credit awards on a first-come, first-served basis,
subject to the limitations in section 16.82A.
7. After the authority has approved an application and made
a tax credit award, all of the following apply:
a. The authority shall issue beginning farmer tax credit
certificates to an eligible taxpayer on an annual basis as
provided in section 16.82A.
b. An eligible taxpayer may claim the tax credit each tax
year as provided in section 16.82.
8. Any financial, contractual, or legal authorization
records provided to the authority shall be kept confidential
and are not subject to chapter 22.
Sec. 11. NEW SECTION. 16.82 Beginning farmer tax credit
— allowance.
1. A beginning farmer tax credit is authorized under the
-9-beginning farmer tax credit program as provided in section
16.78. The beginning farmer tax credit is allowed against
the taxes imposed in chapter 422, division II, as provided in
section 422.11E, and in chapter 422, division III, as provided
in section 422.33, subsection 21, to facilitate the transfer of
agricultural assets from an eligible taxpayer to a qualifying
beginning farmer participating in the program.
2. An individual may claim a beginning farmer tax credit
under this section of a partnership, limited liability company,
S corporation, estate, or trust electing to have income
taxed directly to the individual. The amount claimed by the
individual shall be based upon the pro rata share of the
individual’s earnings from the partnership, limited liability
company, S corporation, estate, or trust.
3. Subject to the limitations described in subsections 5,
6, and 7, the authority shall determine the amount of the tax
credit under an agreement using the following methods:
a. In the case of an agreement on a fixed basis, in which
an eligible taxpayer receives a fixed cash rent payment, the
amount of the tax credit equals five percent of the amount of
the fixed cash rent payment for each year.
b. In the case of an agreement on a commodity share basis,
in which an eligible taxpayer receives as a rent payment a
percentage of the commodity produced, the amount of the tax
credit shall equal fifteen percent of the gross amount that
the eligible taxpayer would receive as a rent payment from
the sale of the eligible taxpayer’s share of the crop in each
harvest year. The amount of the tax credit shall be based on
an equation established by rule adopted by the authority which
shall use data compiled by the United States department of
agriculture, which shall include all of the following factors:
(1) The past ten-year average per bushel yield for the
same type of grain as produced under the agreement in the same
county where the leased agricultural land is located excluding
the years of highest and lowest per bushel yields.
-10- (2) The per bushel state price established for the same
type of grain harvested as described in subparagraph (1).
Price information shall be averaged from the past five years
excluding the years of the highest and lowest per bushel state
price.
c. In the case of an agreement made on a flexible basis in
which an eligible taxpayer receives a rent payment consisting
of a fixed cash payment and an amount subject to adjustment
according to a risk-sharing arrangement, or receives a rent
payment consisting of an amount subject to adjustment according
to a risk-sharing arrangement, the amount of the tax credit
equals the sum of the following amounts:
(1) To the extent that a portion of the amount of the
rent payment is calculated on a fixed basis as described in
paragraph “a”, that portion of the tax credit equals five
percent of the fixed cash payment in the same manner as
provided in paragraph “a”.
(2) To the extent that a portion of the amount of the rent
payment is calculated on a commodity share basis as described
in paragraph “b”, that portion of the tax credit equals fifteen
percent of the amount that the eligible taxpayer would receive
from the sale of the eligible taxpayer’s share of the commodity
in the same manner as provided in paragraph “b”.
(3) (a) To the extent that the amount of the rent payment
may be adjusted after taking into account all risk-sharing
factors provided in the agreement, that portion of the tax
credit equals fifteen percent of the highest adjusted amount
that the eligible taxpayer could receive in excess of the
amounts calculated in subparagraphs (1) and (2) based on an
equation adopted by rule by the authority.
(b) As used in subparagraph division (a), “risk-sharing
factor” means an occurrence or lack of occurrence that may
affect the commodity’s production or profitability as provided
in the agreement, and which may include but is not limited to
production costs, per acre crop yield, gross revenue, or market
-11-price.
(c) The authority shall adopt rules establishing criteria
for commonly used risk-sharing factors and adjustment limits.
4. The authority shall provide the department with data, in
the format prescribed by the department, of eligible taxpayers
and persons who have been decertified due to lease termination
or other cause of ineligibility by January 31 of each year.
The data shall include the amount of the tax credit issued
for the most recent year and all expected future tax credits
under an agreement for each eligible taxpayer and the type of
agreement.
5. The amount of tax credits that may be awarded to an
eligible taxpayer for any one year under all agreements shall
not exceed fifty thousand dollars.
6. The amount of the tax credit shall be reduced by the
percent ownership interest of the qualifying beginning farmer
in the agricultural asset.
7. A tax credit in excess of the eligible taxpayer’s
tax liability for the tax year is not refundable but may be
credited to the tax liability for the following ten tax years
or until depleted, whichever is earlier. A tax credit shall
not be carried back to a tax year prior to the tax year in which
the eligible taxpayer redeems the tax credit.
8. a. To claim a tax credit under this section, an eligible
taxpayer shall include one or more tax credit certificates with
the eligible taxpayer’s tax return pursuant to rules adopted
by the department.
b. A tax credit shall not be transferable to any other
person other than the eligible taxpayer’s estate or trust upon
the eligible taxpayer’s death pursuant to rules adopted by the
department.
9. If an agreement is terminated by the eligible taxpayer,
all of the following shall apply:
a. Any tax credit properly claimed by the eligible taxpayer
prior to the date of termination or for the year during which
-12-the termination occurred shall be allowed except as provided
in paragraph “b”, but no additional tax credits may be issued
or claimed under the program for that agreement. The eligible
taxpayer may apply for and be awarded another beginning farmer
tax credit under a new agreement for the same agricultural
assets as provided in this section.
b. If the authority determines that the eligible taxpayer is
at fault for the termination, any beginning farmer tax credit
that is claimed by the eligible taxpayer for the year during
which the termination occurred shall be disallowed and the
amount shall be considered a tax payment due. If an eligible
taxpayer does not notify the authority of the termination
within thirty days of the date of the termination in the manner
and form prescribed by the authority, the eligible taxpayer
shall be conclusively deemed at fault for the termination.
Sec. 12. NEW SECTION. 16.82A Beginning farmer tax credit
awards — amount and availability.
1. a. Upon approval of an application as provided in
section 16.81, the authority shall make a tax credit award
to the eligible taxpayer. The tax credit award shall equal
the sum of the tax credits calculated by the authority under
section 16.82 for all eligible years under the approved
agreement.
b. The authority shall notify the eligible taxpayer of
the tax credit award under the program. The notification
shall include the total tax credit award, the amount of the
tax credit award that will be issued by way of a tax credit
certificate in each future year under the approved agreement,
and a statement that the eligible taxpayer has no right to
receive tax credit certificates and claim tax credits under the
program if all requirements of the agreement and the program
are not satisfied.
c. If after making a tax credit award the eligible taxpayer
or qualified beginning farmer no longer meets the requirements
of the agreement or the program, the authority may revoke a tax
-13-credit award and may rescind a tax credit certificate.
2. The amount of beginning farmer tax credits that may be
awarded by the authority in any one calendar year under the
beginning farmer tax credit program shall not in the aggregate
exceed a limit of twelve million dollars. Tax credits shall
be awarded by the authority not later than December 15 of each
calendar year after the agricultural development board reviews
applications as provided in section 16.81 and the authority
determines tax credit amounts for the approved applications as
provided in section 16.82, aggregated for purposes of meeting
the annual program award limits.
3. a. The authority shall issue tax credit certificates
on an annual basis to eligible taxpayers who have received a
tax credit award. The tax credit certificate shall contain the
information required by the department.
b. The aggregate amount of tax credit certificates issued to
an eligible taxpayer shall not exceed the eligible taxpayer’s
tax credit award.
c. A tax credit certificate, unless rescinded by the
authority, shall be accepted by the department as payment for
taxes pursuant to chapter 422, divisions II and III, subject
to any conditions or restrictions placed by the authority upon
the face of the tax credit certificate and subject to the
limitations of the program.
Sec. 13. NEW SECTION. 422.11E Beginning farmer tax credit
program.
The taxes imposed under this division, less the credits
allowed under section 422.12, shall be reduced by a beginning
farmer tax credit as allowed under chapter 16, subchapter VIII,
part 5, subpart B.
Sec. 14. Section 422.33, subsection 21, Code 2019, is
amended to read as follows:
21. The taxes imposed under this division shall be reduced
by an agricultural assets transfer a beginning farmer tax
credit as allowed under section 16.80 chapter 16, subchapter
-14-VIII, part 5, subpart B.
Sec. 15. REPEAL. Sections 16.80 and 422.11M, Code 2019,
are repealed.
Sec. 16. APPLICABILITY OF PRIOR TAX CREDITS — APPROVED
APPLICATIONS AND CERTIFICATES.
1. Notwithstanding any provision of this Act to the
contrary, any agricultural asset transfer tax credit
application approved prior to the effective date of this Act
under section 16.80 as that section existed on or before
December 31, 2018, for a year prior to 2019 but for which tax
credit certificates could have been issued for a tax year
beginning on or after January 1, 2019, shall be governed by
section 16.80, Code 2019, and shall be eligible to receive
tax credit certificates for tax years beginning on or after
January 1, 2019, for the remainder of the agricultural lease
term as provided by section 16.80, Code 2019. Tax credit
certificates approved and issued pursuant to this subsection
are not considered an award subject to the maximum tax credit
award limitation in section 16.82A, as enacted in this Act.
2. a. Any application which was submitted prior to the
effective date of this Act for the agricultural assets transfer
tax credit pursuant to section 16.80 as that section existed
on December 31, 2018, for the tax year beginning January 1,
2019, shall be governed by section 16.80, Code 2019, except as
provided in paragraph “b”.
b. Any amount of tax credit certificate approved and issued
pursuant to this subsection shall not be subject to the maximum
tax credit issuance limitation in section 16.80, subsection
10, Code 2019, but shall instead be counted in the same manner
as an award for purposes of the twelve million dollar calendar
year award limitation in section 16.82A, subsection 2, as
enacted in this Act, and shall reduce, dollar-for-dollar, that
maximum calendar year award limitation for the calendar year
during which the tax credit certificate is issued.
Sec. 17. APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE
-15-OF CARRYOVER PROVISIONS. For any tax year commencing in
calendar years 2014 through 2018, a tax credit that could
have been first issued, awarded, or allowed and claimed under
sections 16.75 through 16.82 as those sections existed on
December 31, 2017, or under section 16.80 as that section
existed on December 31, 2018, may be credited to the tax
liability of that taxpayer for ten tax years following the tax
year for which the eligible taxpayer could have first claimed
the tax credit, or until depleted, whichever is earlier.
Sec. 18. EFFECTIVE DATE. This Act, being deemed of
immediate importance, takes effect upon enactment.
Sec. 19. RETROACTIVE APPLICABILITY. This Act applies
retroactively to January 1, 2019, for tax years beginning on
or after that date.
______________________________
LINDA UPMEYERSpeaker of the House______________________________
CHARLES SCHNEIDERPresident of the Senate I hereby certify that this bill originated in the House and is known as House File 768, Eighty-eighth General Assembly.______________________________
CARMINE BOALChief Clerk of the HouseApproved _______________, 2019______________________________
KIM REYNOLDSGovernorda/jh/md
the Iowa finance authority, a beginning farmer tax credit
program, fees, and including effective date and retroactive
applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
Section 1. Section 2.48, subsection 3, paragraph e,
subparagraph (1), Code 2019, is amended to read as follows:
(1) The agricultural assets transfer beginning farmer
tax credit program as provided in section 16.80 chapter 16,
subchapter VIII, part 5, subpart B.
Sec. 2. Section 16.2, subsection 1, unnumbered paragraph 1,
Code 2019, is amended to read as follows:
An Iowa finance authority board of directors is created. The
powers of the authority are vested in and shall be exercised
by the board. The authority includes nine members appointed
by the governor subject to confirmation by the senate. The
authority also includes one ex officio voting member who must
be designated by the agricultural development board created in
section 16.2C and be a member of that board.
Sec. 3. Section 16.2, subsections 2 and 3, Code 2019, are
amended to read as follows:
2. Members The members of the authority shall be appointed
by the governor shall serve for staggered terms of six years
beginning and ending as provided in section 69.19. A person
appointed by the governor to fill a vacancy shall serve only
for the unexpired portion of the term. A member is eligible
for reappointment. The ex officio voting member designated by
the agricultural development board shall serve at the pleasure
of that board. A member of the authority may be removed from
office by the governor for misfeasance, malfeasance, or willful
neglect of duty or other just cause, after notice and hearing,
unless the notice and hearing is expressly waived in writing.
3. Five Six members of the authority constitute a quorum and
the affirmative vote of a majority of the appointed members is
necessary for any substantive action taken by the authority.
The majority shall not include any member who has a conflict of
interest and a statement by a member of a conflict of interest
shall be conclusive for this purpose. A vacancy in the
membership does not impair the right of a quorum to exercise
all rights and perform all duties of the authority.
-1- Sec. 4. Section 16.2B, subsection 3, paragraph b, Code 2019,
is amended to read as follows:
b. Obtain agricultural assets transfer Claim beginning
farmer tax credits, including tax credit certificates issued
pursuant to subchapter VIII, part 5, subpart B.
Sec. 5. Section 16.59, subsection 4, Code 2019, is amended
to read as follows:
4. For a family farm limited liability company, an aggregate
net worth of all members, including each member’s ownership
interest in the family farm limited liability company, and
each member’s spouse and minor children of not greater than
twice the low or moderate net worth. However, the aggregate
net worth of each member and that member’s spouse and minor
children shall not exceed the low or moderate net worth.
Sec. 6. NEW SECTION. 16.77 Definitions.
As used in this subpart B, unless the context otherwise
requires:
1. “Agricultural development board” means the agricultural
development board created in section 16.2C.
2. “Agricultural lease agreement” or “agreement” means an
agreement for the transfer of agricultural assets, that must at
least include a lease of agricultural land, from an eligible
taxpayer to a qualified beginning farmer as provided in section
16.79A.
3. “Department” means the department of revenue.
4. “Eligible taxpayer” means a taxpayer who may participate
in the beginning farmer tax credit program, including by
meeting all the criteria as provided in section 16.79.
5. “Program” means the beginning farmer tax credit program
created pursuant to section 16.78.
6. “Qualified beginning farmer” means a beginning farmer
as defined in section 16.58 who meets the requirements to
participate in a beginning farmer tax credit program as
provided in section 16.79.
7. “Tax credit” means the beginning farmer tax credit
-2-allowed under section 16.82.
Sec. 7. NEW SECTION. 16.78 Beginning farmer tax credit
program — establishment and administration.
1. A beginning farmer tax credit program is established
under the control of the authority.
2. The authority and the department shall cooperate in
administering the program. The department shall have all
rulemaking powers necessary to administer its responsibilities
under this subpart as it does under chapter 422.
3. To every extent practicable, the authority shall
administer the program in a manner that encourages
participation by eligible taxpayers and qualifying beginning
farmers for the primary purposes of providing beginning farmers
access to farmland and enhancing the stability of the beginning
farmer’s farming business.
4. The authority and the department shall each adopt
rules in accordance with chapter 17A as necessary for the
administration of their respective responsibilities under this
subpart. The eligibility requirements for taxpayers and the
qualifications for beginning farmers as provided in the rules
shall not be more stringent than provided in this subpart.
5. The authority shall provide for the preparation or
revision and publication or distribution of forms necessary to
administer their responsibilities under this subpart.
Sec. 8. NEW SECTION. 16.79 Beginning farmer tax credit
program — eligibility criteria.
1. A taxpayer is eligible to participate in the beginning
farmer tax credit program if the taxpayer meets all of the
following requirements:
a. The taxpayer is a person who may acquire or otherwise
obtain or lease agricultural land in this state pursuant to
chapter 9H or 9I. However, the taxpayer must not be a person
who may acquire or otherwise obtain or lease agricultural
land exclusively because of an exception provided in one of
those chapters or in a provision of another chapter of this
-3-Code including but not limited to chapter 10, 10D, or 501, or
section 15E.207.
b. The taxpayer has entered into an agricultural lease
agreement with a qualified beginning farmer to lease
agricultural land as provided in section 16.79A.
c. The taxpayer has not been at fault for terminating a
prior agreement under the program or another agreement in which
the taxpayer was allowed to claim a tax credit under section
175.37 as it existed prior to January 1, 2015, or section 16.80
as it existed prior to January 1, 2018.
d. If the agreement includes the lease of a confinement
feeding operation structure as defined in section 459.102, the
taxpayer is not a party to a pending administrative or judicial
action, including a contested case proceeding under chapter
17A, relating to an alleged violation involving an animal
feeding operation as regulated by the department of natural
resources, regardless of whether the pending action is brought
by the department or the attorney general.
e. The taxpayer is not classified as a habitual violator for
a violation of state law involving an animal feeding operation
as regulated by the department of natural resources under
chapter 459.
f. The taxpayer is not a partner of a partnership,
shareholder of a family farm corporation, or member of a
family farm limited liability company that is the lessee of
an agricultural asset that is part of an agricultural lease
agreement.
2. A beginning farmer is a qualified beginning farmer
eligible to participate in the program by meeting all of the
following criteria:
a. Is a resident of the state. If the beginning farmer is a
partnership, all partners must be residents of the state. If a
beginning farmer is a family farm corporation, all shareholders
must be residents of the state. If the beginning farmer is
a family farm limited liability company, all members must be
-4-residents of the state.
b. Has sufficient education, training, or experience in
farming. If the beginning farmer is a partnership, at least
one partner who is not a minor must have sufficient education,
training, or experience in farming. If the beginning farmer is
a family farm corporation, at least one shareholder who is not
a minor must have sufficient education, training, or experience
in farming. If the beginning farmer is a family farm limited
liability company, at least one member who is not a minor must
have sufficient education, training, or experience in farming.
c. Has access to adequate working capital and production
items.
d. Will materially and substantially participate in
farming. If the beginning farmer is a partnership, family farm
corporation, or family farm limited liability company, at least
one of the partners, shareholders, or members who is not a
minor must materially and substantially participate in farming.
e. Does not own more than a ten percent ownership interest
in an agricultural asset included in the agreement.
Sec. 9. NEW SECTION. 16.79A Agricultural lease agreement.
1. A beginning farmer tax credit is allowed only for
agricultural assets that are subject to an agricultural lease
agreement entered into by an eligible taxpayer and a qualifying
beginning farmer participating in the beginning farmer tax
credit program established pursuant to section 16.78.
2. The agreement must include the lease of agricultural
land located in this state, including any improvements, and may
provide for the rental of agricultural equipment as defined in
section 322F.1.
3. a. The agreement must include provisions which describe
the consideration paid for the agreement in a manner that
allows the authority to calculate the value of the lease in
order to determine the tax credit amount as provided in section
16.82.
b. The agreement must be in writing.
-5- c. The agreement must be for at least two years, but not
more than five years. The agreement may be renewed by the
eligible taxpayer and qualified beginning farmer for a term of
at least two years, but not more than five years.
d. The agreement shall not include a lease or rental of
equipment intended as a security.
e. The agreement cannot be assigned and the agricultural
land subject to the agreement shall not be subleased.
f. (1) The agricultural assets shall not be leased or
rented at a rate that is substantially higher than the market
rate for similar agricultural assets leased or rented within
the same community.
(2) As used in subparagraph (1), when referring to an
agricultural asset that is cropland, “substantially higher”
means not more than thirty percent above the average cash rent
paid for cropland rented in the same county according to the
most recent cash rent survey for cropland published by a unit
of Iowa state university of science and technology recognized
by the authority.
4. a. The agreement may be amended after the authority
approves an application and makes a tax credit award without
changing the eligibility status of the taxpayer, except as
provided in paragraph “b”.
b. The underlying lease for agricultural land may only be
amended without submitting a new application if any of the
following apply:
(1) The terms of the amended lease are more favorable to the
qualified beginning farmer, including but not limited to the
rent payment being reduced.
(2) A party has changed their name.
(3) The owner of an agricultural asset is changed to the
owner’s estate or trust upon the eligible taxpayer’s death.
c. If an amendment to an agreement changes the total amount
that will be paid to the eligible taxpayer under the agreement,
the eligible taxpayer shall notify the authority in a manner
-6-and form prescribed by the authority within thirty days of the
date the amendment is executed by the parties.
(1) If the amendment will reduce the total amount paid to
the eligible taxpayer under the agreement, the authority shall
recalculate and reduce the eligible taxpayer’s tax credit award
under section 16.82A.
(2) If the amendment will increase the total amount paid to
the eligible taxpayer under the agreement, the tax credit award
shall not be increased unless the eligible taxpayer submits an
amended application to the authority in the manner and form
prescribed by the authority and that meets the requirements of
section 16.81. If the amended application is approved under
section 16.81, the authority may increase the amount of the tax
credit award. The increased amount of the tax credit award
shall be subject to the aggregate award limitation in section
16.82A for the calendar year in which the increased award is
made.
(3) This paragraph “c” does not apply to an amendment to an
agreement that requires a new application under paragraph “b” in
order to be valid.
5. An eligible taxpayer or qualified beginning farmer may
terminate an agreement as provided in the agreement or by
law. The eligible taxpayer must notify the authority of the
termination within thirty days of the date of termination in
the manner and form prescribed by the authority.
Sec. 10. NEW SECTION. 16.81 Beginning farmer tax credit
— application.
1. The deadline for submitting an application to the
authority to claim a beginning farmer tax credit is August 1 of
each year. The application shall be for a period that is not
longer than the term of the lease.
2. a. The authority shall impose, assess, and collect
application fees on an interim basis until December 31, 2021.
The amount of an application fee shall not be more than the
following:
-7- (1) For an application that includes an agreement for the
lease of one hundred acres or less of agricultural land, a fee
of three hundred dollars.
(2) For an application that includes an agreement for the
lease of more than one hundred acres, but not more than two
hundred fifty acres of agricultural land, a fee of four hundred
dollars.
(3) For an application that includes an agreement for the
lease of more than two hundred fifty acres of agricultural
land, a fee of five hundred dollars.
(4) For an amendment to an agreement that is part of an
application that has been previously approved, a fee of one
hundred dollars.
b. Any amount of fees collected by the authority under this
subsection shall be considered repayment receipts as defined
in section 8.2.
c. This subsection is repealed on January 1, 2022.
3. a. The authority shall impose, assess, and collect
application fees and shall adopt rules as necessary to
administer this subsection, including by providing for the rate
of those fees.
b. The authority may establish different rates based on
separate categories of applications or agricultural lease
agreements as determined relevant by the authority.
c. The authority shall calculate the rates of the
application fees to be effective for each successive
twelve-month period. The total amount of application fees
collected by the authority for that period shall not be more
than the authority’s estimate of the total amount of revenues
necessary to administer the provisions of this subpart based
on the expected revenue to be collected from the application
fees and the expected costs to be incurred by the authority
in administering the provisions of this subpart during that
period. The authority may adjust the rates throughout that
period as the authority determines necessary to comply with
-8-this paragraph.
d. The amount of application fees collected by the authority
under this subsection shall be considered repayment receipts as
defined in section 8.2.
e. (1) The rules described in this subsection shall first
take effect immediately after the repeal of subsection 2.
(2) This paragraph “e” is repealed immediately after the
rules described in this subsection take effect.
4. An eligible taxpayer shall not participate in the
beginning farmer tax credit program for more than ten years,
and shall not receive more than ten tax credit certificates
under the program.
5. The agricultural development board shall review and
recommend approval of an application for a tax credit as
provided by rules adopted by the authority. The application
must include a copy of the agricultural lease agreement. The
authority may require that the parties to an agreement provide
additional information as determined relevant by the authority.
6. The authority shall approve all beginning farmer tax
credit applications that meet the requirements of this subpart
and make tax credit awards on a first-come, first-served basis,
subject to the limitations in section 16.82A.
7. After the authority has approved an application and made
a tax credit award, all of the following apply:
a. The authority shall issue beginning farmer tax credit
certificates to an eligible taxpayer on an annual basis as
provided in section 16.82A.
b. An eligible taxpayer may claim the tax credit each tax
year as provided in section 16.82.
8. Any financial, contractual, or legal authorization
records provided to the authority shall be kept confidential
and are not subject to chapter 22.
Sec. 11. NEW SECTION. 16.82 Beginning farmer tax credit
— allowance.
1. A beginning farmer tax credit is authorized under the
-9-beginning farmer tax credit program as provided in section
16.78. The beginning farmer tax credit is allowed against
the taxes imposed in chapter 422, division II, as provided in
section 422.11E, and in chapter 422, division III, as provided
in section 422.33, subsection 21, to facilitate the transfer of
agricultural assets from an eligible taxpayer to a qualifying
beginning farmer participating in the program.
2. An individual may claim a beginning farmer tax credit
under this section of a partnership, limited liability company,
S corporation, estate, or trust electing to have income
taxed directly to the individual. The amount claimed by the
individual shall be based upon the pro rata share of the
individual’s earnings from the partnership, limited liability
company, S corporation, estate, or trust.
3. Subject to the limitations described in subsections 5,
6, and 7, the authority shall determine the amount of the tax
credit under an agreement using the following methods:
a. In the case of an agreement on a fixed basis, in which
an eligible taxpayer receives a fixed cash rent payment, the
amount of the tax credit equals five percent of the amount of
the fixed cash rent payment for each year.
b. In the case of an agreement on a commodity share basis,
in which an eligible taxpayer receives as a rent payment a
percentage of the commodity produced, the amount of the tax
credit shall equal fifteen percent of the gross amount that
the eligible taxpayer would receive as a rent payment from
the sale of the eligible taxpayer’s share of the crop in each
harvest year. The amount of the tax credit shall be based on
an equation established by rule adopted by the authority which
shall use data compiled by the United States department of
agriculture, which shall include all of the following factors:
(1) The past ten-year average per bushel yield for the
same type of grain as produced under the agreement in the same
county where the leased agricultural land is located excluding
the years of highest and lowest per bushel yields.
-10- (2) The per bushel state price established for the same
type of grain harvested as described in subparagraph (1).
Price information shall be averaged from the past five years
excluding the years of the highest and lowest per bushel state
price.
c. In the case of an agreement made on a flexible basis in
which an eligible taxpayer receives a rent payment consisting
of a fixed cash payment and an amount subject to adjustment
according to a risk-sharing arrangement, or receives a rent
payment consisting of an amount subject to adjustment according
to a risk-sharing arrangement, the amount of the tax credit
equals the sum of the following amounts:
(1) To the extent that a portion of the amount of the
rent payment is calculated on a fixed basis as described in
paragraph “a”, that portion of the tax credit equals five
percent of the fixed cash payment in the same manner as
provided in paragraph “a”.
(2) To the extent that a portion of the amount of the rent
payment is calculated on a commodity share basis as described
in paragraph “b”, that portion of the tax credit equals fifteen
percent of the amount that the eligible taxpayer would receive
from the sale of the eligible taxpayer’s share of the commodity
in the same manner as provided in paragraph “b”.
(3) (a) To the extent that the amount of the rent payment
may be adjusted after taking into account all risk-sharing
factors provided in the agreement, that portion of the tax
credit equals fifteen percent of the highest adjusted amount
that the eligible taxpayer could receive in excess of the
amounts calculated in subparagraphs (1) and (2) based on an
equation adopted by rule by the authority.
(b) As used in subparagraph division (a), “risk-sharing
factor” means an occurrence or lack of occurrence that may
affect the commodity’s production or profitability as provided
in the agreement, and which may include but is not limited to
production costs, per acre crop yield, gross revenue, or market
-11-price.
(c) The authority shall adopt rules establishing criteria
for commonly used risk-sharing factors and adjustment limits.
4. The authority shall provide the department with data, in
the format prescribed by the department, of eligible taxpayers
and persons who have been decertified due to lease termination
or other cause of ineligibility by January 31 of each year.
The data shall include the amount of the tax credit issued
for the most recent year and all expected future tax credits
under an agreement for each eligible taxpayer and the type of
agreement.
5. The amount of tax credits that may be awarded to an
eligible taxpayer for any one year under all agreements shall
not exceed fifty thousand dollars.
6. The amount of the tax credit shall be reduced by the
percent ownership interest of the qualifying beginning farmer
in the agricultural asset.
7. A tax credit in excess of the eligible taxpayer’s
tax liability for the tax year is not refundable but may be
credited to the tax liability for the following ten tax years
or until depleted, whichever is earlier. A tax credit shall
not be carried back to a tax year prior to the tax year in which
the eligible taxpayer redeems the tax credit.
8. a. To claim a tax credit under this section, an eligible
taxpayer shall include one or more tax credit certificates with
the eligible taxpayer’s tax return pursuant to rules adopted
by the department.
b. A tax credit shall not be transferable to any other
person other than the eligible taxpayer’s estate or trust upon
the eligible taxpayer’s death pursuant to rules adopted by the
department.
9. If an agreement is terminated by the eligible taxpayer,
all of the following shall apply:
a. Any tax credit properly claimed by the eligible taxpayer
prior to the date of termination or for the year during which
-12-the termination occurred shall be allowed except as provided
in paragraph “b”, but no additional tax credits may be issued
or claimed under the program for that agreement. The eligible
taxpayer may apply for and be awarded another beginning farmer
tax credit under a new agreement for the same agricultural
assets as provided in this section.
b. If the authority determines that the eligible taxpayer is
at fault for the termination, any beginning farmer tax credit
that is claimed by the eligible taxpayer for the year during
which the termination occurred shall be disallowed and the
amount shall be considered a tax payment due. If an eligible
taxpayer does not notify the authority of the termination
within thirty days of the date of the termination in the manner
and form prescribed by the authority, the eligible taxpayer
shall be conclusively deemed at fault for the termination.
Sec. 12. NEW SECTION. 16.82A Beginning farmer tax credit
awards — amount and availability.
1. a. Upon approval of an application as provided in
section 16.81, the authority shall make a tax credit award
to the eligible taxpayer. The tax credit award shall equal
the sum of the tax credits calculated by the authority under
section 16.82 for all eligible years under the approved
agreement.
b. The authority shall notify the eligible taxpayer of
the tax credit award under the program. The notification
shall include the total tax credit award, the amount of the
tax credit award that will be issued by way of a tax credit
certificate in each future year under the approved agreement,
and a statement that the eligible taxpayer has no right to
receive tax credit certificates and claim tax credits under the
program if all requirements of the agreement and the program
are not satisfied.
c. If after making a tax credit award the eligible taxpayer
or qualified beginning farmer no longer meets the requirements
of the agreement or the program, the authority may revoke a tax
-13-credit award and may rescind a tax credit certificate.
2. The amount of beginning farmer tax credits that may be
awarded by the authority in any one calendar year under the
beginning farmer tax credit program shall not in the aggregate
exceed a limit of twelve million dollars. Tax credits shall
be awarded by the authority not later than December 15 of each
calendar year after the agricultural development board reviews
applications as provided in section 16.81 and the authority
determines tax credit amounts for the approved applications as
provided in section 16.82, aggregated for purposes of meeting
the annual program award limits.
3. a. The authority shall issue tax credit certificates
on an annual basis to eligible taxpayers who have received a
tax credit award. The tax credit certificate shall contain the
information required by the department.
b. The aggregate amount of tax credit certificates issued to
an eligible taxpayer shall not exceed the eligible taxpayer’s
tax credit award.
c. A tax credit certificate, unless rescinded by the
authority, shall be accepted by the department as payment for
taxes pursuant to chapter 422, divisions II and III, subject
to any conditions or restrictions placed by the authority upon
the face of the tax credit certificate and subject to the
limitations of the program.
Sec. 13. NEW SECTION. 422.11E Beginning farmer tax credit
program.
The taxes imposed under this division, less the credits
allowed under section 422.12, shall be reduced by a beginning
farmer tax credit as allowed under chapter 16, subchapter VIII,
part 5, subpart B.
Sec. 14. Section 422.33, subsection 21, Code 2019, is
amended to read as follows:
21. The taxes imposed under this division shall be reduced
by an agricultural assets transfer a beginning farmer tax
credit as allowed under section 16.80 chapter 16, subchapter
-14-VIII, part 5, subpart B.
Sec. 15. REPEAL. Sections 16.80 and 422.11M, Code 2019,
are repealed.
Sec. 16. APPLICABILITY OF PRIOR TAX CREDITS — APPROVED
APPLICATIONS AND CERTIFICATES.
1. Notwithstanding any provision of this Act to the
contrary, any agricultural asset transfer tax credit
application approved prior to the effective date of this Act
under section 16.80 as that section existed on or before
December 31, 2018, for a year prior to 2019 but for which tax
credit certificates could have been issued for a tax year
beginning on or after January 1, 2019, shall be governed by
section 16.80, Code 2019, and shall be eligible to receive
tax credit certificates for tax years beginning on or after
January 1, 2019, for the remainder of the agricultural lease
term as provided by section 16.80, Code 2019. Tax credit
certificates approved and issued pursuant to this subsection
are not considered an award subject to the maximum tax credit
award limitation in section 16.82A, as enacted in this Act.
2. a. Any application which was submitted prior to the
effective date of this Act for the agricultural assets transfer
tax credit pursuant to section 16.80 as that section existed
on December 31, 2018, for the tax year beginning January 1,
2019, shall be governed by section 16.80, Code 2019, except as
provided in paragraph “b”.
b. Any amount of tax credit certificate approved and issued
pursuant to this subsection shall not be subject to the maximum
tax credit issuance limitation in section 16.80, subsection
10, Code 2019, but shall instead be counted in the same manner
as an award for purposes of the twelve million dollar calendar
year award limitation in section 16.82A, subsection 2, as
enacted in this Act, and shall reduce, dollar-for-dollar, that
maximum calendar year award limitation for the calendar year
during which the tax credit certificate is issued.
Sec. 17. APPLICABILITY OF PRIOR TAX CREDITS — CONTINUANCE
-15-OF CARRYOVER PROVISIONS. For any tax year commencing in
calendar years 2014 through 2018, a tax credit that could
have been first issued, awarded, or allowed and claimed under
sections 16.75 through 16.82 as those sections existed on
December 31, 2017, or under section 16.80 as that section
existed on December 31, 2018, may be credited to the tax
liability of that taxpayer for ten tax years following the tax
year for which the eligible taxpayer could have first claimed
the tax credit, or until depleted, whichever is earlier.
Sec. 18. EFFECTIVE DATE. This Act, being deemed of
immediate importance, takes effect upon enactment.
Sec. 19. RETROACTIVE APPLICABILITY. This Act applies
retroactively to January 1, 2019, for tax years beginning on
or after that date.
______________________________
LINDA UPMEYERSpeaker of the House______________________________
CHARLES SCHNEIDERPresident of the Senate I hereby certify that this bill originated in the House and is known as House File 768, Eighty-eighth General Assembly.______________________________
CARMINE BOALChief Clerk of the HouseApproved _______________, 2019______________________________
KIM REYNOLDSGovernorda/jh/md