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Senate File 291 - IntroducedA Bill ForAn Act 1relating to the beginning farmer tax credit program, by
2modifying participation and lease agreement requirements and
3tax credit amounts, and including effective date provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 16.58, subsections 1, 2, and 3, Code
22021, are amended to read as follows:
31. “Agricultural assets” asset” means agricultural land
4with or without an agricultural improvement, depreciable
5agricultural property, crops, or livestock.
62. “Agricultural improvements” improvement” means any
7improvements, including buildings, structures, or fixtures
8suitable for use in farming which are, if located on any size
9parcel of agricultural land.
103. “Agricultural land” means land suitable for use in
11farming, any portion of which may include an agricultural
12improvement.
13 Sec. 2. Section 16.79A, subsection 1, Code 2021, is amended
14to read as follows:
151. a. A beginning farmer tax credit is allowed only for
16agricultural assets that are subject to an agricultural lease
17agreement entered into by an eligible taxpayer and a qualifying
18beginning farmer participating in the beginning farmer tax
19credit program established pursuant to section 16.78.
20b. The tax credit is allowed regardless of whether the
21principle agricultural asset is soil, pasture, or a building or
22other structure used in farming.
23 Sec. 3. Section 16.79A, subsection 3, paragraph c, Code
242021, is amended to read as follows:
25c. The agreement must be for at least two years, but not
26more than five years. The agreement may be renewed any number
27of times by the eligible taxpayer and qualified beginning
28farmer for a term of at least two years, but not more than five
29years. However, an eligible taxpayer shall not participate in
30the program for more than fifteen years.
31 Sec. 4. Section 16.81, subsection 4, Code 2021, is amended
32by striking the subsection.
33 Sec. 5. Section 16.81, subsection 6, Code 2021, is amended
34to read as follows:
356. The authority shall approve all beginning farmer tax
-1-1credit applications that meet the requirements of this subpart
2and make tax credit awards on a first-come, first-served
3basis, subject to the limitations in section 16.82A. The
4authority shall not disapprove an application or fail to
5award a tax credit to an eligible taxpayer merely because the
6eligible taxpayer had entered into a different agreement with
7a qualified beginning farmer and the authority approved an
8application to make a tax credit award to the eligible taxpayer
9for the same or different tax year.
10 Sec. 6. Section 16.82, subsection 5, Code 2021, is amended
11to read as follows:
125. The amount of tax credits that may be awarded to an
13eligible taxpayer for any one year under all agreements an
14agreement shall not exceed fifty thousand dollars.
15 Sec. 7. BEGINNING FARMER TAX CREDIT PROGRAM — FORMER
16PERIOD OF PARTICIPATION EXTENDED. An eligible taxpayer first
17participating in the beginning farmer tax credit program on or
18after January 1, 2019, as provided in 2019 Iowa Acts, chapter
19161, for a tax year beginning on or after that date, may
20participate in the program for not more than fifteen years in
21the same manner as provided in section 16.79A, as amended by
22this Act.
23 Sec. 8. EFFECTIVE DATE. This Act takes effect January 1,
242022.
25EXPLANATION
26The inclusion of this explanation does not constitute agreement with
27the explanation’s substance by the members of the general assembly.
28GENERAL. This bill provides for the participation of an
29eligible taxpayer (taxpayer) and qualified beginning farmer
30(beginning farmer) in the beginning farmer tax credit program
31(program) (Code section 16.81(4)). Under the program, a tax
32credit is awarded to a taxpayer who transfers agricultural
33assets to a beginning farmer by agricultural lease agreement
34(agreement). The transferred agricultural assets include
35agricultural land and improvements, as well as depreciable
-2-1agricultural property. The agreement must be approved by the
2Iowa finance authority (authority) (Code section 16.79A) who
3issues a tax credit certificate to the taxpayer on an annual
4basis for the period of the agreement (Code section 16.81).
5LEASE OF AGRICULTURAL LAND WHICH INCLUDES IMPROVEMENTS
6(BUILDINGS). The bill provides that the agreement may provide
7for lease of any size parcel of agricultural land and an
8improvement such as a building (amended Code section 16.58(1),
9(2), and (3)). The principal agricultural asset transferred
10in the agreement may be agricultural land or that part of the
11agricultural land which is a building or other structure used
12in farming (amended Code section 16.79A(1)).
13PARTICIPATION IN THE PROGRAM — FROM 10 TO 15 YEARS.
14 The bill increases from 10 to 15 the number of years that
15a taxpayer may participate in the program (amended Code
16section 16.79A(3)). The extended years of participation
17apply retroactively to a taxpayer previously approved by the
18authority to participate in the program.
19PARTICIPATION IN THE PROGRAM — TAX CREDIT CERTIFICATES
20AND AWARDS. The bill provides that a taxpayer may claim
21multiple tax credits under the program (amended Code sections
2216.79A(3) and 16.81(6)) so long as each tax credit is based
23on an agreement approved by the authority (amended Code
24section 16.81(6)). It also provides that the current $50,000
25limitation on tax credits that can be claimed by a taxpayer
26applies to each rather than all such agreements (amended Code
27section 16.82(5)).
28BACKGROUND. Generally, in order to qualify as a beginning
29farmer, a person must have a low or moderate net worth, be able
30to successfully engage in farming, and promise to materially
31participate in the farming operation (Code sections 16.58(6)
32and (10), and 16.79(2)). The amount of the tax credit depends
33upon the type of payment arrangement provided in the agreement,
34including a fixed amount (5 percent of cash rent payment) or
35some form or risk-sharing between the parties (15 percent of
-3-1the market price of the commodity produced on the leasehold).
2A taxpayer may claim the tax credit in the applicable tax year
3up to the taxpayer’s liability. Any amount of the unused tax
4credit may be applied to reduce the taxpayer’s liability for
5each of the following 10 years until depleted, whichever comes
6first; and cannot be refunded (Code section 16.82(7)).
7EFFECTIVE DATE. The bill takes effect on January 1, 2022.
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2modifying participation and lease agreement requirements and
3tax credit amounts, and including effective date provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 16.58, subsections 1, 2, and 3, Code
22021, are amended to read as follows:
31. “Agricultural assets” asset” means agricultural land
4with or without an agricultural improvement, depreciable
5agricultural property, crops, or livestock.
62. “Agricultural improvements” improvement” means any
7improvements, including buildings, structures, or fixtures
8suitable for use in farming which are, if located on any size
9parcel of agricultural land.
103. “Agricultural land” means land suitable for use in
11farming, any portion of which may include an agricultural
12improvement.
13 Sec. 2. Section 16.79A, subsection 1, Code 2021, is amended
14to read as follows:
151. a. A beginning farmer tax credit is allowed only for
16agricultural assets that are subject to an agricultural lease
17agreement entered into by an eligible taxpayer and a qualifying
18beginning farmer participating in the beginning farmer tax
19credit program established pursuant to section 16.78.
20b. The tax credit is allowed regardless of whether the
21principle agricultural asset is soil, pasture, or a building or
22other structure used in farming.
23 Sec. 3. Section 16.79A, subsection 3, paragraph c, Code
242021, is amended to read as follows:
25c. The agreement must be for at least two years, but not
26more than five years. The agreement may be renewed any number
27of times by the eligible taxpayer and qualified beginning
28farmer for a term of at least two years, but not more than five
29years. However, an eligible taxpayer shall not participate in
30the program for more than fifteen years.
31 Sec. 4. Section 16.81, subsection 4, Code 2021, is amended
32by striking the subsection.
33 Sec. 5. Section 16.81, subsection 6, Code 2021, is amended
34to read as follows:
356. The authority shall approve all beginning farmer tax
-1-1credit applications that meet the requirements of this subpart
2and make tax credit awards on a first-come, first-served
3basis, subject to the limitations in section 16.82A. The
4authority shall not disapprove an application or fail to
5award a tax credit to an eligible taxpayer merely because the
6eligible taxpayer had entered into a different agreement with
7a qualified beginning farmer and the authority approved an
8application to make a tax credit award to the eligible taxpayer
9for the same or different tax year.
10 Sec. 6. Section 16.82, subsection 5, Code 2021, is amended
11to read as follows:
125. The amount of tax credits that may be awarded to an
13eligible taxpayer for any one year under all agreements an
14agreement shall not exceed fifty thousand dollars.
15 Sec. 7. BEGINNING FARMER TAX CREDIT PROGRAM — FORMER
16PERIOD OF PARTICIPATION EXTENDED. An eligible taxpayer first
17participating in the beginning farmer tax credit program on or
18after January 1, 2019, as provided in 2019 Iowa Acts, chapter
19161, for a tax year beginning on or after that date, may
20participate in the program for not more than fifteen years in
21the same manner as provided in section 16.79A, as amended by
22this Act.
23 Sec. 8. EFFECTIVE DATE. This Act takes effect January 1,
242022.
25EXPLANATION
26The inclusion of this explanation does not constitute agreement with
27the explanation’s substance by the members of the general assembly.
28GENERAL. This bill provides for the participation of an
29eligible taxpayer (taxpayer) and qualified beginning farmer
30(beginning farmer) in the beginning farmer tax credit program
31(program) (Code section 16.81(4)). Under the program, a tax
32credit is awarded to a taxpayer who transfers agricultural
33assets to a beginning farmer by agricultural lease agreement
34(agreement). The transferred agricultural assets include
35agricultural land and improvements, as well as depreciable
-2-1agricultural property. The agreement must be approved by the
2Iowa finance authority (authority) (Code section 16.79A) who
3issues a tax credit certificate to the taxpayer on an annual
4basis for the period of the agreement (Code section 16.81).
5LEASE OF AGRICULTURAL LAND WHICH INCLUDES IMPROVEMENTS
6(BUILDINGS). The bill provides that the agreement may provide
7for lease of any size parcel of agricultural land and an
8improvement such as a building (amended Code section 16.58(1),
9(2), and (3)). The principal agricultural asset transferred
10in the agreement may be agricultural land or that part of the
11agricultural land which is a building or other structure used
12in farming (amended Code section 16.79A(1)).
13PARTICIPATION IN THE PROGRAM — FROM 10 TO 15 YEARS.
14 The bill increases from 10 to 15 the number of years that
15a taxpayer may participate in the program (amended Code
16section 16.79A(3)). The extended years of participation
17apply retroactively to a taxpayer previously approved by the
18authority to participate in the program.
19PARTICIPATION IN THE PROGRAM — TAX CREDIT CERTIFICATES
20AND AWARDS. The bill provides that a taxpayer may claim
21multiple tax credits under the program (amended Code sections
2216.79A(3) and 16.81(6)) so long as each tax credit is based
23on an agreement approved by the authority (amended Code
24section 16.81(6)). It also provides that the current $50,000
25limitation on tax credits that can be claimed by a taxpayer
26applies to each rather than all such agreements (amended Code
27section 16.82(5)).
28BACKGROUND. Generally, in order to qualify as a beginning
29farmer, a person must have a low or moderate net worth, be able
30to successfully engage in farming, and promise to materially
31participate in the farming operation (Code sections 16.58(6)
32and (10), and 16.79(2)). The amount of the tax credit depends
33upon the type of payment arrangement provided in the agreement,
34including a fixed amount (5 percent of cash rent payment) or
35some form or risk-sharing between the parties (15 percent of
-3-1the market price of the commodity produced on the leasehold).
2A taxpayer may claim the tax credit in the applicable tax year
3up to the taxpayer’s liability. Any amount of the unused tax
4credit may be applied to reduce the taxpayer’s liability for
5each of the following 10 years until depleted, whichever comes
6first; and cannot be refunded (Code section 16.82(7)).
7EFFECTIVE DATE. The bill takes effect on January 1, 2022.
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