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House File 694 - 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” means agricultural land,
4agricultural improvements, depreciable agricultural property,
5crops, 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 16.77, subsection 2, Code 2021, is amended
14to read as follows:
152. “Agricultural lease agreement” or “agreement” means an
16agreement for the transfer of agricultural assets, that must at
17least include a lease of agricultural land, from an eligible
18taxpayer to a qualified beginning farmer as provided in section
1916.79A.
20 Sec. 3. Section 16.79A, subsection 1, Code 2021, is amended
21to read as follows:
221. a. A beginning farmer tax credit is allowed only for
23agricultural assets that are subject to an agricultural lease
24agreement entered into by an eligible taxpayer and a qualifying
25beginning farmer participating in the beginning farmer tax
26credit program established pursuant to section 16.78.
27b. The tax credit is allowed regardless of whether the
28principle agricultural asset is soil, pasture, or a building or
29other structure used in farming.
30 Sec. 4. Section 16.79A, subsection 2, Code 2021, is amended
31to read as follows:
322. The agreement must include the lease of agricultural
33land located in this state, including any or agricultural
34 improvements located in this state, and may provide for the
35rental of agricultural equipment as defined in section 322F.1.
-1-1 Sec. 5. Section 16.79A, subsection 3, paragraph c, Code
22021, is amended to read as follows:
3c. The agreement must be for at least two years, but not
4more than five years. The agreement may be renewed any number
5of times by the eligible taxpayer and qualified beginning
6farmer for a term of at least two years, but not more than five
7years. However, an eligible taxpayer shall not participate in
8the program for more than fifteen years.
9 Sec. 6. Section 16.81, subsection 4, Code 2021, is amended
10by striking the subsection.
11 Sec. 7. Section 16.81, subsection 6, Code 2021, is amended
12to read as follows:
136. The authority shall approve all beginning farmer tax
14credit applications that meet the requirements of this subpart
15and make tax credit awards on a first-come, first-served basis,
16subject to the limitations in section 16.82A. An eligible
17taxpayer may apply and be approved to enter into agreements
18with different qualified beginning farmers.
19 Sec. 8. Section 16.82, subsection 5, Code 2021, is amended
20to read as follows:
215. The amount of tax credits that may be awarded to an
22eligible taxpayer for any one year under all agreements an
23agreement shall not exceed fifty thousand dollars.
24 Sec. 9. BEGINNING FARMER TAX CREDIT PROGRAM — FORMER
25PERIOD OF PARTICIPATION EXTENDED. An eligible taxpayer first
26participating in the beginning farmer tax credit program on or
27after January 1, 2019, as provided in 2019 Iowa Acts, chapter
28161, for a tax year beginning on or after that date, may
29participate in the program for not more than fifteen years in
30the same manner as provided in section 16.79A, as amended by
31this Act.
32 Sec. 10. EFFECTIVE DATE. This Act takes effect January 1,
332022.
34EXPLANATION
35The inclusion of this explanation does not constitute agreement with
-2-1the explanation’s substance by the members of the general assembly.
2GENERAL. This bill provides for the participation of an
3eligible taxpayer (taxpayer) and qualified beginning farmer
4(beginning farmer) in the beginning farmer tax credit program
5(program) (Code section 16.81(4)). Under the program, a tax
6credit is awarded to a taxpayer who transfers agricultural
7assets to a beginning farmer by agricultural lease agreement
8(agreement). The transferred agricultural assets include
9agricultural land and improvements, as well as depreciable
10agricultural property. The agreement must be approved by the
11Iowa finance authority (authority) (Code section 16.79A) who
12issues a tax credit certificate to the taxpayer on an annual
13basis for the period of the agreement (Code section 16.81).
14LEASE OF AGRICULTURAL LAND WHICH INCLUDES IMPROVEMENTS
15(BUILDINGS). The bill provides that the agreement may provide
16for lease of any size parcel of agricultural land and an
17improvement such as a building (amended Code section 16.58(1),
18(2), and (3)). The principal agricultural asset transferred in
19the agreement may be agricultural land or a building or other
20structure used in farming (amended Code section 16.79A(1)).
21PARTICIPATION IN THE PROGRAM — FROM 10 TO 15 YEARS.
22 The bill increases from 10 to 15 the number of years that
23a taxpayer may participate in the program. (amended Code
24section 16.79A(3)). The extended years of participation
25apply retroactively to a taxpayer previously approved by the
26authority to participate in the program (amendment Code section
2716.82(5)).
28PARTICIPATION IN THE PROGRAM — TAX CREDIT CERTIFICATES
29AND AWARDS. The bill provides that a taxpayer may claim
30multiple tax credits under the program (amended Code sections
3116.79A(3) and 16.81(6)) so long as each tax credit is based
32on an agreement approved by the authority (amended Code
33section 16.81(6)). It also provides that the current $50,000
34limitation on tax credits that can be claimed by a taxpayer
35applies to each rather than all such agreements (amended Code
-3-1section 16.82(5)).
2BACKGROUND. Generally, in order to qualify as a beginning
3farmer, a person must have a low or moderate net worth, be able
4to successfully engage in farming, and promise to materially
5participate in the farming operation (Code sections 16.58(6)
6and (10), and 16.79(2)). The amount of the tax credit depends
7upon the type of payment arrangement provided in the agreement,
8including a fixed amount (5 percent of cash rent payment) or
9some form or risk-sharing between the parties (15 percent of
10the market price of the commodity produced on the leasehold).
11A taxpayer may claim the tax credit in the applicable tax year
12up to the taxpayer’s liability. Any amount of the unused tax
13credit may be applied to reduce the taxpayer’s liability for
14each of the following 10 years until depleted, whichever comes
15first; and cannot be refunded (Code section 16.82(7)).
16EFFECTIVE 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” means agricultural land,
4agricultural improvements, depreciable agricultural property,
5crops, 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 16.77, subsection 2, Code 2021, is amended
14to read as follows:
152. “Agricultural lease agreement” or “agreement” means an
16agreement for the transfer of agricultural assets, that must at
17least include a lease of agricultural land, from an eligible
18taxpayer to a qualified beginning farmer as provided in section
1916.79A.
20 Sec. 3. Section 16.79A, subsection 1, Code 2021, is amended
21to read as follows:
221. a. A beginning farmer tax credit is allowed only for
23agricultural assets that are subject to an agricultural lease
24agreement entered into by an eligible taxpayer and a qualifying
25beginning farmer participating in the beginning farmer tax
26credit program established pursuant to section 16.78.
27b. The tax credit is allowed regardless of whether the
28principle agricultural asset is soil, pasture, or a building or
29other structure used in farming.
30 Sec. 4. Section 16.79A, subsection 2, Code 2021, is amended
31to read as follows:
322. The agreement must include the lease of agricultural
33land located in this state, including any or agricultural
34 improvements located in this state, and may provide for the
35rental of agricultural equipment as defined in section 322F.1.
-1-1 Sec. 5. Section 16.79A, subsection 3, paragraph c, Code
22021, is amended to read as follows:
3c. The agreement must be for at least two years, but not
4more than five years. The agreement may be renewed any number
5of times by the eligible taxpayer and qualified beginning
6farmer for a term of at least two years, but not more than five
7years. However, an eligible taxpayer shall not participate in
8the program for more than fifteen years.
9 Sec. 6. Section 16.81, subsection 4, Code 2021, is amended
10by striking the subsection.
11 Sec. 7. Section 16.81, subsection 6, Code 2021, is amended
12to read as follows:
136. The authority shall approve all beginning farmer tax
14credit applications that meet the requirements of this subpart
15and make tax credit awards on a first-come, first-served basis,
16subject to the limitations in section 16.82A. An eligible
17taxpayer may apply and be approved to enter into agreements
18with different qualified beginning farmers.
19 Sec. 8. Section 16.82, subsection 5, Code 2021, is amended
20to read as follows:
215. The amount of tax credits that may be awarded to an
22eligible taxpayer for any one year under all agreements an
23agreement shall not exceed fifty thousand dollars.
24 Sec. 9. BEGINNING FARMER TAX CREDIT PROGRAM — FORMER
25PERIOD OF PARTICIPATION EXTENDED. An eligible taxpayer first
26participating in the beginning farmer tax credit program on or
27after January 1, 2019, as provided in 2019 Iowa Acts, chapter
28161, for a tax year beginning on or after that date, may
29participate in the program for not more than fifteen years in
30the same manner as provided in section 16.79A, as amended by
31this Act.
32 Sec. 10. EFFECTIVE DATE. This Act takes effect January 1,
332022.
34EXPLANATION
35The inclusion of this explanation does not constitute agreement with
-2-1the explanation’s substance by the members of the general assembly.
2GENERAL. This bill provides for the participation of an
3eligible taxpayer (taxpayer) and qualified beginning farmer
4(beginning farmer) in the beginning farmer tax credit program
5(program) (Code section 16.81(4)). Under the program, a tax
6credit is awarded to a taxpayer who transfers agricultural
7assets to a beginning farmer by agricultural lease agreement
8(agreement). The transferred agricultural assets include
9agricultural land and improvements, as well as depreciable
10agricultural property. The agreement must be approved by the
11Iowa finance authority (authority) (Code section 16.79A) who
12issues a tax credit certificate to the taxpayer on an annual
13basis for the period of the agreement (Code section 16.81).
14LEASE OF AGRICULTURAL LAND WHICH INCLUDES IMPROVEMENTS
15(BUILDINGS). The bill provides that the agreement may provide
16for lease of any size parcel of agricultural land and an
17improvement such as a building (amended Code section 16.58(1),
18(2), and (3)). The principal agricultural asset transferred in
19the agreement may be agricultural land or a building or other
20structure used in farming (amended Code section 16.79A(1)).
21PARTICIPATION IN THE PROGRAM — FROM 10 TO 15 YEARS.
22 The bill increases from 10 to 15 the number of years that
23a taxpayer may participate in the program. (amended Code
24section 16.79A(3)). The extended years of participation
25apply retroactively to a taxpayer previously approved by the
26authority to participate in the program (amendment Code section
2716.82(5)).
28PARTICIPATION IN THE PROGRAM — TAX CREDIT CERTIFICATES
29AND AWARDS. The bill provides that a taxpayer may claim
30multiple tax credits under the program (amended Code sections
3116.79A(3) and 16.81(6)) so long as each tax credit is based
32on an agreement approved by the authority (amended Code
33section 16.81(6)). It also provides that the current $50,000
34limitation on tax credits that can be claimed by a taxpayer
35applies to each rather than all such agreements (amended Code
-3-1section 16.82(5)).
2BACKGROUND. Generally, in order to qualify as a beginning
3farmer, a person must have a low or moderate net worth, be able
4to successfully engage in farming, and promise to materially
5participate in the farming operation (Code sections 16.58(6)
6and (10), and 16.79(2)). The amount of the tax credit depends
7upon the type of payment arrangement provided in the agreement,
8including a fixed amount (5 percent of cash rent payment) or
9some form or risk-sharing between the parties (15 percent of
10the market price of the commodity produced on the leasehold).
11A taxpayer may claim the tax credit in the applicable tax year
12up to the taxpayer’s liability. Any amount of the unused tax
13credit may be applied to reduce the taxpayer’s liability for
14each of the following 10 years until depleted, whichever comes
15first; and cannot be refunded (Code section 16.82(7)).
16EFFECTIVE DATE. The bill takes effect on January 1, 2022.
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