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House File 2550 - IntroducedA Bill ForAn Act 1relating to the production, processing, distribution,
2and marketing of agricultural products, including by
3providing tax credits and making appropriations.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2beginning farmer tax credit program
3 Section 1. Section 16.77, Code 2022, is amended by adding
4the following new subsection:
5 NEW SUBSECTION. 6A. “Specialty crop” means a commodity
6limited to fruits, vegetables, tree nuts, or horticulture
7plants that may be consumed by humans in an unprocessed state.
8 Sec. 2. Section 16.82, subsection 3, paragraph a, Code 2022,
9is amended to read as follows:
10a. (1) In the case of an agreement on a fixed basis, in
11which an eligible taxpayer receives a fixed cash rent payment,
12the amount of the tax credit equals five percent of the amount
13of the fixed cash rent payment for each year.
14(2) Notwithstanding subparagraph (1), for acres used to
15produce a specialty crop, the amount of the tax credit equals
16ten percent of the amount of the fixed cash rent payment
17attributable to those acres for each year. This subparagraph
18does not restrict an otherwise qualifying acre from including
19an actively managed pollinator habitat.
20DIVISION II
21RETIRED FARMER LEASE INCOME EXCLUSION
22 Sec. 3. Section 422.7, Code 2022, is amended by adding the
23following new subsection:
24 NEW SUBSECTION. 21A. a. Subtract, to the extent included,
25net income received by an eligible individual pursuant to a
26farm tenancy agreement covering real property held by the
27eligible individual for ten or more years, if the eligible
28individual materially participated in a farming business for
29ten or more years.
30b. An individual who elects to exclude income received
31pursuant to a farm tenancy agreement under this subsection
32shall not claim any of the following in the tax year in which
33the election is made or in any succeeding year:
34(1) The capital gain exclusion under section 422.7,
35subsection 21.
-1- 1(2) The beginning farmer tax credit under section 422.11E.
2c. Married individuals who file separate state income tax
3returns shall allocate their combined annual exclusion limit
4to each spouse in the proportion that each spouse’s respective
5net income from a farm tenancy agreement bears to the total net
6income from a farm tenancy agreement.
7d. The department shall establish criteria, by rule,
8relating to whether and how a surviving spouse may claim the
9income exclusion for which a deceased eligible individual would
10have been eligible under this subsection.
11e. Net income from a farm tenancy agreement earned,
12received, or reported by an entity taxed as a partnership
13for federal tax purposes, an S corporation, or a trust or
14estate is not eligible for the election and deduction in this
15subsection, even if such net income ultimately passes through
16to an eligible individual.
17f. Net income from a farm tenancy agreement earned,
18received, or reported by an individual is not eligible
19for the election and deduction in this subsection unless
20the tenant-lessee is a person that meets the definition
21of a qualified beginning farmer in section 16.77 and the
22tenant-lessee is growing specialty crops as defined in section
2316.77 on the land comprising the farm tenancy agreement.
24g. For purposes of this subsection:
25(1) “Eligible individual” means an individual who is
26disabled or who is fifty-five years of age or older at the time
27the election is made, who no longer materially participates in
28a farming business at the time the election is made, and who,
29as an owner-lessor, is party to a farm tenancy agreement.
30(2) “Farm tenancy agreement” means a written agreement
31outlining the rights and obligations of an owner-lessor and a
32tenant-lessee where the tenant-lessee has a farm tenancy as
33defined in section 562.1A. A “farm tenancy agreement” includes
34cash leases, crop share leases, or livestock share leases.
35DIVISION III
-2-1RETIRED FARMER CAPITAL GAIN EXCLUSION
2 Sec. 4. Section 422.7, subsection 21, Code 2022, is amended
3by striking the subsection and inserting in lieu thereof the
4following:
521. a. For purposes of this subsection:
6(1) “Farming business” means the production, care, growing,
7harvesting, preservation, handling, or storage of crops
8or forest or fruit trees; the production, care, feeding,
9management, and housing of livestock; or horticulture, all for
10intended profit.
11(2) “Held” shall be determined with reference to the holding
12period provisions of section 1223 of the Internal Revenue Code
13and the federal regulations pursuant thereto.
14(3) “Materially participated” means the same as “material
15participation” in section 469(h) of the Internal Revenue Code.
16(4) “Qualified beginning farmer” means the same as defined
17in section 16.77 who grows specialty crops as defined in
18section 16.77.
19(5) (a) “Real property used in a farming business” means
20tracts of land not to exceed one hundred sixty acres in the
21aggregate and the improvements and structures located on such
22tracts which are in good faith used primarily for a farming
23business. Buildings which are primarily used or intended for
24human habitation are deemed to be used in a farming business
25when the building is located on or adjacent to the parcel
26used in the farming business. Land and the nonresidential
27improvements and structures located on such land that shall
28be considered to be used primarily in a farming business
29include but are not limited to land, improvements or structures
30used for the storage or maintenance of farm machinery or
31equipment, for the drying, storage, handling, or preservation
32of agricultural crops, or for the storage of farm inputs, feed,
33or manure. Real property used in a farming business shall also
34include woodland, wasteland, pastureland, and idled land used
35for the conservation of natural resources including soil and
-3-1water.
2(b) Real property classified as agricultural property for
3Iowa property tax purposes, except real property described in
4section 441.21, subsection 12, shall be presumed to be real
5property used in a farming business. This presumption is
6rebuttable by the department by a preponderance of evidence
7that the real property did not meet the requirements of
8subparagraph division (a).
9(6) “Retired farmer” means an individual who is disabled
10or who is fifty-five years of age or older and who no longer
11materially participates in a farming business when an exclusion
12and deduction is claimed under this subsection.
13b. Subtract the net capital gain from the sale of real
14property used in a farming business if all of the following
15conditions are satisfied:
16(1) The taxpayer has materially participated in a farming
17business for a minimum of ten years and has held the real
18property used in a farming business for a minimum of ten years.
19If the taxpayer is a retired farmer, the taxpayer is considered
20to meet the material participation requirement if the taxpayer
21materially participated in a farming business for ten years or
22more in the aggregate, prior to making an election under this
23subsection.
24(2) The real property used in a farming business by the
25taxpayer is sold to a qualified beginning farmer.
26c. A taxpayer who is a retired farmer may make, subject to
27the limitations described in paragraphs “f” and “g”, a single,
28lifetime election to exclude all qualifying capital gains under
29paragraph “b”.
30d. A taxpayer who is a retired farmer who elects to exclude
31capital gains under paragraph “b” shall not claim the beginning
32farmer tax credit under section 422.11E or the exclusion for
33net income received pursuant to a farm tenancy agreement in
34section 422.7, subsection 21A, in the tax year in which this
35election is made or in any subsequent year.
-4- 1e. A taxpayer who is a retired farmer who claims the
2beginning farmer tax credit under section 422.11E shall not,
3in the same year, make an election under this subsection. A
4taxpayer who is a retired farmer and who elects to exclude
5the net income received from a farm tenancy agreement under
6section 422.7, subsection 21A, shall not, in the same tax year
7or in any subsequent tax year, make the election under this
8subsection.
9f. Married individuals who file separate state income tax
10returns shall allocate their combined annual net capital gain
11exclusion under paragraph “b” to each spouse in the proportion
12that each spouse’s respective net capital gain bears to the
13total net capital gain.
14g. The department shall establish criteria, by rule,
15relating to whether and how a surviving spouse may claim the
16income exclusion for which a deceased retired farmer would have
17been eligible under this subsection.
18 Sec. 5. REPEAL. 2018 Iowa Acts, chapter 1161, section 113,
19is repealed.
20 Sec. 6. REPEAL. 2019 Iowa Acts, chapter 162, section 1, is
21repealed.
22 Sec. 7. EFFECTIVE DATE. This division of this Act takes
23effect January 1, 2023.
24 Sec. 8. APPLICABILITY.
251. This division of this Act applies to tax years beginning
26on or after January 1, 2023.
272. This division of this Act applies to sales consummated on
28or after the effective date of this division of this Act, and
29sales consummated prior to the effective date of this division
30of this Act shall be governed by the law as it existed prior to
31the effective date of this division of this Act.
32DIVISION IV
33IOWA-GROWN FOOD TAX CREDIT
34 Sec. 9. NEW SECTION. 137F.20 Iowa-grown food tax credit.
351. As used in this section:
-5- 1a. “Food” means raw, cooked, or a processed edible substance
2intended in whole or in part for human consumption, that
3is grown or processed in this state. “Food” may include
4non-nutritional ingredients incapable of being grown or
5processed in this state.
6b. “Food establishment” means a grocery store, restaurant,
7or other entity that sells food to the public and is licensed
8in this state.
9c. “Nonprofit organization” means public or nonpublic
10schools, hospitals, religious institutions, dependent care
11facilities, child care facilities, and any other nonprofit
12organization in this state.
13d. “Wholesaler” means a wholesale food business licensed in
14this state.
152. a. An Iowa-grown food tax credit may be claimed by a
16food establishment to reduce the taxes imposed under chapter
17422, subchapters II and III, that is equal to one percent of
18the sales price of food sold by the food establishment in this
19state.
20b. An Iowa-grown food tax credit may be claimed by a
21wholesaler to reduce the taxes imposed under chapter 422,
22subchapters II and III, that is equal to one percent of the
23sales price of food sold by the wholesaler to a nonprofit
24organization in this state.
25 Sec. 10. NEW SECTION. 422.12O Iowa-grown food tax credit.
26The taxes imposed under this subchapter, less the credits
27allowed under section 422.12, shall be reduced by an Iowa-grown
28food tax credit authorized pursuant to section 137F.20.
29 Sec. 11. Section 422.33, Code 2022, is amended by adding the
30following new subsection:
31 NEW SUBSECTION. 32. The taxes imposed under this subchapter
32shall be reduced by an Iowa-grown food tax credit under section
33137F.20.
34DIVISION V
35SPECIALTY CROPS — APPROPRIATIONS
-6-1 Sec. 12. SPECIALTY CROPS — FISCAL YEAR 2022-2023.
21. Notwithstanding section 8.57G, subsection 2, there is
3appropriated from the Iowa coronavirus fiscal recovery fund
4to the economic development authority for the fiscal year
5beginning July 1, 2022, and ending June 30, 2023, the following
6amount, or so much thereof as is necessary, to be used for the
7purposes designated:
8For awarding grants to support persons engaged in
9community-based initiatives to expand the capacity of
10operations engaged in processing, distributing, and marketing
11specialty crops:
.................................................. $1210,000,000
132. The economic development authority shall provide a
14preference to applicants who are beginning farmers or ranchers
15or socially disadvantaged farmers or ranchers as defined in 7
16U.S.C. §2279.
173. The economic development authority shall provide a
18preference to applicants who have been awarded matching moneys
19from entities other than state agencies receiving funding under
20the American Rescue Plan Act of 2021, Pub.L. No.117-2.
214. In establishing criteria to award grants and in selecting
22applicants to receive grants under this section, the economic
23development authority shall cooperate with the department of
24agriculture and land stewardship.
255. a. As used in this section, “specialty crop” means a
26plant or part of a plant having commercial value and intended
27to be marketed or used for human consumption or as livestock
28feed in a raw or unprocessed state.
29b. “Specialty crop” does not include corn, grain sorghum,
30oats, soybeans, or wheat.
31 Sec. 13. SPECIALTY CROPS — FISCAL YEAR 2023-2024.
321. Notwithstanding section 8.57G, subsection 2, there is
33appropriated from the Iowa coronavirus fiscal recovery fund
34to the economic development authority for the fiscal year
35beginning July 1, 2023, and ending June 30, 2024, the following
-7-1amount, or so much thereof as is necessary, to be used for the
2purposes designated:
3For awarding grants to support persons engaged in
4community-based initiatives to expand the capacity of
5operations engaged in processing, distributing, and marketing
6specialty crops:
.................................................. $710,000,000
82. The economic development authority shall provide a
9preference to applicants who are beginning farmers or ranchers
10or socially disadvantaged farmers or ranchers as defined in 7
11U.S.C. §2279.
123. The economic development authority shall provide a
13preference to applicants who have been awarded matching moneys
14from entities other than state agencies receiving funding under
15the American Rescue Plan Act of 2021, Pub.L. No.117-2.
164. In establishing criteria to award grants and in selecting
17applicants to receive grants under this section, the economic
18development authority shall cooperate with the department of
19agriculture and land stewardship.
205. a. As used in this section, “specialty crop” means a
21plant or part of a plant having commercial value and intended
22to be marketed or used for human consumption or as livestock
23feed in a raw or unprocessed state.
24b. “Specialty crop” does not include corn, grain sorghum,
25oats, soybeans, or wheat.
26EXPLANATION
27The inclusion of this explanation does not constitute agreement with
28the explanation’s substance by the members of the general assembly.
29DIVISION I — BEGINNING FARMER TAX CREDIT PROGRAM. This bill
30amends the beginning farmer tax credit program which awards
31a tax credit to a taxpayer who transfers agricultural assets
32to a beginning farmer by an agricultural lease agreement. The
33transferred agricultural assets include agricultural land and
34improvements, as well as depreciable agricultural property.
35If the taxpayer and beginning farmer enter into an agreement
-8-1on a fixed cash rent basis, the amount of the tax credit
2equals 5 percent of the amount of the fixed cash rent payment
3for each year of 15 years that the taxpayer is eligible to
4participate in the program. The bill provides that in the
5case of specialty crop acres, the amount equals 10 percent of
6the amount of the fixed cash rent. The specialty crop acre
7is limited to the production of fruit, vegetables, tree nuts,
8dried fruits, or horticulture or nursery crops that may be
9consumed in an unprocessed state.
10DIVISION II — RETIRED FARMER LEASE INCOME EXCLUSION.
11 Commencing with tax years beginning on or after January 1,
122023, the bill excludes from the individual income tax a
13retired farmer’s total net income received pursuant to a
14farm tenancy agreement covering real property held by the
15retired farmer for 10 or more years, if the farmer materially
16participated in a farming business for 10 or more years.
17A retired farmer is not eligible for the lease income
18exclusion unless the farmer is at least 55 years of age and no
19longer materially participating in farming.
20A retired farmer who elects to claim the lease income
21exclusion is not eligible, in the tax year the election is made
22or in succeeding tax years, to claim the capital gain exclusion
23under Code section 422.7(21), as amended by another division of
24the bill, or the beginning farmer tax credit.
25The net income from a farm tenancy agreement earned by
26an individual is not eligible for the exclusion unless the
27tenant-lessee is a person that meets the definition of a
28qualified beginning farmer and the tenant-lessee is growing
29specialty crops on the land comprising the farm tenancy
30agreement.
31DIVISION III — RETIRED FARMER CAPITAL GAIN EXCLUSION. The
32bill modifies the individual income tax capital gain exclusion
33for the sale of real property used in a farming business which
34otherwise would have gone into effect in tax year 2023, which
35was enacted in 2018 Iowa Acts, chapter 1161, section 113,
-9-1and later modified in 2019 Iowa Acts, chapter 162. The bill
2repeals both 2018 Iowa Acts, chapter 1161, section 113, and
32019 Iowa Acts, chapter 162, and creates a new capital gain
4exclusion provision based upon the 2019 Iowa Acts, chapter
5162, provisions, effective for tax years beginning on or after
6January 1, 2023.
7Under the provisions in 2019 Iowa Acts, chapter 162, section
81, which otherwise would have gone into effect during the 2023
9tax year, a taxpayer who materially participates in a farming
10business for at least 10 years and held real property used
11in such a business for at least 10 years, may make a single
12lifetime exclusion election from the individual income tax of
13the capital gain of the sale of such property.
14In order to be eligible for the capital gain tax exclusion on
15the sale of real property used in a farming business, the bill
16requires the sale of the real property to be 160 acres or less
17and to be made to a beginning farmer as defined in Code section
1816.77 who grows specialty crops.
19The bill modifies the term “materially participated” in a
20farming business to include a retired farmer if the retired
21farmer materially participated in a farming business for 10
22years or more, in the aggregate, prior to making the election
23to exclude the capital gain of the sale of real property used
24in a farming business.
25Under the bill, a retired farmer is not eligible for the
26capital gain exclusion if the retired farmer claims the
27beginning farmer tax credit in the same tax year. A retired
28farmer electing the capital gain exclusion is not eligible to
29elect to exclude retired farmer lease income in the same tax
30year or any succeeding tax year.
31The division takes effect January 1, 2023, and applies to
32sales consummated on or after that date.
33For sales consummated prior to January 1, 2023, the existing
34law in Code section 422.7(21) shall govern.
35DIVISION IV — IOWA-GROWN FOOD TAX CREDIT. The bill creates
-10-1an Iowa-grown food tax credit that may be claimed by a food
2establishment (e.g., a grocery store) equal to 1 percent of the
3sales price of food sold. The tax credit may also be claimed
4by a wholesaler equal to 1 percent of the sales price sold to a
5nonprofit corporation.
6DIVISION V — SPECIALTY CROPS — APPROPRIATIONS. The bill
7appropriates moneys from the Iowa coronavirus fiscal recovery
8fund to the economic development authority (authority) for
9fiscal years 2022-2023 and 2023-2024 for purposes of supporting
10persons engaged in community-based initiatives to expand the
11capacity of operations engaged in processing, distributing,
12and marketing a specialty crop. A specialty crop includes
13a plant or part of a plant having commercial value which is
14intended for human or livestock use but does not include corn,
15grain sorghum, oats, soybeans, or wheat. In awarding moneys
16to an applicant, the authority must provide a preference to a
17beginning farmer or rancher or socially disadvantaged farmer
18or rancher. The authority must also provide a preference to
19an applicant who has been awarded matching moneys from an
20entity other than a state agency receiving funding under the
21federal American Rescue Plan Act. In establishing criteria to
22award grants and in selecting applicants to receive grants, the
23authority must cooperate with the department of agriculture and
24land stewardship.
-11-da/ns
2and marketing of agricultural products, including by
3providing tax credits and making appropriations.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1DIVISION I
2beginning farmer tax credit program
3 Section 1. Section 16.77, Code 2022, is amended by adding
4the following new subsection:
5 NEW SUBSECTION. 6A. “Specialty crop” means a commodity
6limited to fruits, vegetables, tree nuts, or horticulture
7plants that may be consumed by humans in an unprocessed state.
8 Sec. 2. Section 16.82, subsection 3, paragraph a, Code 2022,
9is amended to read as follows:
10a. (1) In the case of an agreement on a fixed basis, in
11which an eligible taxpayer receives a fixed cash rent payment,
12the amount of the tax credit equals five percent of the amount
13of the fixed cash rent payment for each year.
14(2) Notwithstanding subparagraph (1), for acres used to
15produce a specialty crop, the amount of the tax credit equals
16ten percent of the amount of the fixed cash rent payment
17attributable to those acres for each year. This subparagraph
18does not restrict an otherwise qualifying acre from including
19an actively managed pollinator habitat.
20DIVISION II
21RETIRED FARMER LEASE INCOME EXCLUSION
22 Sec. 3. Section 422.7, Code 2022, is amended by adding the
23following new subsection:
24 NEW SUBSECTION. 21A. a. Subtract, to the extent included,
25net income received by an eligible individual pursuant to a
26farm tenancy agreement covering real property held by the
27eligible individual for ten or more years, if the eligible
28individual materially participated in a farming business for
29ten or more years.
30b. An individual who elects to exclude income received
31pursuant to a farm tenancy agreement under this subsection
32shall not claim any of the following in the tax year in which
33the election is made or in any succeeding year:
34(1) The capital gain exclusion under section 422.7,
35subsection 21.
-1- 1(2) The beginning farmer tax credit under section 422.11E.
2c. Married individuals who file separate state income tax
3returns shall allocate their combined annual exclusion limit
4to each spouse in the proportion that each spouse’s respective
5net income from a farm tenancy agreement bears to the total net
6income from a farm tenancy agreement.
7d. The department shall establish criteria, by rule,
8relating to whether and how a surviving spouse may claim the
9income exclusion for which a deceased eligible individual would
10have been eligible under this subsection.
11e. Net income from a farm tenancy agreement earned,
12received, or reported by an entity taxed as a partnership
13for federal tax purposes, an S corporation, or a trust or
14estate is not eligible for the election and deduction in this
15subsection, even if such net income ultimately passes through
16to an eligible individual.
17f. Net income from a farm tenancy agreement earned,
18received, or reported by an individual is not eligible
19for the election and deduction in this subsection unless
20the tenant-lessee is a person that meets the definition
21of a qualified beginning farmer in section 16.77 and the
22tenant-lessee is growing specialty crops as defined in section
2316.77 on the land comprising the farm tenancy agreement.
24g. For purposes of this subsection:
25(1) “Eligible individual” means an individual who is
26disabled or who is fifty-five years of age or older at the time
27the election is made, who no longer materially participates in
28a farming business at the time the election is made, and who,
29as an owner-lessor, is party to a farm tenancy agreement.
30(2) “Farm tenancy agreement” means a written agreement
31outlining the rights and obligations of an owner-lessor and a
32tenant-lessee where the tenant-lessee has a farm tenancy as
33defined in section 562.1A. A “farm tenancy agreement” includes
34cash leases, crop share leases, or livestock share leases.
35DIVISION III
-2-1RETIRED FARMER CAPITAL GAIN EXCLUSION
2 Sec. 4. Section 422.7, subsection 21, Code 2022, is amended
3by striking the subsection and inserting in lieu thereof the
4following:
521. a. For purposes of this subsection:
6(1) “Farming business” means the production, care, growing,
7harvesting, preservation, handling, or storage of crops
8or forest or fruit trees; the production, care, feeding,
9management, and housing of livestock; or horticulture, all for
10intended profit.
11(2) “Held” shall be determined with reference to the holding
12period provisions of section 1223 of the Internal Revenue Code
13and the federal regulations pursuant thereto.
14(3) “Materially participated” means the same as “material
15participation” in section 469(h) of the Internal Revenue Code.
16(4) “Qualified beginning farmer” means the same as defined
17in section 16.77 who grows specialty crops as defined in
18section 16.77.
19(5) (a) “Real property used in a farming business” means
20tracts of land not to exceed one hundred sixty acres in the
21aggregate and the improvements and structures located on such
22tracts which are in good faith used primarily for a farming
23business. Buildings which are primarily used or intended for
24human habitation are deemed to be used in a farming business
25when the building is located on or adjacent to the parcel
26used in the farming business. Land and the nonresidential
27improvements and structures located on such land that shall
28be considered to be used primarily in a farming business
29include but are not limited to land, improvements or structures
30used for the storage or maintenance of farm machinery or
31equipment, for the drying, storage, handling, or preservation
32of agricultural crops, or for the storage of farm inputs, feed,
33or manure. Real property used in a farming business shall also
34include woodland, wasteland, pastureland, and idled land used
35for the conservation of natural resources including soil and
-3-1water.
2(b) Real property classified as agricultural property for
3Iowa property tax purposes, except real property described in
4section 441.21, subsection 12, shall be presumed to be real
5property used in a farming business. This presumption is
6rebuttable by the department by a preponderance of evidence
7that the real property did not meet the requirements of
8subparagraph division (a).
9(6) “Retired farmer” means an individual who is disabled
10or who is fifty-five years of age or older and who no longer
11materially participates in a farming business when an exclusion
12and deduction is claimed under this subsection.
13b. Subtract the net capital gain from the sale of real
14property used in a farming business if all of the following
15conditions are satisfied:
16(1) The taxpayer has materially participated in a farming
17business for a minimum of ten years and has held the real
18property used in a farming business for a minimum of ten years.
19If the taxpayer is a retired farmer, the taxpayer is considered
20to meet the material participation requirement if the taxpayer
21materially participated in a farming business for ten years or
22more in the aggregate, prior to making an election under this
23subsection.
24(2) The real property used in a farming business by the
25taxpayer is sold to a qualified beginning farmer.
26c. A taxpayer who is a retired farmer may make, subject to
27the limitations described in paragraphs “f” and “g”, a single,
28lifetime election to exclude all qualifying capital gains under
29paragraph “b”.
30d. A taxpayer who is a retired farmer who elects to exclude
31capital gains under paragraph “b” shall not claim the beginning
32farmer tax credit under section 422.11E or the exclusion for
33net income received pursuant to a farm tenancy agreement in
34section 422.7, subsection 21A, in the tax year in which this
35election is made or in any subsequent year.
-4- 1e. A taxpayer who is a retired farmer who claims the
2beginning farmer tax credit under section 422.11E shall not,
3in the same year, make an election under this subsection. A
4taxpayer who is a retired farmer and who elects to exclude
5the net income received from a farm tenancy agreement under
6section 422.7, subsection 21A, shall not, in the same tax year
7or in any subsequent tax year, make the election under this
8subsection.
9f. Married individuals who file separate state income tax
10returns shall allocate their combined annual net capital gain
11exclusion under paragraph “b” to each spouse in the proportion
12that each spouse’s respective net capital gain bears to the
13total net capital gain.
14g. The department shall establish criteria, by rule,
15relating to whether and how a surviving spouse may claim the
16income exclusion for which a deceased retired farmer would have
17been eligible under this subsection.
18 Sec. 5. REPEAL. 2018 Iowa Acts, chapter 1161, section 113,
19is repealed.
20 Sec. 6. REPEAL. 2019 Iowa Acts, chapter 162, section 1, is
21repealed.
22 Sec. 7. EFFECTIVE DATE. This division of this Act takes
23effect January 1, 2023.
24 Sec. 8. APPLICABILITY.
251. This division of this Act applies to tax years beginning
26on or after January 1, 2023.
272. This division of this Act applies to sales consummated on
28or after the effective date of this division of this Act, and
29sales consummated prior to the effective date of this division
30of this Act shall be governed by the law as it existed prior to
31the effective date of this division of this Act.
32DIVISION IV
33IOWA-GROWN FOOD TAX CREDIT
34 Sec. 9. NEW SECTION. 137F.20 Iowa-grown food tax credit.
351. As used in this section:
-5- 1a. “Food” means raw, cooked, or a processed edible substance
2intended in whole or in part for human consumption, that
3is grown or processed in this state. “Food” may include
4non-nutritional ingredients incapable of being grown or
5processed in this state.
6b. “Food establishment” means a grocery store, restaurant,
7or other entity that sells food to the public and is licensed
8in this state.
9c. “Nonprofit organization” means public or nonpublic
10schools, hospitals, religious institutions, dependent care
11facilities, child care facilities, and any other nonprofit
12organization in this state.
13d. “Wholesaler” means a wholesale food business licensed in
14this state.
152. a. An Iowa-grown food tax credit may be claimed by a
16food establishment to reduce the taxes imposed under chapter
17422, subchapters II and III, that is equal to one percent of
18the sales price of food sold by the food establishment in this
19state.
20b. An Iowa-grown food tax credit may be claimed by a
21wholesaler to reduce the taxes imposed under chapter 422,
22subchapters II and III, that is equal to one percent of the
23sales price of food sold by the wholesaler to a nonprofit
24organization in this state.
25 Sec. 10. NEW SECTION. 422.12O Iowa-grown food tax credit.
26The taxes imposed under this subchapter, less the credits
27allowed under section 422.12, shall be reduced by an Iowa-grown
28food tax credit authorized pursuant to section 137F.20.
29 Sec. 11. Section 422.33, Code 2022, is amended by adding the
30following new subsection:
31 NEW SUBSECTION. 32. The taxes imposed under this subchapter
32shall be reduced by an Iowa-grown food tax credit under section
33137F.20.
34DIVISION V
35SPECIALTY CROPS — APPROPRIATIONS
-6-1 Sec. 12. SPECIALTY CROPS — FISCAL YEAR 2022-2023.
21. Notwithstanding section 8.57G, subsection 2, there is
3appropriated from the Iowa coronavirus fiscal recovery fund
4to the economic development authority for the fiscal year
5beginning July 1, 2022, and ending June 30, 2023, the following
6amount, or so much thereof as is necessary, to be used for the
7purposes designated:
8For awarding grants to support persons engaged in
9community-based initiatives to expand the capacity of
10operations engaged in processing, distributing, and marketing
11specialty crops:
.................................................. $1210,000,000
132. The economic development authority shall provide a
14preference to applicants who are beginning farmers or ranchers
15or socially disadvantaged farmers or ranchers as defined in 7
16U.S.C. §2279.
173. The economic development authority shall provide a
18preference to applicants who have been awarded matching moneys
19from entities other than state agencies receiving funding under
20the American Rescue Plan Act of 2021, Pub.L. No.117-2.
214. In establishing criteria to award grants and in selecting
22applicants to receive grants under this section, the economic
23development authority shall cooperate with the department of
24agriculture and land stewardship.
255. a. As used in this section, “specialty crop” means a
26plant or part of a plant having commercial value and intended
27to be marketed or used for human consumption or as livestock
28feed in a raw or unprocessed state.
29b. “Specialty crop” does not include corn, grain sorghum,
30oats, soybeans, or wheat.
31 Sec. 13. SPECIALTY CROPS — FISCAL YEAR 2023-2024.
321. Notwithstanding section 8.57G, subsection 2, there is
33appropriated from the Iowa coronavirus fiscal recovery fund
34to the economic development authority for the fiscal year
35beginning July 1, 2023, and ending June 30, 2024, the following
-7-1amount, or so much thereof as is necessary, to be used for the
2purposes designated:
3For awarding grants to support persons engaged in
4community-based initiatives to expand the capacity of
5operations engaged in processing, distributing, and marketing
6specialty crops:
.................................................. $710,000,000
82. The economic development authority shall provide a
9preference to applicants who are beginning farmers or ranchers
10or socially disadvantaged farmers or ranchers as defined in 7
11U.S.C. §2279.
123. The economic development authority shall provide a
13preference to applicants who have been awarded matching moneys
14from entities other than state agencies receiving funding under
15the American Rescue Plan Act of 2021, Pub.L. No.117-2.
164. In establishing criteria to award grants and in selecting
17applicants to receive grants under this section, the economic
18development authority shall cooperate with the department of
19agriculture and land stewardship.
205. a. As used in this section, “specialty crop” means a
21plant or part of a plant having commercial value and intended
22to be marketed or used for human consumption or as livestock
23feed in a raw or unprocessed state.
24b. “Specialty crop” does not include corn, grain sorghum,
25oats, soybeans, or wheat.
26EXPLANATION
27The inclusion of this explanation does not constitute agreement with
28the explanation’s substance by the members of the general assembly.
29DIVISION I — BEGINNING FARMER TAX CREDIT PROGRAM. This bill
30amends the beginning farmer tax credit program which awards
31a tax credit to a taxpayer who transfers agricultural assets
32to a beginning farmer by an agricultural lease agreement. The
33transferred agricultural assets include agricultural land and
34improvements, as well as depreciable agricultural property.
35If the taxpayer and beginning farmer enter into an agreement
-8-1on a fixed cash rent basis, the amount of the tax credit
2equals 5 percent of the amount of the fixed cash rent payment
3for each year of 15 years that the taxpayer is eligible to
4participate in the program. The bill provides that in the
5case of specialty crop acres, the amount equals 10 percent of
6the amount of the fixed cash rent. The specialty crop acre
7is limited to the production of fruit, vegetables, tree nuts,
8dried fruits, or horticulture or nursery crops that may be
9consumed in an unprocessed state.
10DIVISION II — RETIRED FARMER LEASE INCOME EXCLUSION.
11 Commencing with tax years beginning on or after January 1,
122023, the bill excludes from the individual income tax a
13retired farmer’s total net income received pursuant to a
14farm tenancy agreement covering real property held by the
15retired farmer for 10 or more years, if the farmer materially
16participated in a farming business for 10 or more years.
17A retired farmer is not eligible for the lease income
18exclusion unless the farmer is at least 55 years of age and no
19longer materially participating in farming.
20A retired farmer who elects to claim the lease income
21exclusion is not eligible, in the tax year the election is made
22or in succeeding tax years, to claim the capital gain exclusion
23under Code section 422.7(21), as amended by another division of
24the bill, or the beginning farmer tax credit.
25The net income from a farm tenancy agreement earned by
26an individual is not eligible for the exclusion unless the
27tenant-lessee is a person that meets the definition of a
28qualified beginning farmer and the tenant-lessee is growing
29specialty crops on the land comprising the farm tenancy
30agreement.
31DIVISION III — RETIRED FARMER CAPITAL GAIN EXCLUSION. The
32bill modifies the individual income tax capital gain exclusion
33for the sale of real property used in a farming business which
34otherwise would have gone into effect in tax year 2023, which
35was enacted in 2018 Iowa Acts, chapter 1161, section 113,
-9-1and later modified in 2019 Iowa Acts, chapter 162. The bill
2repeals both 2018 Iowa Acts, chapter 1161, section 113, and
32019 Iowa Acts, chapter 162, and creates a new capital gain
4exclusion provision based upon the 2019 Iowa Acts, chapter
5162, provisions, effective for tax years beginning on or after
6January 1, 2023.
7Under the provisions in 2019 Iowa Acts, chapter 162, section
81, which otherwise would have gone into effect during the 2023
9tax year, a taxpayer who materially participates in a farming
10business for at least 10 years and held real property used
11in such a business for at least 10 years, may make a single
12lifetime exclusion election from the individual income tax of
13the capital gain of the sale of such property.
14In order to be eligible for the capital gain tax exclusion on
15the sale of real property used in a farming business, the bill
16requires the sale of the real property to be 160 acres or less
17and to be made to a beginning farmer as defined in Code section
1816.77 who grows specialty crops.
19The bill modifies the term “materially participated” in a
20farming business to include a retired farmer if the retired
21farmer materially participated in a farming business for 10
22years or more, in the aggregate, prior to making the election
23to exclude the capital gain of the sale of real property used
24in a farming business.
25Under the bill, a retired farmer is not eligible for the
26capital gain exclusion if the retired farmer claims the
27beginning farmer tax credit in the same tax year. A retired
28farmer electing the capital gain exclusion is not eligible to
29elect to exclude retired farmer lease income in the same tax
30year or any succeeding tax year.
31The division takes effect January 1, 2023, and applies to
32sales consummated on or after that date.
33For sales consummated prior to January 1, 2023, the existing
34law in Code section 422.7(21) shall govern.
35DIVISION IV — IOWA-GROWN FOOD TAX CREDIT. The bill creates
-10-1an Iowa-grown food tax credit that may be claimed by a food
2establishment (e.g., a grocery store) equal to 1 percent of the
3sales price of food sold. The tax credit may also be claimed
4by a wholesaler equal to 1 percent of the sales price sold to a
5nonprofit corporation.
6DIVISION V — SPECIALTY CROPS — APPROPRIATIONS. The bill
7appropriates moneys from the Iowa coronavirus fiscal recovery
8fund to the economic development authority (authority) for
9fiscal years 2022-2023 and 2023-2024 for purposes of supporting
10persons engaged in community-based initiatives to expand the
11capacity of operations engaged in processing, distributing,
12and marketing a specialty crop. A specialty crop includes
13a plant or part of a plant having commercial value which is
14intended for human or livestock use but does not include corn,
15grain sorghum, oats, soybeans, or wheat. In awarding moneys
16to an applicant, the authority must provide a preference to a
17beginning farmer or rancher or socially disadvantaged farmer
18or rancher. The authority must also provide a preference to
19an applicant who has been awarded matching moneys from an
20entity other than a state agency receiving funding under the
21federal American Rescue Plan Act. In establishing criteria to
22award grants and in selecting applicants to receive grants, the
23authority must cooperate with the department of agriculture and
24land stewardship.
-11-da/ns