Bill Text: IA HF599 | 2013-2014 | 85th General Assembly | Enrolled

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: A bill for an act relating to beginning farmers by modifying the agricultural assets transfer tax credit, providing a custom farming contract tax credit, and terminating the agricultural loan assistance program, and including effective date and retroactive applicability provisions. (Formerly HSB 69) (Formerly HF 252) Effective 7-1-13, with exception of Division I, effective 6-17-13 and all of Division II except for section 25, s.s. 2, effective 12-31-17.

Spectrum: Committee Bill

Status: (Passed) 2013-12-31 - END OF 2013 ACTIONS [HF599 Detail]

Download: Iowa-2013-HF599-Enrolled.html

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House File 599
AN ACT
RELATING TO BEGINNING FARMERS BY MODIFYING THE AGRICULTURAL
ASSETS TRANSFER TAX CREDIT, PROVIDING A CUSTOM FARMING
CONTRACT TAX CREDIT, AND TERMINATING THE AGRICULTURAL
LOAN ASSISTANCE PROGRAM, AND INCLUDING EFFECTIVE DATE AND
RETROACTIVE APPLICABILITY PROVISIONS.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
DIVISION I
GENERAL PROVISIONS
Section 1. Section 2.48, subsection 3, paragraph e,
subparagraph (1), Code 2013, is amended to read as follows:
(1) The agricultural assets transfer tax credit under
section 175.37 and the custom farming contract tax credit as
provided in section 175.38 .
Sec. 2. Section 175.2, subsection 1, Code 2013, is amended
by adding the following new paragraphs:
NEW PARAGRAPH . 0h. “Beginning farmer tax credit program”
means all of the following:

House File 599, p. 2
(1) The agricultural assets transfer tax credit as provided
in section 175.37.
(2) The custom farming contract tax credit as provided in
section 175.38.
NEW PARAGRAPH . 0t. “Production item” includes tools,
machinery, or equipment principally used to produce crops or
livestock.
NEW PARAGRAPH . 00t. “Qualified beginning farmer” means a
beginning farmer who meets the requirements to participate in
a beginning farmer tax credit program as provided in section
175.36A.
NEW PARAGRAPH . v. “Veteran” means the same as defined in
section 35.1.
Sec. 3. Section 175.4, subsection 18, Code 2013, is amended
by striking the subsection.
Sec. 4. Section 175.8, subsection 1, unnumbered paragraph
1, Code 2013, is amended to read as follows:
The authority shall submit a report to the governor and to
the members of the general assembly as request it, not later
than January 15 of each year , a . The report shall be complete
and economically designed and reproduced , report setting forth
all of the following :
Sec. 5. Section 175.8, subsection 2, Code 2013, is amended
to read as follows:
2. a. The annual report shall identify performance include
all of the following:
(1) Performance goals of the authority , and . The report
shall clearly indicate the extent of progress during the
reporting period , in attaining the goals.
(2) An evaluation of the success of its programs, with
a special emphasis on the beginning farmer loan program as
provided in section 175.12, and the beginning farmer tax credit
program.
b. Where possible, the findings and results of its
performance goals and evaluation shall be expressed in terms of
number of loans , tax credits, participating qualified beginning
farmers, and acres of agricultural land , including by county .
Sec. 6. NEW SECTION . 175.36A Criteria for beginning farmers
qualifying to participate in the beginning farmer tax credit
program.
A beginning farmer qualifies to participate in the beginning
farmer tax credit program, by meeting all of the following
criteria:

House File 599, p. 3
1. 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
residents of the state.
2. Has sufficient education, training, or experience in
farming. If the beginning farmer is a partnership, each
partner who is not a minor must have sufficient education,
training, or experience in farming. If the beginning farmer
is a family farm corporation, each 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, each member who is not a minor must have
sufficient education, training, or experience in farming.
3. Has access to adequate working capital and production
items.
4. Will materially and substantially participate in
farming. If the beginning farmer is a partnership, family
farm corporation, or family farm limited liability company,
each partner, shareholder, or member who is not a minor must
materially and substantially participate in farming.
5. Is not responsible for managing or maintaining
agricultural land and other agricultural assets that are
greater than necessary to adequately support a beginning farmer
as determined by the authority according to rules which shall
be adopted by the authority.
Sec. 7. NEW SECTION . 175.36B Administration of beginning
farmer tax credit program.
1. To every extent practicable, the authority shall
administer tax credits under the beginning farmer tax credit
program in a uniform manner that encourages participation by
qualified beginning farmers. The authority shall determine a
qualified beginning farmer’s low or moderate net worth by using
a single method applicable to all its programs, including the
beginning farmer tax credit program.
2. The authority shall establish a due date to receive
applications to participate in the beginning farmer tax credit
program. The authority may establish different due dates for
applications to qualify for each beginning farmer tax credit.
3. The department of revenue shall cooperate with the
authority in administering the beginning farmer tax credit
program.

House File 599, p. 4
Sec. 8. Section 175.37, subsection 1, Code 2013, is amended
to read as follows:
1. An agricultural assets transfer tax credit is allowed
under this section . The tax credit is allowed against the
taxes imposed in chapter 422, division II , as provided in
section 422.11M , and in chapter 422, division III , as provided
in section 422.33 , to facilitate the transfer of agricultural
assets from a taxpayer to a qualified beginning farmer.
Sec. 9. Section 175.37, subsection 2, paragraph b, Code
2013, is amended to read as follows:
b. Execute an agricultural assets transfer agreement with a
qualified beginning farmer as provided in this section .
Sec. 10. Section 175.37, subsection 4, Code 2013, is amended
to read as follows:
4. The tax credit is allowed only for agricultural assets
that are subject to an agricultural assets transfer agreement.
The agreement shall provide for 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 .
a. The agreement may be shall include a lease made on a cash
basis or on a commodity share basis which includes a share of
the crops or livestock produced on the agricultural land. The
agreement must be in writing.
b. The agreement shall be for at least two years, but
not more than five years. The agreement or that part of
the agreement providing for the lease may be renewed by the
qualified beginning farmer for a term of at least two years,
but not more than five years. An agreement does not include a
lease or the rental of equipment intended as a security.
c. The agricultural transfer agreement cannot be assigned
and the land subject to the agreement cannot be subleased.
Sec. 11. Section 175.37, subsection 5, Code 2013, is amended
to read as follows:
5. The tax credit shall be calculated based on the gross
amount paid to the taxpayer under the agricultural assets
transfer agreement. The agreement shall be based on a cash
basis or a commodity share basis or both.
a. Except as provided in paragraph “b” , For an agreement
that includes a lease on a cash basis, the tax credit shall
equal five be computed as follows:
(1) If the qualified beginning farmer is not a veteran, the
taxpayer may claim a tax credit equal to seven percent of the

House File 599, p. 5
gross amount paid to the taxpayer under the agreement for each
tax year that the tax credit is allowed .
(2) If the qualified beginning farmer is a veteran, the
taxpayer may claim eight percent of the gross amount paid to
the taxpayer under the agreement for the first year that the
tax credit is allowed and seven percent of the gross amount
paid to the taxpayer for each subsequent tax year that the
tax credit is allowed. However, the taxpayer may only claim
seven percent of the gross amount paid to the taxpayer under
a renewed agreement or a new agreement executed by the same
parties.
b. The For an agreement that includes a lease on a commodity
share basis, the tax credit shall equal fifteen be computed as
follows:
(1) (a) If the qualified beginning farmer is not a veteran,
the taxpayer may claim a tax credit equal to seventeen percent
of the amount paid to the taxpayer from crops or animals sold
under an the agreement in which the payment is exclusively made
from the sale of crops or animals.
(b) If the qualified beginning farmer is a veteran, the
taxpayer may claim a tax credit equal to eighteen percent of
the amount paid to the taxpayer from crops or animals sold
under the agreement for the first tax year that the taxpayer
is allowed the tax credit and seventeen percent of the amount
paid to the taxpayer for each subsequent tax year that the
taxpayer is allowed the tax credit. However, the taxpayer may
only claim seventeen percent of the amount paid to the taxpayer
from crops or animals sold for any tax year under a renewed
agreement or a new agreement executed by the same parties.
(2) Notwithstanding subparagraph (1), the authority may
elect an alternative method to compute a tax credit for a lease
based on a crop share basis. The alternative method shall
utilize a formula which uses data compiled by the United States
department of agriculture. The formula shall calculate the
amount of the tax credit by multiplying the average per bushel
yield for the same type of grain as produced under the lease
in the same county where the leased land is located by a per
bushel state price established for such type of grain harvested
the previous fall.
Sec. 12. Section 175.37, subsection 6, Code 2013, is amended
by striking the subsection.
Sec. 13. Section 175.37, subsection 8, unnumbered paragraph
1, Code 2013, is amended to read as follows:

House File 599, p. 6
A taxpayer shall not claim a tax credit under this section
unless a tax credit certificate issued by the authority is
attached to the taxpayer’s tax return for the tax year for
which the tax credit is claimed. The authority must review
and approve an application for a tax credit as provided by
rules adopted by the authority. The application must include
a copy of the agricultural assets transfer agreement. The
authority may approve an application and issue a tax credit
certificate to a taxpayer who has previously been allowed a
tax credit under this section . The authority may require
that the parties to an agricultural assets transfer agreement
provide additional information as determined relevant by the
authority. The authority shall review an application for
a tax credit which includes the renewal of an agricultural
assets transfer agreement to determine that the parties to the
renewed agreement meet the same qualifications as required for
an original application. However, The authority shall not
approve an application or issue a tax credit certificate to a
taxpayer for an amount in excess of fifty thousand dollars.
In addition, the authority shall not approve an application
or issue a certificate to a taxpayer if any of the following
applies:
Sec. 14. Section 175.37, subsection 8, paragraph c, Code
2013, is amended by striking the paragraph.
Sec. 15. Section 175.37, subsection 9, unnumbered paragraph
1, Code 2013, is amended to read as follows:
A taxpayer or the qualified beginning farmer may terminate
an agricultural assets transfer agreement as provided in the
agreement or by law. The taxpayer must immediately notify the
authority of the termination.
Sec. 16. Section 175.37, subsection 9, paragraph b, Code
2013, is amended to read as follows:
b. If the authority determines that the taxpayer is at fault
for the termination, any prior tax credit allowed under this
section is disallowed. The tax credit shall be recaptured
and the amount of the tax credit shall be immediately due and
payable to the department of revenue. If a taxpayer does
not immediately notify the authority of the termination,
the taxpayer shall be conclusively deemed at fault for the
termination.
Sec. 17. Section 175.37, subsection 10, Code 2013, is
amended by striking the subsection.
Sec. 18. NEW SECTION . 175.38 Custom farming contract tax

House File 599, p. 7
credit.
1. A custom farming contract tax credit is allowed under
this section. The tax credit is allowed against the taxes
imposed in chapter 422, division II, as provided in section
422.11M, and in chapter 422, division III, as provided in
section 422.33, to encourage taxpayers who are considering
custom farming agricultural land located in this state to
negotiate with qualified beginning farmers.
2. In order to be eligible to claim a custom farming
contract tax credit, the taxpayer must meet qualifications
established by rules adopted by the authority. At a minimum,
the taxpayer must be a person who may acquire or otherwise
obtain or lease agricultural land in the same manner as
provided for a taxpayer claiming an agricultural assets
transfer tax credit under section 175.37.
3. An individual may claim a custom farming contract
tax credit 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.
4. A custom farming contract tax credit is allowed only for
the amount paid by the taxpayer to a qualified beginning farmer
under a custom farming contract as provided in rules adopted by
the department. The contract must provide for the production
of crops located on agricultural land or the production of
livestock principally located on agricultural land. The
agricultural land must be real estate and any improvements used
for farming in which the taxpayer holds a legal or equitable
interest.
5. The custom farming contract must provide that the
taxpayer pay the qualified beginning farmer on a cash basis.
The contract must be in writing for a term of not more than
twelve months. The total cash payment must equal at least one
thousand dollars.
6. The taxpayer must make all management decisions
substantially contributing to or affecting the production
of crops located on the agricultural land or the production
of livestock principally located on the agricultural land.
However, nothing in this paragraph prohibits a qualified
beginning farmer from regularly or frequently taking part in
making day-to-day operational decisions affecting production.

House File 599, p. 8
The qualified beginning farmer must provide for all of the
following:
a. Production items principally used to produce crops
located on the agricultural land or to produce livestock
principally located on the agricultural land.
b. Labor principally used to produce crops located on the
agricultural land or to produce livestock principally located
on the agricultural land. The qualified beginning farmer must
personally provide such labor on a regular, continuous, and
substantial basis.
7. A custom farming contract tax credit is not allowed if
the taxpayer and qualified beginning farmer are related as any
of the following:
a. Persons who hold a legal or equitable interest in the
same agricultural land, including as individuals or as general
partners, limited partners, shareholders, or members in the
same business entity as defined in section 501A.102.
b. Family members related as spouse, child, stepchild,
brother, or sister.
c. Partners in the same partnership which holds agricultural
land, or shareholders in the same family farm corporation or
members in the same family farm limited liability company and
defined in section 9H.1.
8. A custom farming contract tax credit shall be calculated
based on the gross amount paid to the qualified beginning
farmer under the custom farming contract.
a. If the qualified beginning farmer is not a veteran, the
taxpayer may claim a tax credit equal to seven percent of the
gross amount paid to the qualified beginning farmer under the
contract for each tax year that the tax credit is allowed.
b. If the qualified beginning farmer is a veteran, the
taxpayer may claim a tax credit equal to eight percent of the
gross amount paid to the qualified beginning farmer under the
contract for the first year that the tax credit is allowed
and seven percent of the gross amount paid to the qualified
beginning farmer under the contract for each subsequent tax
year that the tax credit is allowed. However, the taxpayer
may only claim seven percent of the gross amount paid to the
qualified beginning farmer under a renewed contract or a new
contract executed by the same parties.
9. A custom farming contract tax credit in excess of the
taxpayer’s liability for the tax year may be credited to the
tax liability for the following five years or until depleted,

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whichever is earlier. A tax credit shall not be carried back
to a tax year prior to the tax year in which the taxpayer
redeems the tax credit. A tax credit shall not be transferable
to any other person other than the taxpayer’s estate or trust
upon the taxpayer’s death.
10. A taxpayer shall not claim a custom farming contract
tax credit unless a tax credit certificate issued by the
authority under this section is attached to the taxpayer’s tax
return for the tax year for which the tax credit is claimed.
The authority must review and approve an application for a
tax credit certificate as provided by rules adopted by the
authority. The application must include a copy of the custom
farming contract. The authority may approve an application
and issue a tax credit certificate to a taxpayer who has
previously been allowed a tax credit under this section.
The authority may require that the parties to the contract
provide additional information as determined relevant by the
authority. The authority shall review an application for a tax
credit certificate which includes the renewal of a contract to
determine that the parties to the renewed contract meet the
same qualifications as required for an original application.
The authority shall not approve an application or issue a tax
credit certificate to a taxpayer for an amount in excess of
fifty thousand dollars. In addition, the authority shall not
approve an application or issue a tax credit certificate to a
taxpayer if any of the following applies:
a. The taxpayer is at fault for terminating another custom
farming contract, as determined by the authority.
b. The taxpayer is party to a pending administrative or
judicial action, or classified as a habitual violator in the
same manner as provided in section 175.37.
c. The contract amount is substantially higher or lower
than the market rate for a similar custom farming contract, as
determined by the authority.
11. A taxpayer or the qualified beginning farmer may
terminate a custom farming contract as provided in the contract
or by law. The taxpayer must immediately notify the authority
of the termination.
a. If the authority determines that the taxpayer is not
at fault for the termination, the authority shall not issue a
tax credit certificate to the taxpayer for a subsequent tax
year based on the approved application. Any prior tax credit
is allowed as provided in this section until its expiration.

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The taxpayer may apply for and be issued another tax credit
certificate for the same agricultural land under a custom
farming contract with another qualified beginning farmer.
b. If the authority determines that the taxpayer is at fault
for the termination, any prior tax credit allowed under this
section is disallowed, and the amount of the tax credit shall
be immediately due and payable to the department of revenue.
If a taxpayer does not immediately notify the authority of the
termination, the taxpayer shall be conclusively deemed at fault
for the termination.
Sec. 19. NEW SECTION . 175.39 Tax credit certificates ——
availability.
1. The amount of tax credits that may be issued to support
the beginning farmer tax credit program shall not in the
aggregate exceed twelve million dollars in any year. Of the
aggregate amount, eight million dollars is allocated to support
the agricultural assets transfer tax credit as provided in
section 175.37 and four million dollars is allocated to support
the custom farming contract tax credit as provided in section
175.38. However, the authority’s board of directors may at
any time during the year adjust the allocation by adopting a
resolution.
2. The authority shall issue tax certificates to support
a beginning farmer tax credit on a first-come, first-served
basis.
Sec. 20. Section 422.11M, Code 2013, is amended to read as
follows:
422.11M Agricultural assets transferred to beginning
Beginning farmers —— agricultural assets transfer tax credit and
custom farming contract tax credit .
The taxes imposed under this division , less the credits
allowed under section 422.12 , shall be reduced by an the
following:
1. An agricultural assets transfer tax credit as allowed
under section 175.37 .
2. A custom farming contract tax credit as allowed under
section 175.38.
Sec. 21. Section 422.33, subsection 21, Code 2013, is
amended to read as follows:
21. The taxes imposed under this division shall be reduced
by an the following:
a. An agricultural assets transfer tax credit as allowed
under section 175.37 .

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b. A custom farming contract tax credit as allowed under
section 175.38.
Sec. 22. REPEAL. Section 175.35, Code 2013, is repealed.
Sec. 23. EFFECTIVE UPON ENACTMENT. This division of this
Act, being deemed of immediate importance, takes effect upon
enactment.
Sec. 24. RETROACTIVE APPLICABILITY. This division of this
Act applies retroactively to January 1, 2013, for tax years
beginning on or after that date.
DIVISION II
FUTURE REPEALS
Sec. 25. FUTURE REPEALS.
1. The sections of this Act amending sections 2.48, 175.8,
175.37, 422.11M, and 422.33, are repealed. The Code editor
shall revise the applicable Code language to that language
existing in the 2013 Code of Iowa.
2. The sections of this Act enacting section 175.2,
subsection 1, paragraphs “0h”, “0t”, “00t”, and “v”, section
175.36A, section 175.36B, section 175.38, and section 175.39,
are repealed.
3. Any intervening amendments effective prior to the
effective date of this division of this Act that relates to
the beginning farmer tax credit program shall be stricken with
the repeal, unless a subsequent Act specifically provides
otherwise.
Sec. 26. PRESERVATION OF EXISTING RIGHTS.
This division of this Act shall not limit, modify, or
otherwise adversely affect any of the following:
1. A tax credit or tax credit certificate issued, awarded,
or allowed before the effective date of this division of this
Act.
2. A taxpayer’s right to claim or redeem a tax credit
issued, awarded, or allowed before the effective date of this
division of this Act, including but not limited to any tax
credit carryforward amount.
Sec. 27. IOWA FINANCE AUTHORITY. The Iowa finance authority
established in chapter 16 shall propose legislation to the
general assembly necessary to implement this division of this
Act. The Iowa finance authority shall propose such legislation
for consideration by the general assembly during its 2017
legislative session.
Sec. 28. EFFECTIVE DATES.
1. Except as provided in subsection 2, this division of this

House File 599, p. 12
Act takes effect December 31, 2017.
2. The section of this division of this Act which requires
the Iowa finance authority to propose legislation for
consideration by the general assembly takes effect July 1,
2013.
______________________________
KRAIG PAULSEN
Speaker of the House
______________________________
PAM JOCHUM
President of the Senate
I hereby certify that this bill originated in the House and
is known as House File 599, Eighty-fifth General Assembly.
______________________________
CARMINE BOAL
Chief Clerk of the House
Approved _______________, 2013
______________________________
TERRY E. BRANSTAD
Governor