Bill Text: IA HSB69 | 2013-2014 | 85th General Assembly | Introduced

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

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Bill Title: A study bill for providing a tax credit for lessors or lessees of agricultural land in order to support beginning farmers.

Spectrum: Unknown

Status: (N/A - Dead) 2013-02-13 - Voted - Agriculture. [HSB69 Detail]

Download: Iowa-2013-HSB69-Introduced.html

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House Study Bill 69 - Introduced
HOUSE FILE _____
BY (PROPOSED COMMITTEE ON
AGRICULTURE BILL BY
CHAIRPERSON GRASSLEY)
A BILL FOR
An Act providing a tax credit for lessors or lessees of
agricultural land in order to support beginning farmers.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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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 agricultural expansion tax credit as
provided in section 175.37A .
Sec. 2. 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.
a. Except as provided in paragraph “b” , the tax credit shall
equal five seven percent of the amount paid to the taxpayer
under the agreement.
b. The tax credit shall equal fifteen seventeen percent
of the amount paid to the taxpayer from crops or animals sold
under an agreement in which the payment is exclusively made
from the sale of crops or animals.
Sec. 3. Section 175.37, subsection 8, unnumbered paragraph
1, Code 2013, is amended to read as follows:
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
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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 tax credit certificate to a taxpayer if any of the
following applies:
Sec. 4. Section 175.37, subsection 10, Code 2013, is amended
by striking the subsection.
Sec. 5. NEW SECTION . 175.37A Agricultural expansion tax
credit.
1. An agricultural expansion 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 expansion of agricultural
production by beginning farmers who qualify under this section.
2. In order to qualify for the agricultural expansion tax
credit, a beginning farmer must be a party to an agricultural
assets transfer agreement, including a renewed agreement,
approved by the authority as provided in section 175.37. The
beginning farmer may claim the agricultural expansion tax
credit even if the other party to the agricultural assets
transfer agreement does not claim an agricultural assets
transfer tax credit allowed under section 175.37.
3. The agricultural expansion tax credit applies to costs
incurred by the beginning farmer that are attributable to the
expansion of an agricultural operation on land leased by the
beginning farmer pursuant to the agricultural assets transfer
agreement.
4. The agricultural expansion tax credit must be claimed in
a tax year that is all of the following:
a. Begins at least twenty-four months after the original
agricultural assets transfer agreement is approved by the
authority.
b. Occurs during some period that the original or renewed
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agricultural assets transfer agreement is effective.
5. The amount of the agricultural expansion tax credit
equals seven percent of the total amount of costs incurred by
the beginning farmer for the acquisition of property qualifying
under subsection 6 in the tax year for which the tax credit is
claimed. The total amount of such costs must equal at least
five thousand dollars.
6. a. The acquired property qualifies for the agricultural
expansion tax credit if it is any of the following:
(1) Farm machinery and equipment exempt from sales and
use tax as provided in chapter 423. The farm machinery and
equipment must be stored on the leased land subject to the
agreement and must be directly and primarily used on the leased
land in the production of crops as defined in section 202.1
or animals as defined in section 459.102 during the remaining
period of the agreement or renewed agreement.
(2) An animal as defined in section 459.102. Each animal
must be primarily kept on the leased land subject to the
agreement. There must be a ten percent increase in the number
of animal units kept by the beginning farmer on the leased land
by computing the maximum number of animal units kept at any one
time on the leased land in the current tax year when compared
to the previous tax year. Animal units shall be calculated in
the same manner as provided in section 459.102.
b. The agricultural expansion tax credit is only allowed
for the reasonable market value of the acquired property and
is disallowed if the acquired property is transferred for less
than its reasonable market value. The authority may presume
that the property’s reasonable market value equals the sales
price paid or received by the beginning farmer when purchasing
or selling the property in the ordinary course of business.
7. An agricultural expansion 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, the tax year
following the expiration of the agricultural assets transfer
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agreement, or until depleted, whichever is earlier. A tax
credit shall not be carried back to a tax year prior to the tax
year in which the taxpayer claims the tax credit. A tax credit
carried forward pursuant to this subsection is not transferable
other than to the beginning farmer’s estate or trust upon the
beginning farmer’s death.
8. A beginning farmer shall not claim an agricultural
expansion tax credit 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.
a. The authority must review and approve an application
for a tax credit certificate. The application must include a
copy of the agricultural assets transfer agreement and evidence
that the taxpayer has complied with the requirements of this
section. The authority may require that the parties to an
agricultural assets transfer agreement provide additional
information as determined relevant by the authority.
b. The tax credit certificate shall contain the beginning
farmer’s name, address, and tax identification number; the
amount of the tax credit; and any other information required
by the department of revenue.
c. The tax credit certificate, unless otherwise void, shall
be accepted by the department of revenue as payment for taxes
imposed pursuant to chapter 422, division II or III, subject to
any conditions or restrictions placed by the authority upon the
face of the tax credit certificate.
d. The authority shall not approve an application or issue
a tax credit certificate to a beginning farmer for an amount in
excess of fifty thousand dollars.
e. The tax credit certificate is not transferable other than
to the beginning farmer’s estate or trust upon the beginning
farmer’s death.
9. a. A beginning farmer who terminates the agricultural
assets transfer agreement must immediately notify the authority
of the termination. Upon termination of an agreement, the
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authority shall not issue a tax credit certificate for the
agricultural expansion tax credit to the beginning farmer for
a subsequent tax year.
b. If the authority determines that the beginning farmer
is not at fault for the termination, any prior tax credit
allowed as provided in this section shall continue until its
expiration.
c. If the authority determines that the beginning farmer is
at fault for the termination, any prior agricultural expansion
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 the beginning farmer does
not immediately notify the authority of the termination, the
beginning farmer shall be conclusively deemed at fault for the
termination.
10. An individual who is a beginning farmer may claim
the agricultural expansion tax credit allowed a partnership,
limited liability company, S corporation, estate, or trust
electing to have the 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 of a partnership,
limited liability company, S corporation, estate, or trust.
11. The authority shall adopt rules to administer this
section. The rules may provide for the following:
a. Allowed methods for a beginning farmer to acquire or
transfer property eligible for the agricultural expansion tax
credit.
b. The review and approval of tax certificates required for
the agricultural expansion tax credit. The authority shall
cooperate with the department of revenue in implementing this
paragraph “b” .
Sec. 6. NEW SECTION . 175.37B Amount of tax credit
certificates available —— agricultural assets transfer tax credit
and agricultural expansion tax credit.
The amount of tax credit certificates that may be issued
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by the authority under sections 175.37 and 175.37A shall not
in the aggregate exceed twelve million dollars in any fiscal
year. Each year, the authority shall allocate a percentage
of certificates to support tax credits to be issued under
sections 175.37 and 175.37A. However, the authority may adjust
the allocation during the year as it deems necessary. The
authority shall issue tax certificates allocated under each
section on a first-come, first-served basis.
Sec. 7. Section 422.11M, Code 2013, is amended to read as
follows:
422.11M Agricultural assets transferred to beginning
Beginning farmers —— agricultural assets transfer and expansion
of operations .
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. An agricultural expansion tax credit as allowed under
section 175.37A.
Sec. 8. 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 .
b. An agricultural expansion tax credit as allowed under
section 175.37A.
Sec. 9. EFFECTIVE UPON ENACTMENT. This Act, being deemed of
immediate importance, takes effect upon enactment.
Sec. 10. APPLICABILITY. This Act applies retroactively to
January 1, 2013, for tax years beginning on or after that date.
EXPLANATION
BACKGROUND AGRICULTURAL ASSETS TRANSFER TAX CREDIT. In
2006, the general assembly enacted S.F. 2268 (2006 Iowa Acts,
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ch. 1161) that provides a tax credit for owners of agricultural
assets (agricultural land, depreciable agricultural property,
crops, or livestock) who help beginning farmers acquire
those agricultural assets by lease or rental arrangements.
The program is administered by the agricultural development
authority (authority) established within the department of
agriculture and land stewardship. A beginning farmer is an
individual, partnership, family farm corporation, or family
farm limited liability company as provided under Code chapter
9H (Iowa’s corporate farming law), with a low or moderate net
worth who engages in farming or wishes to engage in farming.
The owner who executes an agricultural assets transfer
agreement approved by the authority may claim a tax credit
against individual or corporate income tax liability after
receiving a certificate issued by the authority. Generally,
the lessor must be a person who may acquire or otherwise
obtain or lease agricultural land under Code chapter 9H or 9I
(restricting corporate and foreign ownership of agricultural
land). The bill provides a number of restrictions upon the
authority in approving applications and issuing certificates.
The owner cannot be at fault for terminating a prior agreement,
be involved in legal proceedings regarding environmental
violations, or agree to provide more agricultural assets than
the beginning farmer can be expected to adequately manage.
The agricultural assets cannot be leased or rented at a rate
substantially different from similar market arrangements. The
agreement may be terminated, but if the termination is the
fault of the owner, any tax credits must be repaid and no
further tax credit certificates can be issued to the taxpayer.
The tax credit equals 5 percent of the amount paid to the
taxpayer under the agreement, except in the case of a landlord
who shares in the costs associated with production. In that
case, the tax credit equals 15 percent of the amount paid to
the taxpayer from crops or animals sold.
In 2009, the general assembly enacted S.F. 483 (2009 Iowa
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Acts, ch. 135), which capped the amount of tax credits to be an
amount not to exceed $6 million per year with the requirement
that the certificates must be issued on a first-come,
first-served basis.
BILL —— CHANGES TO THE AGRICULTURAL ASSETS TRANSFER TAX
CREDIT. The bill increases the amount of the tax credit from
5 to 7 percent of the amount paid to the taxpayer except in
the case of a cost-share arrangement which is increased from
15 to 17 percent. The lessee cannot be issued a tax credit
certificate equaling more than $50,000.
BILL —— AGRICULTURAL EXPANSION TAX CREDIT. The bill
enacts new Code section 175.37A to provide an agricultural
expansion tax credit. The tax credit is also allowed against
individual or corporate income tax liability. Its purpose
is to facilitate the expansion of agricultural production by
qualifying beginning farmers. In order to qualify for this tax
credit, a beginning farmer must be a party to an agricultural
assets transfer agreement, regardless of whether the owner who
is the other party to the agreement claims the agricultural
assets transfer tax credit.
The new tax credit applies to costs incurred by the
beginning farmer that are attributable to the expansion of an
agricultural operation on land leased by the beginning farmer
pursuant to the agreement. The amount of the tax credit is 7
percent of the total amount of costs incurred by the beginning
farmer for the acquisition of certain property that is used on
the leased land as part of crop or livestock production. The
bill establishes a minimum investment threshold of $5,000 and
requires the property to be either farm machinery or equipment
or livestock (referred to as animals), so long as the number
of animals increases from the prior tax year. The tax credit
applies to the reasonable market value of the property which is
presumed to be its purchase price.
The authority is required to issue a tax credit certificate
to the beginning farmer to be attached to the beginning
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farmer’s tax return. The authority cannot issue a tax credit
certificate equaling more than $50,000 in any tax year. A
beginning farmer is entitled to limited carryforward but not a
carryback. The beginning farmer cannot transfer the tax credit
or tax credit certificate, except to an estate or trust upon
the farmer’s death.
The authority is required to adopt rules to administer the
program and may allow methods for a beginning farmer to acquire
or dispose of the qualified property and to review and approve
applications for tax credit certificates.
The bill allows up to $12 million in tax credit certificates
for both the current agricultural assets transfer tax credit
and the new agricultural expansion tax credit to be issued
by the authority each year. Each year, the authority must
allocate a percentage of certificates to support tax credits
to be issued for each program, but may adjust the allocation
during the year as it deems necessary. The authority must
still issue tax certificates allocated under each program on a
first-come, first-served basis.
The bill takes effect upon enactment and applies
retroactively to January 1, 2013, for tax years beginning on
or after that date.
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