Bill Text: IA SF360 | 2021-2022 | 89th General Assembly | Introduced

Iowa Senate Bill 360 (Prior Session Legislation)

Introduced

Bill Title: A bill for an act relating to the beginning farmer tax credit program, by modifying participation and lease agreement requirements and tax credit amounts, and including effective date provisions.(Formerly SSB 1144.)

Spectrum: Committee Bill

Status: (Introduced - Dead) 2021-02-17 - Fiscal note. [SF360 Detail]

Download: Iowa-2021-SF360-Introduced.html

Senate File 360 - Introduced SENATE FILE 360 BY COMMITTEE ON AGRICULTURE (SUCCESSOR TO SSB 1144) (COMPANION TO HF 484 BY COMMITTEE ON AGRICULTURE) A BILL FOR An Act relating to the beginning farmer tax credit program, by 1 modifying participation and lease agreement requirements and 2 tax credit amounts, and including effective date provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1885SV (1) 89 da/jh

S.F. 360 Section 1. Section 16.58, subsections 1, 2, and 3, Code 1 2021, are amended to read as follows: 2 1. “Agricultural assets” means agricultural land, 3 agricultural improvements, depreciable agricultural property, 4 crops, or livestock. 5 2. “Agricultural improvements” improvement” means any 6 improvements, including buildings, structures, or fixtures 7 suitable for use in farming , which are if located on any size 8 parcel of agricultural land. 9 3. “Agricultural land” means land suitable for use in 10 farming , any portion of which may include an agricultural 11 improvement . 12 Sec. 2. Section 16.77, subsection 2, Code 2021, is amended 13 to read as follows: 14 2. “Agricultural lease agreement” or “agreement” means an 15 agreement for the transfer of agricultural assets , that must at 16 least include a lease of agricultural land, from an eligible 17 taxpayer to a qualified beginning farmer as provided in section 18 16.79A . 19 Sec. 3. Section 16.79A, subsection 1, Code 2021, is amended 20 to read as follows: 21 1. a. A beginning farmer tax credit is allowed only for 22 agricultural assets that are subject to an agricultural lease 23 agreement entered into by an eligible taxpayer and a qualifying 24 beginning farmer participating in the beginning farmer tax 25 credit program established pursuant to section 16.78 . 26 b. The tax credit is allowed regardless of whether the 27 principle agricultural asset is soil, pasture, or a building or 28 other structure used in farming. 29 Sec. 4. Section 16.79A, subsection 2, Code 2021, is amended 30 to read as follows: 31 2. The agreement must include the lease of agricultural 32 land located in this state , including any or agricultural 33 improvements located in this state , and may provide for the 34 rental of agricultural equipment as defined in section 322F.1 . 35 -1- LSB 1885SV (1) 89 da/jh 1/ 4

S.F. 360 Sec. 5. Section 16.79A, subsection 3, paragraph c, Code 1 2021, is amended to read as follows: 2 c. The agreement must be for at least two years, but not 3 more than five years. The agreement may be renewed any number 4 of times by the eligible taxpayer and qualified beginning 5 farmer for a term of at least two years, but not more than five 6 years. However, an eligible taxpayer shall not participate in 7 the program for more than fifteen years. 8 Sec. 6. Section 16.81, subsection 4, Code 2021, is amended 9 by striking the subsection. 10 Sec. 7. Section 16.81, subsection 6, Code 2021, is amended 11 to read as follows: 12 6. The authority shall approve all beginning farmer tax 13 credit applications that meet the requirements of this subpart 14 and make tax credit awards on a first-come, first-served basis, 15 subject to the limitations in section 16.82A . An eligible 16 taxpayer may apply and be approved to enter into agreements 17 with different qualified beginning farmers. 18 Sec. 8. Section 16.82, subsection 5, Code 2021, is amended 19 to read as follows: 20 5. The amount of tax credits that may be awarded to an 21 eligible taxpayer for any one year under all agreements an 22 agreement shall not exceed fifty thousand dollars. 23 Sec. 9. BEGINNING FARMER TAX CREDIT PROGRAM —— FORMER 24 PERIOD OF PARTICIPATION EXTENDED. An eligible taxpayer first 25 participating in the beginning farmer tax credit program on or 26 after January 1, 2019 as provided in 2019 Iowa Acts, chapter 27 161, for a tax year beginning on or after that date, may 28 participate in the program for not more than fifteen years in 29 the same manner as provided in section 16.79A, as amended by 30 this Act. 31 Sec. 10. EFFECTIVE DATE. This Act takes effect January 1, 32 2022. 33 EXPLANATION 34 The inclusion of this explanation does not constitute agreement with 35 -2- LSB 1885SV (1) 89 da/jh 2/ 4

S.F. 360 the explanation’s substance by the members of the general assembly. 1 GENERAL. This bill provides for the participation of an 2 eligible taxpayer (taxpayer) and qualified beginning farmer 3 (beginning farmer) in the beginning farmer tax credit program 4 (program) (Code section 16.81(4)). Under the program, a tax 5 credit is awarded to a taxpayer who transfers agricultural 6 assets to a beginning farmer by agricultural lease agreement 7 (agreement). The transferred agricultural assets include 8 agricultural land and improvements, as well as depreciable 9 agricultural property. The agreement must be approved by the 10 Iowa finance authority (authority) (Code section 16.79A) who 11 issues a tax credit certificate to the taxpayer on an annual 12 basis for the period of the agreement (Code section 16.81). 13 LEASE OF AGRICULTURAL LAND WHICH INCLUDES IMPROVEMENTS 14 (BUILDINGS). The bill provides that the agreement may provide 15 for lease of any size parcel of agricultural land and an 16 improvement such as a building (amended Code section 16.58(1), 17 (2), and (3)). The principal agricultural asset transferred in 18 the agreement may be agricultural land or a building or other 19 structure used in farming (amended Code section 16.79A(1)). 20 PARTICIPATION IN THE PROGRAM —— FROM 10 TO 15 YEARS. 21 The bill increases from 10 to 15 the number of years that 22 a taxpayer may participate in the program. (amended Code 23 section 16.79A(3)). The extended years of participation 24 apply retroactively to a taxpayer previously approved by the 25 authority to participate in the program (amendment Code section 26 16.82(5)). 27 PARTICIPATION IN THE PROGRAM —— TAX CREDIT CERTIFICATES 28 AND AWARDS. The bill provides that a taxpayer may claim 29 multiple tax credits under the program (amended Code sections 30 16.79A(3) and 16.81(6)) so long as each tax credit is based 31 on an agreement approved by the authority (amended Code 32 section 16.81(6)). It also provides that the current $50,000 33 limitation on tax credits that can be claimed by a taxpayer 34 applies to each rather than all such agreements (amended Code 35 -3- LSB 1885SV (1) 89 da/jh 3/ 4

S.F. 360 section 16.82(5)). 1 BACKGROUND. Generally, in order to qualify as a beginning 2 farmer, a person must have a low or moderate net worth, be able 3 to successfully engage in farming, and promise to materially 4 participate in the farming operation (Code sections 16.58(6) 5 and (10), and 16.79(2)). The amount of the tax credit depends 6 upon the type of payment arrangement provided in the agreement, 7 including a fixed amount (5 percent of cash rent payment) or 8 some form or risk-sharing between the parties (15 percent of 9 the market price of the commodity produced on the leasehold). 10 A taxpayer may claim the tax credit in the applicable tax year 11 up to the taxpayer’s liability. Any amount of the unused tax 12 credit may be applied to reduce the taxpayer’s liability for 13 each of the following 10 years until depleted, whichever comes 14 first; and cannot be refunded (Code section 16.82(7)). 15 EFFECTIVE DATE. The bill takes effect on January 1, 2022. 16 -4- LSB 1885SV (1) 89 da/jh 4/ 4