Bill Text: MN HF3265 | 2013-2014 | 88th Legislature | Introduced
Bill Title: Business farming or businesses owning or leasing farmland prohibition exemption provided.
Sponsorship: Bipartisan Bill
Status: (Introduced - Dead) 2014-03-21 - Introduction and first reading, referred to Agriculture Policy [HF3265 Detail]
Download: Minnesota-2013-HF3265-Introduced.html
1.2relating to agriculture; providing an exemption from the prohibition on business
1.3farming or businesses owning or leasing farmland;amending Minnesota Statutes
1.42012, section 500.24, subdivisions 2, 3.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2012, section 500.24, subdivision 2, is amended to read:
1.7 Subd. 2. Definitions. The definitions in this subdivision apply to this section.
1.8(a) "Farming" means the production of (1) agricultural products; (2) livestock or
1.9livestock products; (3) milk or milk products; or (4) fruit or other horticultural products. It
1.10does not include the processing, refining, or packaging of said products, nor the provision
1.11of spraying or harvesting services by a processor or distributor of farm products. It does
1.12not include the production of timber or forest products, the production of poultry or
1.13poultry products, or the feeding and caring for livestock that are delivered to a corporation
1.14for slaughter or processing for up to 20 days before slaughter or processing.
1.15(b) "Family farm" means an unincorporated farming unit owned by one or more
1.16persons residing on the farm or actively engaging in farming.
1.17(c) "Family farm corporation" means a corporation founded for the purpose of
1.18farming and the ownership of agricultural land in which the majority of the stock is held
1.19by and the majority of the stockholders are persons, the spouses of persons, or current
1.20beneficiaries of one or more family farm trusts in which the trustee holds stock in a family
1.21farm corporation, related to each other within the third degree of kindred according to
1.22the rules of the civil law, and at least one of the related persons is residing on or actively
1.23operating the farm, and none of whose stockholders are corporations; provided that a
1.24family farm corporation shall not cease to qualify as such hereunder by reason of any:
2.1(1) transfer of shares of stock to a person or the spouse of a person related within
2.2the third degree of kindred according to the rules of civil law to the person making the
2.3transfer, or to a family farm trust of which the shareholder, spouse, or related person is
2.4a current beneficiary; or
2.5(2) distribution from a family farm trust of shares of stock to a beneficiary related
2.6within the third degree of kindred according to the rules of civil law to a majority of the
2.7current beneficiaries of the trust, or to a family farm trust of which the shareholder, spouse,
2.8or related person is a current beneficiary.
2.9For the purposes of this section, a transfer may be made with or without
2.10consideration, either directly or indirectly, during life or at death, whether or not in trust,
2.11of the shares in the family farm corporation, and stock owned by a family farm trust are
2.12considered to be owned in equal shares by the current beneficiaries.
2.13(d) "Family farm trust" means:
2.14(1) a trust in which:
2.15(i) a majority of the current beneficiaries are persons or spouses of persons who are
2.16related to each other within the third degree of kindred according to the rules of civil law;
2.17(ii) all of the current beneficiaries are natural persons or nonprofit corporations
2.18or trusts described in the Internal Revenue Code, section 170(c), as amended, and the
2.19regulations under that section; and
2.20(iii) one of the family member current beneficiaries is residing on or actively
2.21operating the farm; or the trust leases the agricultural land to a family farm unit, a family
2.22farm corporation, an authorized farm corporation, an authorized livestock farm corporation,
2.23a family farm limited liability company, a family farm trust, an authorized farm limited
2.24liability company, a family farm partnership, or an authorized farm partnership; or
2.25(2) a charitable remainder trust as defined in the Internal Revenue Code, section 664,
2.26as amended, and the regulations under that section, and a charitable lead trust as set forth
2.27in the Internal Revenue Code, section 170(f), and the regulations under that section.
2.28(e) "Authorized farm corporation" means a corporation meeting the following
2.29standards:
2.30(1) it has no more than five shareholders, provided that for the purposes of this
2.31section, a husband and wife are considered one shareholder;
2.32(2) all its shareholders, other than any estate, are natural persons or a family farm trust;
2.33(3) it does not have more than one class of shares;
2.34(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
2.3520 percent of its gross receipts;
3.1(5) shareholders holding 51 percent or more of the interest in the corporation reside
3.2on the farm or are actively engaging in farming;
3.3(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
3.4more than 1,500 acres of agricultural land; and
3.5(7) none of its shareholders are shareholders in other authorized farm corporations
3.6that directly or indirectly in combination with the corporation own more than 1,500 acres
3.7of agricultural land.
3.8(f) "Authorized livestock farm corporation" means a corporation formed for the
3.9production of livestock and meeting the following standards:
3.10(1) it is engaged in the production of livestock other than dairy cattle;
3.11(2) all its shareholders, other than any estate, are natural persons, family farm trusts,
3.12or family farm corporations;
3.13(3) it does not have more than one class of shares;
3.14(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
3.1520 percent of its gross receipts;
3.16(5) shareholders holding 75 percent or more of the control, financial, and capital
3.17investment in the corporation are farmers, and at least 51 percent of the required
3.18percentage of farmers are actively engaged in livestock production;
3.19(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
3.20more than 1,500 acres of agricultural land; and
3.21(7) none of its shareholders are shareholders in other authorized farm corporations
3.22that directly or indirectly in combination with the corporation own more than 1,500 acres
3.23of agricultural land.
3.24(g) "Agricultural land" means real estate used for farming or capable of being used
3.25for farming in this state.
3.26(h) "Pension or investment fund" means a pension or employee welfare benefit fund,
3.27however organized, a mutual fund, a life insurance company separate account, a common
3.28trust of a bank or other trustee established for the investment and reinvestment of money
3.29contributed to it, a real estate investment trust, or an investment company as defined in
3.30United States Code, title 15, section 80a-3.
3.31(i) "Farm homestead" means a house including adjoining buildings that has been used
3.32as part of a farming operation or is part of the agricultural land used for a farming operation.
3.33(j) "Family farm partnership" means a limited partnership formed for the purpose of
3.34farming and the ownership of agricultural land in which the majority of the interests in
3.35the partnership is held by and the majority of the partners are natural persons or current
3.36beneficiaries of one or more family farm trusts in which the trustee holds an interest in a
4.1family farm partnership related to each other within the third degree of kindred according
4.2to the rules of the civil law, and at least one of the related persons is residing on the farm,
4.3actively operating the farm, or the agricultural land was owned by one or more of the
4.4related persons for a period of five years before its transfer to the limited partnership, and
4.5none of the partners is a corporation. A family farm partnership does not cease to qualify
4.6as a family farm partnership because of a:
4.7(1) transfer of a partnership interest to a person or spouse of a person related within
4.8the third degree of kindred according to the rules of civil law to the person making the
4.9transfer or to a family farm trust of which the partner, spouse, or related person is a current
4.10beneficiary; or
4.11(2) distribution from a family farm trust of a partnership interest to a beneficiary
4.12related within the third degree of kindred according to the rules of civil law to a majority
4.13of the current beneficiaries of the trust, or to a family farm trust of which the partner,
4.14spouse, or related person is a current beneficiary.
4.15For the purposes of this section, a transfer may be made with or without
4.16consideration, either directly or indirectly, during life or at death, whether or not in trust,
4.17of a partnership interest in the family farm partnership, and interest owned by a family
4.18farm trust is considered to be owned in equal shares by the current beneficiaries.
4.19(k) "Authorized farm partnership" means a limited partnership meeting the following
4.20standards:
4.21(1) it has been issued a certificate from the secretary of state or is registered with the
4.22county recorder and farming and ownership of agricultural land is stated as a purpose or
4.23character of the business;
4.24(2) it has no more than five partners;
4.25(3) all its partners, other than any estate, are natural persons or family farm trusts;
4.26(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
4.2720 percent of its gross receipts;
4.28(5) its general partners hold at least 51 percent of the interest in the land assets of the
4.29partnership and reside on the farm or are actively engaging in farming not more than 1,500
4.30acres as a general partner in an authorized limited partnership;
4.31(6) its limited partners do not participate in the business of the limited partnership
4.32including operating, managing, or directing management of farming operations;
4.33(7) it does not, directly or indirectly, own or otherwise have an interest in any title to
4.34more than 1,500 acres of agricultural land; and
5.1(8) none of its limited partners are limited partners in other authorized farm
5.2partnerships that directly or indirectly in combination with the partnership own more than
5.31,500 acres of agricultural land.
5.4(l) "Family farm limited liability company" means a limited liability company
5.5founded for the purpose of farming and the ownership of agricultural land in which the
5.6majority of the membership interests is held by and the majority of the members are
5.7natural persons, or current beneficiaries of one or more family farm trusts in which the
5.8trustee holds an interest in a family farm limited liability company related to each other
5.9within the third degree of kindred according to the rules of the civil law, and at least one of
5.10the related persons is residing on the farm, actively operating the farm, or the agricultural
5.11land was owned by one or more of the related persons for a period of five years before
5.12its transfer to the limited liability company, and none of the members is a corporation or
5.13a limited liability company. A family farm limited liability company does not cease to
5.14qualify as a family farm limited liability company because of:
5.15(1) a transfer of a membership interest to a person or spouse of a person related
5.16within the third degree of kindred according to the rules of civil law to the person making
5.17the transfer or to a family farm trust of which the member, spouse, or related person is
5.18a current beneficiary; or
5.19(2) distribution from a family farm trust of a membership interest to a beneficiary
5.20related within the third degree of kindred according to the rules of civil law to a majority
5.21of the current beneficiaries of the trust, or to a family farm trust of which the member,
5.22spouse, or related person is a current beneficiary.
5.23For the purposes of this section, a transfer may be made with or without
5.24consideration, either directly or indirectly, during life or at death, whether or not in trust, of
5.25a membership interest in the family farm limited liability company, and interest owned by
5.26a family farm trust is considered to be owned in equal shares by the current beneficiaries.
5.27Except for a state or federally chartered financial institution acquiring an encumbrance
5.28for the purpose of security or an interest under paragraph (x), a member of a family farm
5.29limited liability company may not transfer a membership interest, including a financial
5.30interest, to a person who is not otherwise eligible to be a member under this paragraph.
5.31(m) "Authorized farm limited liability company" means a limited liability company
5.32meeting the following standards:
5.33(1) it has no more than five members;
5.34(2) all its members, other than any estate, are natural persons or family farm trusts;
5.35(3) it does not have more than one class of membership interests;
6.1(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
6.220 percent of its gross receipts;
6.3(5) members holding 51 percent or more of both the governance rights and financial
6.4rights in the limited liability company reside on the farm or are actively engaged in farming;
6.5(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
6.6more than 1,500 acres of agricultural land; and
6.7(7) none of its members are members in other authorized farm limited liability
6.8companies that directly or indirectly in combination with the authorized farm limited
6.9liability company own more than 1,500 acres of agricultural land.
6.10Except for a state or federally chartered financial institution acquiring an
6.11encumbrance for the purpose of security or an interest under paragraph (x), a member of
6.12an authorized farm limited liability company may not transfer a membership interest,
6.13including a financial interest, to a person who is not otherwise eligible to be a member
6.14under this paragraph.
6.15(n) "Farmer" means a natural person who regularly participates in physical labor or
6.16operations management in the person's farming operation and files "Schedule F" as part of
6.17the person's annual Form 1040 filing with the United States Internal Revenue Service.
6.18(o) "Actively engaged in livestock production" means performing day-to-day
6.19physical labor or day-to-day operations management that significantly contributes to
6.20livestock production and the functioning of a livestock operation.
6.21(p) "Research or experimental farm" means a corporation, limited partnership,
6.22pension, investment fund, or limited liability company that owns or operates agricultural
6.23land for research or experimental purposes, provided that any commercial sales from the
6.24operation are incidental to the research or experimental objectives of the corporation. A
6.25corporation, limited partnership, limited liability company, or pension or investment fund
6.26seeking initial approval by the commissioner to operate agricultural land for research or
6.27experimental purposes must first submit to the commissioner a prospectus or proposal of
6.28the intended method of operation containing information required by the commissioner
6.29including a copy of any operational contract with individual participants.
6.30(q) "Breeding stock farm" means a corporation, limited partnership, or limited
6.31liability company, that owns or operates agricultural land for the purpose of raising breeding
6.32stock, including embryos, for resale to farmers or for the purpose of growing seed, wild
6.33rice, nursery plants, or sod. An entity that is organized to raise livestock other than dairy
6.34cattle under this paragraph that does not qualify as an authorized farm corporation must:
7.1(1) sell all castrated animals to be fed out or finished to farming operations that are
7.2neither directly nor indirectly owned by the business entity operating the breeding stock
7.3operation; and
7.4(2) report its total production and sales annually to the commissioner.
7.5(r) "Aquatic farm" means a corporation, limited partnership, or limited liability
7.6company, that owns or leases agricultural land as a necessary part of an aquatic farm
7.7as defined in section17.47, subdivision 3 .
7.8(s) "Religious farm" means a corporation formed primarily for religious purposes
7.9whose sole income is derived from agriculture.
7.10(t) "Utility corporation" means a corporation regulated under Minnesota Statutes
7.111974, chapter 216B, that owns agricultural land for purposes described in that chapter, or
7.12an electric generation or transmission cooperative that owns agricultural land for use in
7.13its business if the land is not used for farming except under lease to a family farm unit,
7.14a family farm corporation, a family farm trust, a family farm partnership, or a family
7.15farm limited liability company.
7.16(u) "Development organization" means a corporation, limited partnership, limited
7.17liability company, or pension or investment fund that has an interest in agricultural land
7.18for which the corporation, limited partnership, limited liability company, or pension or
7.19investment fund has documented plans to use and subsequently uses the land within
7.20six years from the date of purchase for a specific nonfarming purpose, or if the land is
7.21zoned nonagricultural, or if the land is located within an incorporated area. A corporation,
7.22limited partnership, limited liability company, or pension or investment fund may hold
7.23agricultural land in the amount necessary for its nonfarm business operation; provided,
7.24however, that pending the development of agricultural land for nonfarm purposes, the land
7.25may not be used for farming except under lease to a family farm unit, a family farm
7.26corporation, a family farm trust, an authorized farm corporation, an authorized livestock
7.27farm corporation, a family farm partnership, an authorized farm partnership, a family farm
7.28limited liability company, or an authorized farm limited liability company, or except when
7.29controlled through ownership, options, leaseholds, or other agreements by a corporation
7.30that has entered into an agreement with the United States under the New Community Act
7.31of 1968 (Title IV of the Housing and Urban Development Act of 1968, United States Code,
7.32title 42, sections 3901 to 3914) as amended, or a subsidiary or assign of such a corporation.
7.33(v) "Exempt land" means agricultural land owned or leased by a corporation as of
7.34May 20, 1973, agricultural land owned or leased by a pension or investment fund as of
7.35May 12, 1981, agricultural land owned or leased by a limited partnership as of May 1,
7.361988, or agricultural land owned or leased by a trust as of the effective date of Laws 2000,
8.1chapter 477, including the normal expansion of that ownership at a rate not to exceed 20
8.2percent of the amount of land owned as of May 20, 1973, for a corporation; May 12, 1981,
8.3for a pension or investment fund; May 1, 1988, for a limited partnership, or the effective
8.4date of Laws 2000, chapter 477, for a trust, measured in acres, in any five-year period,
8.5and including additional ownership reasonably necessary to meet the requirements of
8.6pollution control rules. A corporation, limited partnership, or pension or investment fund
8.7that is eligible to own or lease agricultural land under this section prior to May 1997, or a
8.8corporation that is eligible to own or lease agricultural land as a benevolent trust under this
8.9section prior to the effective date of Laws 2000, chapter 477, may continue to own or lease
8.10agricultural land subject to the same conditions and limitations as previously allowed.
8.11(w) "Gifted land" means agricultural land acquired as a gift, either by grant or devise,
8.12by an educational, religious, or charitable nonprofit corporation, limited partnership,
8.13limited liability company, or pension or investment fund if all land so acquired is disposed
8.14of within ten years after acquiring the title.
8.15(x) "Repossessed land" means agricultural land acquired by a corporation, limited
8.16partnership, limited liability company, or pension or investment fund by process of law
8.17in the collection of debts, or by any procedure for the enforcement of a lien or claim on
8.18the land, whether created by mortgage or otherwise if all land so acquired is disposed of
8.19within five years after acquiring the title. The five-year limitation is a covenant running
8.20with the title to the land against any grantee, assignee, or successor of the pension or
8.21investment fund, corporation, limited partnership, or limited liability company. The land
8.22so acquired must not be used for farming during the five-year period, except under a
8.23lease to a family farm unit, a family farm corporation, a family farm trust, an authorized
8.24farm corporation, an authorized livestock farm corporation, a family farm partnership, an
8.25authorized farm partnership, a family farm limited liability company, or an authorized
8.26farm limited liability company. Notwithstanding the five-year divestiture requirement
8.27under this paragraph, a financial institution may continue to own the agricultural land if the
8.28agricultural land is leased to the immediately preceding former owner, but must dispose
8.29of the agricultural land within ten years of acquiring the title. Livestock acquired by a
8.30pension or investment fund, corporation, limited partnership, or limited liability company
8.31in the collection of debts, or by a procedure for the enforcement of lien or claim on the
8.32livestock whether created by security agreement or otherwise after August 1, 1994, must
8.33be sold or disposed of within one full production cycle for the type of livestock acquired
8.34or 18 months after the livestock is acquired, whichever is earlier.
8.35(y) "Commissioner" means the commissioner of agriculture.
9.1(z) "Nonprofit corporation" means a nonprofit corporation organized under state
9.2nonprofit corporation or trust law or qualified for tax-exempt status under federal tax
9.3law that: (1) uses the land for a specific nonfarming purpose; (2) leases the agricultural
9.4land to a family farm unit, a family farm corporation, an authorized farm corporation, an
9.5authorized livestock farm corporation, a family farm limited liability company, a family
9.6farm trust, an authorized farm limited liability company, a family farm partnership, or an
9.7authorized farm partnership; or (3) actively farms less than 160 acres that were acquired
9.8by the nonprofit corporation prior to August 1, 2010, or actively farms less than 40 acres
9.9that were acquired by the nonprofit corporation after August 1, 2010, and the nonprofit
9.10corporation uses all profits from the agricultural land for educational purposes.
9.11(aa) "Current beneficiary" means a person who at any time during a year is entitled
9.12to, or at the discretion of any person may, receive a distribution from the income or
9.13principal of the trust. It does not include a distributee trust, other than a trust described in
9.14section 170(c) of the Internal Revenue Code, as amended, but does include the current
9.15beneficiaries of the distributee trust. It does not include a person in whose favor a power
9.16of appointment could be exercised until the holder of the power of appointment actually
9.17exercises the power of appointment in that person's favor. It does not include a person who
9.18is entitled to receive a distribution only after a specified time or upon the occurrence of a
9.19specified event until the time or occurrence of the event. For the purposes of this section, a
9.20distributee trust is a current beneficiary of a family farm trust.
9.21(bb) "De minimis" means that any corporation, pension or investment fund, limited
9.22liability company, or limited partnership that directly or indirectly owns, acquires, or
9.23otherwise obtains any interest in 40 acres or less of agricultural land and annually receives
9.24less than $150 per acre in gross revenue from rental or agricultural production.
9.25(cc) "Biomedical agricultural entity" means an entity that raises or sells livestock
9.26exclusively for biomedical or scientific use and that does not sell livestock for human
9.27consumption.
9.28 Sec. 2. Minnesota Statutes 2012, section 500.24, subdivision 3, is amended to read:
9.29 Subd. 3. Farming and ownership of agricultural land by corporations
9.30restricted. (a) No corporation, limited liability company, pension or investment fund,
9.31trust, or limited partnership shall engage in farming; nor shall any corporation, limited
9.32liability company, pension or investment fund, trust, or limited partnership, directly or
9.33indirectly, own, acquire, or otherwise obtain any interest, in agricultural land other than a
9.34bona fide encumbrance taken for purposes of security. This subdivision does not apply to
9.35general partnerships. This subdivision does not apply to any agricultural land, corporation,
10.1limited partnership, trust, limited liability company, or pension or investment fund that
10.2meet any of the definitions in subdivision 2, paragraphs (b) to (f), (j) to (m), (p) to (x),
10.3(z),and (bb), and (cc), has a conservation plan prepared for the agricultural land, and
10.4reports as required under subdivision 4.
10.5(b) A corporation, pension or investment fund, trust, limited liability company, or
10.6limited partnership that cannot meet any of the definitions in subdivision 2, paragraphs
10.7(b) to (f), (j) to (m), (p) to (x), (z),and (bb), and (cc), may petition the commissioner for
10.8an exemption from this subdivision. The commissioner may issue an exemption if the
10.9entity meets the following criteria:
10.10(1) the exemption would not contradict the purpose of this section; and
10.11(2) the petitioning entity would not have a significant impact upon the agriculture
10.12industry and the economy.
10.13The commissioner shall review annually each entity that is issued an exemption
10.14under this paragraph to ensure that the entity continues to meet the criteria in clauses
10.15(1) and (2). If an entity fails to meet the criteria, the commissioner shall withdraw the
10.16exemption and the entity is subject to enforcement proceedings under subdivision 5. The
10.17commissioner shall submit a report with a list of each entity that is issued an exemption
10.18under this paragraph to the chairs of the senate and house of representatives agricultural
10.19policy committees by October 1 of each year.
1.3farming or businesses owning or leasing farmland;amending Minnesota Statutes
1.42012, section 500.24, subdivisions 2, 3.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.6 Section 1. Minnesota Statutes 2012, section 500.24, subdivision 2, is amended to read:
1.7 Subd. 2. Definitions. The definitions in this subdivision apply to this section.
1.8(a) "Farming" means the production of (1) agricultural products; (2) livestock or
1.9livestock products; (3) milk or milk products; or (4) fruit or other horticultural products. It
1.10does not include the processing, refining, or packaging of said products, nor the provision
1.11of spraying or harvesting services by a processor or distributor of farm products. It does
1.12not include the production of timber or forest products, the production of poultry or
1.13poultry products, or the feeding and caring for livestock that are delivered to a corporation
1.14for slaughter or processing for up to 20 days before slaughter or processing.
1.15(b) "Family farm" means an unincorporated farming unit owned by one or more
1.16persons residing on the farm or actively engaging in farming.
1.17(c) "Family farm corporation" means a corporation founded for the purpose of
1.18farming and the ownership of agricultural land in which the majority of the stock is held
1.19by and the majority of the stockholders are persons, the spouses of persons, or current
1.20beneficiaries of one or more family farm trusts in which the trustee holds stock in a family
1.21farm corporation, related to each other within the third degree of kindred according to
1.22the rules of the civil law, and at least one of the related persons is residing on or actively
1.23operating the farm, and none of whose stockholders are corporations; provided that a
1.24family farm corporation shall not cease to qualify as such hereunder by reason of any:
2.1(1) transfer of shares of stock to a person or the spouse of a person related within
2.2the third degree of kindred according to the rules of civil law to the person making the
2.3transfer, or to a family farm trust of which the shareholder, spouse, or related person is
2.4a current beneficiary; or
2.5(2) distribution from a family farm trust of shares of stock to a beneficiary related
2.6within the third degree of kindred according to the rules of civil law to a majority of the
2.7current beneficiaries of the trust, or to a family farm trust of which the shareholder, spouse,
2.8or related person is a current beneficiary.
2.9For the purposes of this section, a transfer may be made with or without
2.10consideration, either directly or indirectly, during life or at death, whether or not in trust,
2.11of the shares in the family farm corporation, and stock owned by a family farm trust are
2.12considered to be owned in equal shares by the current beneficiaries.
2.13(d) "Family farm trust" means:
2.14(1) a trust in which:
2.15(i) a majority of the current beneficiaries are persons or spouses of persons who are
2.16related to each other within the third degree of kindred according to the rules of civil law;
2.17(ii) all of the current beneficiaries are natural persons or nonprofit corporations
2.18or trusts described in the Internal Revenue Code, section 170(c), as amended, and the
2.19regulations under that section; and
2.20(iii) one of the family member current beneficiaries is residing on or actively
2.21operating the farm; or the trust leases the agricultural land to a family farm unit, a family
2.22farm corporation, an authorized farm corporation, an authorized livestock farm corporation,
2.23a family farm limited liability company, a family farm trust, an authorized farm limited
2.24liability company, a family farm partnership, or an authorized farm partnership; or
2.25(2) a charitable remainder trust as defined in the Internal Revenue Code, section 664,
2.26as amended, and the regulations under that section, and a charitable lead trust as set forth
2.27in the Internal Revenue Code, section 170(f), and the regulations under that section.
2.28(e) "Authorized farm corporation" means a corporation meeting the following
2.29standards:
2.30(1) it has no more than five shareholders, provided that for the purposes of this
2.31section, a husband and wife are considered one shareholder;
2.32(2) all its shareholders, other than any estate, are natural persons or a family farm trust;
2.33(3) it does not have more than one class of shares;
2.34(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
2.3520 percent of its gross receipts;
3.1(5) shareholders holding 51 percent or more of the interest in the corporation reside
3.2on the farm or are actively engaging in farming;
3.3(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
3.4more than 1,500 acres of agricultural land; and
3.5(7) none of its shareholders are shareholders in other authorized farm corporations
3.6that directly or indirectly in combination with the corporation own more than 1,500 acres
3.7of agricultural land.
3.8(f) "Authorized livestock farm corporation" means a corporation formed for the
3.9production of livestock and meeting the following standards:
3.10(1) it is engaged in the production of livestock other than dairy cattle;
3.11(2) all its shareholders, other than any estate, are natural persons, family farm trusts,
3.12or family farm corporations;
3.13(3) it does not have more than one class of shares;
3.14(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
3.1520 percent of its gross receipts;
3.16(5) shareholders holding 75 percent or more of the control, financial, and capital
3.17investment in the corporation are farmers, and at least 51 percent of the required
3.18percentage of farmers are actively engaged in livestock production;
3.19(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
3.20more than 1,500 acres of agricultural land; and
3.21(7) none of its shareholders are shareholders in other authorized farm corporations
3.22that directly or indirectly in combination with the corporation own more than 1,500 acres
3.23of agricultural land.
3.24(g) "Agricultural land" means real estate used for farming or capable of being used
3.25for farming in this state.
3.26(h) "Pension or investment fund" means a pension or employee welfare benefit fund,
3.27however organized, a mutual fund, a life insurance company separate account, a common
3.28trust of a bank or other trustee established for the investment and reinvestment of money
3.29contributed to it, a real estate investment trust, or an investment company as defined in
3.30United States Code, title 15, section 80a-3.
3.31(i) "Farm homestead" means a house including adjoining buildings that has been used
3.32as part of a farming operation or is part of the agricultural land used for a farming operation.
3.33(j) "Family farm partnership" means a limited partnership formed for the purpose of
3.34farming and the ownership of agricultural land in which the majority of the interests in
3.35the partnership is held by and the majority of the partners are natural persons or current
3.36beneficiaries of one or more family farm trusts in which the trustee holds an interest in a
4.1family farm partnership related to each other within the third degree of kindred according
4.2to the rules of the civil law, and at least one of the related persons is residing on the farm,
4.3actively operating the farm, or the agricultural land was owned by one or more of the
4.4related persons for a period of five years before its transfer to the limited partnership, and
4.5none of the partners is a corporation. A family farm partnership does not cease to qualify
4.6as a family farm partnership because of a:
4.7(1) transfer of a partnership interest to a person or spouse of a person related within
4.8the third degree of kindred according to the rules of civil law to the person making the
4.9transfer or to a family farm trust of which the partner, spouse, or related person is a current
4.10beneficiary; or
4.11(2) distribution from a family farm trust of a partnership interest to a beneficiary
4.12related within the third degree of kindred according to the rules of civil law to a majority
4.13of the current beneficiaries of the trust, or to a family farm trust of which the partner,
4.14spouse, or related person is a current beneficiary.
4.15For the purposes of this section, a transfer may be made with or without
4.16consideration, either directly or indirectly, during life or at death, whether or not in trust,
4.17of a partnership interest in the family farm partnership, and interest owned by a family
4.18farm trust is considered to be owned in equal shares by the current beneficiaries.
4.19(k) "Authorized farm partnership" means a limited partnership meeting the following
4.20standards:
4.21(1) it has been issued a certificate from the secretary of state or is registered with the
4.22county recorder and farming and ownership of agricultural land is stated as a purpose or
4.23character of the business;
4.24(2) it has no more than five partners;
4.25(3) all its partners, other than any estate, are natural persons or family farm trusts;
4.26(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
4.2720 percent of its gross receipts;
4.28(5) its general partners hold at least 51 percent of the interest in the land assets of the
4.29partnership and reside on the farm or are actively engaging in farming not more than 1,500
4.30acres as a general partner in an authorized limited partnership;
4.31(6) its limited partners do not participate in the business of the limited partnership
4.32including operating, managing, or directing management of farming operations;
4.33(7) it does not, directly or indirectly, own or otherwise have an interest in any title to
4.34more than 1,500 acres of agricultural land; and
5.1(8) none of its limited partners are limited partners in other authorized farm
5.2partnerships that directly or indirectly in combination with the partnership own more than
5.31,500 acres of agricultural land.
5.4(l) "Family farm limited liability company" means a limited liability company
5.5founded for the purpose of farming and the ownership of agricultural land in which the
5.6majority of the membership interests is held by and the majority of the members are
5.7natural persons, or current beneficiaries of one or more family farm trusts in which the
5.8trustee holds an interest in a family farm limited liability company related to each other
5.9within the third degree of kindred according to the rules of the civil law, and at least one of
5.10the related persons is residing on the farm, actively operating the farm, or the agricultural
5.11land was owned by one or more of the related persons for a period of five years before
5.12its transfer to the limited liability company, and none of the members is a corporation or
5.13a limited liability company. A family farm limited liability company does not cease to
5.14qualify as a family farm limited liability company because of:
5.15(1) a transfer of a membership interest to a person or spouse of a person related
5.16within the third degree of kindred according to the rules of civil law to the person making
5.17the transfer or to a family farm trust of which the member, spouse, or related person is
5.18a current beneficiary; or
5.19(2) distribution from a family farm trust of a membership interest to a beneficiary
5.20related within the third degree of kindred according to the rules of civil law to a majority
5.21of the current beneficiaries of the trust, or to a family farm trust of which the member,
5.22spouse, or related person is a current beneficiary.
5.23For the purposes of this section, a transfer may be made with or without
5.24consideration, either directly or indirectly, during life or at death, whether or not in trust, of
5.25a membership interest in the family farm limited liability company, and interest owned by
5.26a family farm trust is considered to be owned in equal shares by the current beneficiaries.
5.27Except for a state or federally chartered financial institution acquiring an encumbrance
5.28for the purpose of security or an interest under paragraph (x), a member of a family farm
5.29limited liability company may not transfer a membership interest, including a financial
5.30interest, to a person who is not otherwise eligible to be a member under this paragraph.
5.31(m) "Authorized farm limited liability company" means a limited liability company
5.32meeting the following standards:
5.33(1) it has no more than five members;
5.34(2) all its members, other than any estate, are natural persons or family farm trusts;
5.35(3) it does not have more than one class of membership interests;
6.1(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
6.220 percent of its gross receipts;
6.3(5) members holding 51 percent or more of both the governance rights and financial
6.4rights in the limited liability company reside on the farm or are actively engaged in farming;
6.5(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
6.6more than 1,500 acres of agricultural land; and
6.7(7) none of its members are members in other authorized farm limited liability
6.8companies that directly or indirectly in combination with the authorized farm limited
6.9liability company own more than 1,500 acres of agricultural land.
6.10Except for a state or federally chartered financial institution acquiring an
6.11encumbrance for the purpose of security or an interest under paragraph (x), a member of
6.12an authorized farm limited liability company may not transfer a membership interest,
6.13including a financial interest, to a person who is not otherwise eligible to be a member
6.14under this paragraph.
6.15(n) "Farmer" means a natural person who regularly participates in physical labor or
6.16operations management in the person's farming operation and files "Schedule F" as part of
6.17the person's annual Form 1040 filing with the United States Internal Revenue Service.
6.18(o) "Actively engaged in livestock production" means performing day-to-day
6.19physical labor or day-to-day operations management that significantly contributes to
6.20livestock production and the functioning of a livestock operation.
6.21(p) "Research or experimental farm" means a corporation, limited partnership,
6.22pension, investment fund, or limited liability company that owns or operates agricultural
6.23land for research or experimental purposes, provided that any commercial sales from the
6.24operation are incidental to the research or experimental objectives of the corporation. A
6.25corporation, limited partnership, limited liability company, or pension or investment fund
6.26seeking initial approval by the commissioner to operate agricultural land for research or
6.27experimental purposes must first submit to the commissioner a prospectus or proposal of
6.28the intended method of operation containing information required by the commissioner
6.29including a copy of any operational contract with individual participants.
6.30(q) "Breeding stock farm" means a corporation, limited partnership, or limited
6.31liability company, that owns or operates agricultural land for the purpose of raising breeding
6.32stock, including embryos, for resale to farmers or for the purpose of growing seed, wild
6.33rice, nursery plants, or sod. An entity that is organized to raise livestock other than dairy
6.34cattle under this paragraph that does not qualify as an authorized farm corporation must:
7.1(1) sell all castrated animals to be fed out or finished to farming operations that are
7.2neither directly nor indirectly owned by the business entity operating the breeding stock
7.3operation; and
7.4(2) report its total production and sales annually to the commissioner.
7.5(r) "Aquatic farm" means a corporation, limited partnership, or limited liability
7.6company, that owns or leases agricultural land as a necessary part of an aquatic farm
7.7as defined in section
7.8(s) "Religious farm" means a corporation formed primarily for religious purposes
7.9whose sole income is derived from agriculture.
7.10(t) "Utility corporation" means a corporation regulated under Minnesota Statutes
7.111974, chapter 216B, that owns agricultural land for purposes described in that chapter, or
7.12an electric generation or transmission cooperative that owns agricultural land for use in
7.13its business if the land is not used for farming except under lease to a family farm unit,
7.14a family farm corporation, a family farm trust, a family farm partnership, or a family
7.15farm limited liability company.
7.16(u) "Development organization" means a corporation, limited partnership, limited
7.17liability company, or pension or investment fund that has an interest in agricultural land
7.18for which the corporation, limited partnership, limited liability company, or pension or
7.19investment fund has documented plans to use and subsequently uses the land within
7.20six years from the date of purchase for a specific nonfarming purpose, or if the land is
7.21zoned nonagricultural, or if the land is located within an incorporated area. A corporation,
7.22limited partnership, limited liability company, or pension or investment fund may hold
7.23agricultural land in the amount necessary for its nonfarm business operation; provided,
7.24however, that pending the development of agricultural land for nonfarm purposes, the land
7.25may not be used for farming except under lease to a family farm unit, a family farm
7.26corporation, a family farm trust, an authorized farm corporation, an authorized livestock
7.27farm corporation, a family farm partnership, an authorized farm partnership, a family farm
7.28limited liability company, or an authorized farm limited liability company, or except when
7.29controlled through ownership, options, leaseholds, or other agreements by a corporation
7.30that has entered into an agreement with the United States under the New Community Act
7.31of 1968 (Title IV of the Housing and Urban Development Act of 1968, United States Code,
7.32title 42, sections 3901 to 3914) as amended, or a subsidiary or assign of such a corporation.
7.33(v) "Exempt land" means agricultural land owned or leased by a corporation as of
7.34May 20, 1973, agricultural land owned or leased by a pension or investment fund as of
7.35May 12, 1981, agricultural land owned or leased by a limited partnership as of May 1,
7.361988, or agricultural land owned or leased by a trust as of the effective date of Laws 2000,
8.1chapter 477, including the normal expansion of that ownership at a rate not to exceed 20
8.2percent of the amount of land owned as of May 20, 1973, for a corporation; May 12, 1981,
8.3for a pension or investment fund; May 1, 1988, for a limited partnership, or the effective
8.4date of Laws 2000, chapter 477, for a trust, measured in acres, in any five-year period,
8.5and including additional ownership reasonably necessary to meet the requirements of
8.6pollution control rules. A corporation, limited partnership, or pension or investment fund
8.7that is eligible to own or lease agricultural land under this section prior to May 1997, or a
8.8corporation that is eligible to own or lease agricultural land as a benevolent trust under this
8.9section prior to the effective date of Laws 2000, chapter 477, may continue to own or lease
8.10agricultural land subject to the same conditions and limitations as previously allowed.
8.11(w) "Gifted land" means agricultural land acquired as a gift, either by grant or devise,
8.12by an educational, religious, or charitable nonprofit corporation, limited partnership,
8.13limited liability company, or pension or investment fund if all land so acquired is disposed
8.14of within ten years after acquiring the title.
8.15(x) "Repossessed land" means agricultural land acquired by a corporation, limited
8.16partnership, limited liability company, or pension or investment fund by process of law
8.17in the collection of debts, or by any procedure for the enforcement of a lien or claim on
8.18the land, whether created by mortgage or otherwise if all land so acquired is disposed of
8.19within five years after acquiring the title. The five-year limitation is a covenant running
8.20with the title to the land against any grantee, assignee, or successor of the pension or
8.21investment fund, corporation, limited partnership, or limited liability company. The land
8.22so acquired must not be used for farming during the five-year period, except under a
8.23lease to a family farm unit, a family farm corporation, a family farm trust, an authorized
8.24farm corporation, an authorized livestock farm corporation, a family farm partnership, an
8.25authorized farm partnership, a family farm limited liability company, or an authorized
8.26farm limited liability company. Notwithstanding the five-year divestiture requirement
8.27under this paragraph, a financial institution may continue to own the agricultural land if the
8.28agricultural land is leased to the immediately preceding former owner, but must dispose
8.29of the agricultural land within ten years of acquiring the title. Livestock acquired by a
8.30pension or investment fund, corporation, limited partnership, or limited liability company
8.31in the collection of debts, or by a procedure for the enforcement of lien or claim on the
8.32livestock whether created by security agreement or otherwise after August 1, 1994, must
8.33be sold or disposed of within one full production cycle for the type of livestock acquired
8.34or 18 months after the livestock is acquired, whichever is earlier.
8.35(y) "Commissioner" means the commissioner of agriculture.
9.1(z) "Nonprofit corporation" means a nonprofit corporation organized under state
9.2nonprofit corporation or trust law or qualified for tax-exempt status under federal tax
9.3law that: (1) uses the land for a specific nonfarming purpose; (2) leases the agricultural
9.4land to a family farm unit, a family farm corporation, an authorized farm corporation, an
9.5authorized livestock farm corporation, a family farm limited liability company, a family
9.6farm trust, an authorized farm limited liability company, a family farm partnership, or an
9.7authorized farm partnership; or (3) actively farms less than 160 acres that were acquired
9.8by the nonprofit corporation prior to August 1, 2010, or actively farms less than 40 acres
9.9that were acquired by the nonprofit corporation after August 1, 2010, and the nonprofit
9.10corporation uses all profits from the agricultural land for educational purposes.
9.11(aa) "Current beneficiary" means a person who at any time during a year is entitled
9.12to, or at the discretion of any person may, receive a distribution from the income or
9.13principal of the trust. It does not include a distributee trust, other than a trust described in
9.14section 170(c) of the Internal Revenue Code, as amended, but does include the current
9.15beneficiaries of the distributee trust. It does not include a person in whose favor a power
9.16of appointment could be exercised until the holder of the power of appointment actually
9.17exercises the power of appointment in that person's favor. It does not include a person who
9.18is entitled to receive a distribution only after a specified time or upon the occurrence of a
9.19specified event until the time or occurrence of the event. For the purposes of this section, a
9.20distributee trust is a current beneficiary of a family farm trust.
9.21(bb) "De minimis" means that any corporation, pension or investment fund, limited
9.22liability company, or limited partnership that directly or indirectly owns, acquires, or
9.23otherwise obtains any interest in 40 acres or less of agricultural land and annually receives
9.24less than $150 per acre in gross revenue from rental or agricultural production.
9.25(cc) "Biomedical agricultural entity" means an entity that raises or sells livestock
9.26exclusively for biomedical or scientific use and that does not sell livestock for human
9.27consumption.
9.28 Sec. 2. Minnesota Statutes 2012, section 500.24, subdivision 3, is amended to read:
9.29 Subd. 3. Farming and ownership of agricultural land by corporations
9.30restricted. (a) No corporation, limited liability company, pension or investment fund,
9.31trust, or limited partnership shall engage in farming; nor shall any corporation, limited
9.32liability company, pension or investment fund, trust, or limited partnership, directly or
9.33indirectly, own, acquire, or otherwise obtain any interest, in agricultural land other than a
9.34bona fide encumbrance taken for purposes of security. This subdivision does not apply to
9.35general partnerships. This subdivision does not apply to any agricultural land, corporation,
10.1limited partnership, trust, limited liability company, or pension or investment fund that
10.2meet any of the definitions in subdivision 2, paragraphs (b) to (f), (j) to (m), (p) to (x),
10.3(z),
10.4reports as required under subdivision 4.
10.5(b) A corporation, pension or investment fund, trust, limited liability company, or
10.6limited partnership that cannot meet any of the definitions in subdivision 2, paragraphs
10.7(b) to (f), (j) to (m), (p) to (x), (z),
10.8an exemption from this subdivision. The commissioner may issue an exemption if the
10.9entity meets the following criteria:
10.10(1) the exemption would not contradict the purpose of this section; and
10.11(2) the petitioning entity would not have a significant impact upon the agriculture
10.12industry and the economy.
10.13The commissioner shall review annually each entity that is issued an exemption
10.14under this paragraph to ensure that the entity continues to meet the criteria in clauses
10.15(1) and (2). If an entity fails to meet the criteria, the commissioner shall withdraw the
10.16exemption and the entity is subject to enforcement proceedings under subdivision 5. The
10.17commissioner shall submit a report with a list of each entity that is issued an exemption
10.18under this paragraph to the chairs of the senate and house of representatives agricultural
10.19policy committees by October 1 of each year.
