Bill Summary – FastDemocracy

Senate File 291 - Introduced
                                  SENATE FILE 291
                                  BY KINNEY
                            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.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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    Section 1. Section 16.58, subsections 1, 2, and 3, Code
 2021, are amended to read as follows:
    1. “Agricultural assets” asset” means agricultural land
 with or without an agricultural improvement, depreciable
 agricultural property, crops, or livestock.
    2. “Agricultural improvements” improvement” means any
 improvements, including buildings, structures, or fixtures
 suitable for use in farming which are, if located on any size
 parcel of agricultural land.
    3. “Agricultural land” means land suitable for use in
 farming, any portion of which may include an agricultural
 improvement.
    Sec. 2. Section 16.79A, subsection 1, Code 2021, is amended
 to read as follows:
    1. a. A beginning farmer tax credit is allowed only for
 agricultural assets that are subject to an agricultural lease
 agreement entered into by an eligible taxpayer and a qualifying
 beginning farmer participating in the beginning farmer tax
 credit program established pursuant to section 16.78.
    b. The tax credit is allowed regardless of whether the
 principle agricultural asset is soil, pasture, or a building or
 other structure used in farming.
    Sec. 3. Section 16.79A, subsection 3, paragraph c, Code
 2021, is amended to read as follows:
    c. The agreement must be for at least two years, but not
 more than five years. The agreement may be renewed any number
 of times by the eligible taxpayer and qualified beginning
 farmer for a term of at least two years, but not more than five
 years. However, an eligible taxpayer shall not participate in
 the program for more than fifteen years.
    Sec. 4. Section 16.81, subsection 4, Code 2021, is amended
 by striking the subsection.
    Sec. 5. Section 16.81, subsection 6, Code 2021, is amended
 to read as follows:
    6. The authority shall approve all beginning farmer tax
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 credit applications that meet the requirements of this subpart
 and make tax credit awards on a first-come, first-served
 basis, subject to the limitations in section 16.82A. The
 authority shall not disapprove an application or fail to
 award a tax credit to an eligible taxpayer merely because the
 eligible taxpayer had entered into a different agreement with
 a qualified beginning farmer and the authority approved an
 application to make a tax credit award to the eligible taxpayer
 for the same or different tax year.
    Sec. 6. Section 16.82, subsection 5, Code 2021, is amended
 to read as follows:
    5. The amount of tax credits that may be awarded to an
 eligible taxpayer for any one year under all agreements an
 agreement shall not exceed fifty thousand dollars.
    Sec. 7. BEGINNING FARMER TAX CREDIT PROGRAM —— FORMER
 PERIOD OF PARTICIPATION EXTENDED. An eligible taxpayer first
 participating in the beginning farmer tax credit program on or
 after January 1, 2019, as provided in 2019 Iowa Acts, chapter
 161, for a tax year beginning on or after that date, may
 participate in the program for not more than fifteen years in
 the same manner as provided in section 16.79A, as amended by
 this Act.
    Sec. 8. EFFECTIVE DATE. This Act takes effect January 1,
 2022.
                           EXPLANATION
         The inclusion of this explanation does not constitute agreement with
          the explanation’s substance by the members of the general assembly.
    GENERAL. This bill provides for the participation of an
 eligible taxpayer (taxpayer) and qualified beginning farmer
 (beginning farmer) in the beginning farmer tax credit program
 (program) (Code section 16.81(4)). Under the program, a tax
 credit is awarded to a taxpayer who transfers agricultural
 assets to a beginning farmer by agricultural lease agreement
 (agreement). The transferred agricultural assets include
 agricultural land and improvements, as well as depreciable
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                                S.F. 291
 agricultural property. The agreement must be approved by the
 Iowa finance authority (authority) (Code section 16.79A) who
 issues a tax credit certificate to the taxpayer on an annual
 basis for the period of the agreement (Code section 16.81).
    LEASE OF AGRICULTURAL LAND WHICH INCLUDES IMPROVEMENTS
 (BUILDINGS). The bill provides that the agreement may provide
 for lease of any size parcel of agricultural land and an
 improvement such as a building (amended Code section 16.58(1),
 (2), and (3)). The principal agricultural asset transferred
 in the agreement may be agricultural land or that part of the
 agricultural land which is a building or other structure used
 in farming (amended Code section 16.79A(1)).
    PARTICIPATION IN THE PROGRAM —— FROM 10 TO 15 YEARS.
 The bill increases from 10 to 15 the number of years that
 a taxpayer may participate in the program (amended Code
 section 16.79A(3)). The extended years of participation
 apply retroactively to a taxpayer previously approved by the
 authority to participate in the program.
    PARTICIPATION IN THE PROGRAM —— TAX CREDIT CERTIFICATES
 AND AWARDS. The bill provides that a taxpayer may claim
 multiple tax credits under the program (amended Code sections
 16.79A(3) and 16.81(6)) so long as each tax credit is based
 on an agreement approved by the authority (amended Code
 section 16.81(6)). It also provides that the current $50,000
 limitation on tax credits that can be claimed by a taxpayer
 applies to each rather than all such agreements (amended Code
 section 16.82(5)).
    BACKGROUND. Generally, in order to qualify as a beginning
 farmer, a person must have a low or moderate net worth, be able
 to successfully engage in farming, and promise to materially
 participate in the farming operation (Code sections 16.58(6)
 and (10), and 16.79(2)). The amount of the tax credit depends
 upon the type of payment arrangement provided in the agreement,
 including a fixed amount (5 percent of cash rent payment) or
 some form or risk-sharing between the parties (15 percent of
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                               S.F. 291
 the market price of the commodity produced on the leasehold).
 A taxpayer may claim the tax credit in the applicable tax year
 up to the taxpayer’s liability. Any amount of the unused tax
 credit may be applied to reduce the taxpayer’s liability for
 each of the following 10 years until depleted, whichever comes
 first; and cannot be refunded (Code section 16.82(7)).
    EFFECTIVE DATE. The bill takes effect on January 1, 2022.
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Statutes affected: 
Introduced: 16.58, 16.79A, 16.81, 16.82