Bills › 89th General Assembly
SSB 1144
Where it is now
- Done: IntroducedFebruary 2, 2021
- Done: SubcommitteeFebruary 9, 2021
- Done: Senate committeeFebruary 11, 2021
- Skipped: Passes the SenateContinued as SF 360
- Next: House committee
- Next: Passes the House
- Next: To the Governor
- Next: Signed into law
Became SF 360 → Its progress continues under the new number. Go to SF 360 What’s a funnel?
What’s in it
_____ the explanation’s substance by the members of the general assembly. GENERAL.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 agricultural property.81). LEASE OF AGRICULTURAL LAND WHICH INCLUDES IMPROVEMENTS (BUILDINGS).58(1), (2), and (3)).79A(1)). PARTICIPATION IN THE PROGRAM —— FROM TO YEARS.
Read the full explanation
The bill increases from to the number of years that a taxpayer may participate in the program.79A(3)).82(5)). PARTICIPATION IN THE PROGRAM —— TAX CREDIT CERTIFICATES AND AWARDS.81(6)).82(5)). BACKGROUND.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 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.82(7)). EFFECTIVE DATE. The bill takes effect on January 1, 2022.
Senate subcommittee
Named February 9, 2021. On February 10, 2021 it recommended passage.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
AI summary This bill expands the Beginning Farmer Tax Credit program by increasing the maximum participation period, allowing for more agreements, and including agricultural buildings as assets. These changes are projected to reduce General Fund revenue by $0.7 million in fiscal year 2023, $1.1 million in fiscal year 2024, $1.3 million in fiscal year 2025, $1.4 million in fiscal year 2026, $1.6 million in fiscal year 2027, and $1.8 million in fiscal year 2028 and after.2
Read the fiscal note
Description
House File 694 expands the existing Beginning Farmer Tax Credit program. The Bill:
- Specifies that an agricultural asset subject to a qualified agreement may include an agricultural improvement (building).
- Removes a requirement that a qualified lease must include agricultural land.
- Increases the current 10-year maximum that a taxpayer may participate in the program to 15 years.
- Allows a taxpayer to participate in the program through multiple agreements and with more than one qualified beginning farmer.
- Allows agreements to be renewed more than once.
- Changes a current $50,000 per year limit on the annual amount of tax credits a single taxpayer may earn to a $50,000 per year, per agreement limit.
Background
The Beginning Farmer Tax Credit program provides tax incentives to owners of agricultural assets who enter into leases or other agricultural contracts with qualified beginning farmers. The current tax credit is equal to 5.0% of qualified cash rent payments or 15.0% of the market price of the commodity produced on the land subject to the lease. The owner of the agricultural asset(s) subject to a qualified agreement receives the benefit of the tax credit. A farmer qualifies as a beginning farmer by meeting all of the following criteria:
- Is a resident of Iowa.
- Has sufficient education, training, or experience in farming.
- Has access to adequate working capital and production items.
- Will materially and substantially participate in farming.
- Does not own more than a 10.0% ownership interest in an agricultural asset included in the agreement with the taxpayer.
The program is subject to a maximum award amount (cap) of $12.0 million per calendar year. Tax credits awarded under the program totaled $6.4 million for CY 2019 and $6.5 million for CY 2020. The highest total for a year was CY 2017 at $9.6 million. The full award history is provided in the following table.
Assumptions
Although the Beginning Farmer Tax Credit program has an annual cap of $12.0 million, the program does not have sufficient demand under current law to fully utilize that cap. Utilization over the past three years has averaged $6.3 million, and the highest recent utilization was in CY 2020 at $6.5 million. Therefore, it is assumed that under current law the tax credit award demand for future years will equal $6.5 million per year.
The changes provided in the Bill remove participation restrictions and expand the types of agricultural assets that may be the subject of agreements. It is assumed for this projection that the program expansions will increase awards by $2.5 million, to $9.0 million per calendar year. The credits are not refundable or transferable, but unused credits may be carried forward for up to 10 tax years. For reasons particular to each taxpayer, some earned tax credits are never redeemed on a tax return. Based on the history of tax credit redemptions under this program, the following tax credit redemption pattern is assumed:
- Year of award = 0.0%
- First tax year after award = 28.0%
- Second tax year = 15.0%
- Third through sixth tax year = 7.0%
- Tax credits that expire unused = 29.0%
Fiscal Impact
Expanding the Beginning Farmer Tax Credit program is projected to reduce General Fund revenue by the following amounts:
- FY 2023 = $0.7 million
- FY 2024 = $1.1 million
- FY 2025 = $1.3 million
- FY 2026 = $1.4 million
- FY 2027 = $1.6 million
- FY 2028 and after = $1.8 millionAward Award Award Award
Year Amount Year Amount
CY 2007 1.3$ CY 2014 6.5$ CY 2008 2.0 CY 2015 7.0 CY 2009 2.7 CY 2016 8.6 CY 2010 3.6 CY 2017 9.6 CY 2011 5.2 CY 2018 6.0 CY 2012 5.8 CY 2019 6.4 CY 2013 6.0 CY 2020 6.5
In Millions
Beginning Farmer Tax Credit Program Awards
Sources
- Beginning Farmer Tax Credit Program Evaluation Study (December 2020)
- Contingent Liabilities Report (December 2020)
- Department of Revenue
- Legislative Services Agency analysis
- Beginning Farmer Tax Credit · March 1, 2021 · $1.8M
- Beginning Farmer Tax Credit · February 17, 2021 · $1.8M
- Beginning Farmer Tax Credit · February 15, 2021 · $1.8M
Iowa Code it changes
Lobbying
14 for · 2 against · 8 undecided · Who →
Family tree
Similar bills
- SF 291 Relating to the beginning farmer tax credit program, by modifying participation and lease …89th General Assembly · In committeeNearly identical
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