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Bills › 91st General Assembly

HF 624Died when the session ended · March 19, 2025

Relating to the farm tenancy net income exclusion available against the individual income tax, and including effective date and retroactive applicability provisions

Sponsored by the House Ways and Means Committee, Rep. Bill Gustoff (R), Rep. Megan Jones (R), Rep. Derek Wulf (R)

Topics:AgricultureTaxesIncome taxes

Same legislation: HF 56, SF 59

Write your legislators about it

Also covers HF 56 and SF 59.

Official bill pageLobbyist declarationsOne-pager to print

Where it is now

  1. Done: IntroducedJanuary 14, 2025
  2. Done: SubcommitteeJanuary 23, 2025
  3. Done: House committeeFebruary 25, 2025
  4. Done: Passes the HouseMarch 19, 202596–0
  5. Stopped: Senate committeeDied when the General Assembly ended
  6. Next: Passes the Senate
  7. Next: To the Governor
  8. Next: Signed into law

Died when the session ended The 2026 session adjourned on May 3, 2026, the General Assembly’s last regular session. Bills that didn’t pass both chambers died. What’s a funnel?

What’s in it

AI summary Retired farmers can now get a tax break on income from farm rental agreements even if that money is paid through a partnership, an S corporation, a trust, or an estate. This change allows these business groups and trusts to qualify for the same tax exclusion that individuals already receive. The new rule applies to income earned starting in 2024.1

Read the official explanation

Current law excludes from the individual income tax a retired farmer’s total net income received pursuant to a farm tenancy agreement covering real property held by the retired farmer for or more years, if the farmer materially participated in a farming business for or more years. Under current law, net income from a farm tenancy agreement earned by an entity taxed as a partnership for federal tax purposes, an S corporation, or a trust or estate is not eligible for the farm tenancy lease income exclusion. This bill allows the net income from a farm tenancy agreement earned, received, or reported by an entity taxed as a disregarded entity, partnership for federal tax purposes, an S corporation, a trust, or estate to be eligible for the farm tenancy lease income exclusion in the same manner as if the net income received pursuant to a farm tenancy passes directly from the farm tenant to the eligible individual rather than passing to the eligible individual through an entity taxed as a disregarded entity, a partnership, an S corporation, a trust, or an estate. The bill allows net income accruing to a grantor trust or to a business entity that is a disregarded entity to be deemed to have been distributed to its sole owner to the extent the sole owner of such disregarded entity or trust has the right to withdraw or compel distribution of such net income. The bill takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2024.

Why it matters. Retired farmers who receive income from farm tenancy agreements through entities like partnerships, S corporations, trusts, or estates would be able to exclude that income from their individual income tax. This change is estimated to decrease State General Fund revenue by $10.5 million in fiscal year 2026, $4.6 million in fiscal year 2027, $4.7 million in fiscal year 2028, $4.8 million in fiscal year 2029, and $4.9 million in fiscal year 2030. It is also estimated to decrease the statewide local option income surtax for schools by $263,000 in fiscal year 2026, $115,000 in fiscal year 2027, $117,000 in fiscal year 2028, $120,000 in fiscal year 2029, and $122,000 in fiscal year 2030.2

Full bill text3

Senate subcommittee

Named March 26, 2025. It hasn’t reported yet.

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

Less revenue: up to $10.5M Compare with other bills

AI summary This bill allows certain retired farmers to deduct income from farm tenancy agreements through entities like partnerships, S corporations, trusts, or estates from their individual income tax. The change is estimated to decrease State General Fund revenue by $10.5 million in fiscal year 2026, $4.6 million in fiscal year 2027, $4.7 million in fiscal year 2028, $4.8 million in fiscal year 2029, and $4.9 million in fiscal year 2030. It is also estimated to decrease the statewide local option income surtax for schools by $263,000 in fiscal year 2026, $115,000 in fiscal year 2027, $117,000 in fiscal year 2028, $120,000 in fiscal year 2029, and $122,000 in fiscal year 2030.4

Read the fiscal note

Description

House File 624 allows the net income from a farm tenancy agreement for an entity taxed as a disregarded entity, a partnership for federal tax purposes, an S corporation, a trust, or an estate to be deducted from the net individual income tax for a retired farmer who materially participated in a farming business for 10 or more years.

The Bill takes effect upon enactment and is retroactively effective to tax years beginning on or after January 1, 2024.

Background

Iowa Code section 422.7 details how net income is computed for federal income tax purposes with State adjustments. Farm tenancy income covering real property held by an individual for 10 or more years is eligible to be subtracted from net income for State tax purposes. Currently, Iowa Code section 422.7(14)(e) does not allow an entity taxed as a partnership for federal tax purposes, an S corporation, a trust, or an estate to deduct net income from a farm tenancy agreement for the net individual income tax. The Bill would remove this ineligibility.

Assumptions

  • According to the Iowa Department of Revenue (IDR), the Bill will require updating forms, changing administrative rules, and other related costs that cannot be estimated at this time due to lack of information and are not included in this Fiscal Note.
  • Retired farmers aged 55 and older who receive farm income from partnerships will have received at least 10 years of farm income during their entire working lives and will be eligible for the deduction. According to the IDR, the total farm rental income from partnerships that is passed through to qualified retired farmers is estimated to be $80.7 million in tax year (TY) 2022.
  • Retired farmers who receive farm income from S corporations in 5 of the prior 10 tax years will have received at least 10 years of farm income during their entire working lives and will be eligible for the deduction. According to the IDR, the total farm rental income from S corporations that is passed through to qualified retired farmers is estimated to be $27.4 million in TY 2022.
  • Retired farmers who receive farm income from estates and trusts in 5 of the prior 7 tax years will have received at least 10 years of farm income during their entire working lives and will be eligible for the deduction. According to the IDR, the total farm rental income from estates and trusts that is passed through to qualified retired farmers is estimated to be $10.1 million in TY 2022.
  • According to the IDR, qualified total farm rental income for the entities in this Fiscal Note is estimated to be $119.3 million in TY 2024 and will grow annually to $130.8 million by TY 2030.
  • The marginal individual income tax rate per tax year is estimated below:
  • TY 2024 = 5.00%
  • TY 2025 and after = 3.80%
  • The fiscal impact of a tax year would be realized in the following fiscal year, except that TY 2024 and TY 2025 fiscal impacts would both be realized in FY 2026.
  • The income surtax for schools is a local option tax that is based on a taxpayer’s Iowa income tax liability. Law changes that lower Iowa income tax liability also lower the amount of income surtax owed by any taxpayer subject to the surtax. For this estimate, the surtax is assumed to equal 2.5% of State individual income tax liability.

Fiscal Impact

The proposed deductions from the individual income tax in House File 624 are estimated to decrease net individual income tax liability and State General Fund revenue by the following amounts:

  • FY 2026 = $10.5 million
  • FY 2027 = $4.6 million
  • FY 2028 = $4.7 million
  • FY 2029 = $4.8 million
  • FY 2030 = $4.9 million

The decrease in tax liability is also estimated to decrease the statewide local option income surtax for schools by the following amounts:

  • FY 2026 = $263,000
  • FY 2027 = $115,000
  • FY 2028 = $117,000
  • FY 2029 = $120,000
  • FY 2030 = $122,000

Sources

  • Iowa Department of Revenue
  • Legislative Services Agency analysis

Reading a fiscal note5

Iowa Code it changes

Amends§422.7

How the Code works6

Lobbying

10 for · 0 against · 4 undecided · Who →

Family tree

Tried before

HF 2666Passed a chamber90th GAHF 2503Renumbered90th GA

91st General Assembly

HF 56RenumberedHouse companionSF 59Cleared committeeSenate companionHF 624Passed a chamberfrom HF 56

Earlier and later bills are matched by wording or an identical title.

Tried before

This idea has been filed in an earlier General Assembly. None became law, though one got through a chamber.

  • HF 2503 Relating to the farm tenancy net income exclusion available against the individual income …
    90th General Assembly · Renumbered as HF 2666 · same title
    Cleared committee
  • HF 2666 Relating to the farm tenancy net income exclusion available against the individual income …
    90th General Assembly · Passed House · same title
    Passed a chamber

Similar bills this General Assembly

  • SF 19 Relating to the farm tenancy net income exclusion available against the individual income …
    91st General Assembly · In committee
    Nearly identical

Matched by wording or an identical title.