Iowa Code r. 265-44.6 - Beginning farmer tax credit program
(1)
Eligibility.
a.
Eligible taxpayer. A taxpayer is eligible to participate in
the beginning farmer tax credit program if the taxpayer meets all of the
following requirements:
(1) The taxpayer is a
person who may acquire or otherwise obtain or lease agricultural land in this
state pursuant to Iowa Code chapter 9H or 9I. However, the taxpayer must not be
a person who may acquire or otherwise obtain or lease agricultural land
exclusively because of an exception provided in one of those chapters or in a
provision of another chapter of the Iowa Code, including but not limited to
Iowa Code chapter 10, 10D, or 501 or section
15E.207.
(2) The taxpayer has entered into an
agricultural lease agreement with a qualified beginning farmer to lease
agricultural land as provided in 2019 Iowa Acts, House File 768, section
9.
(3) The taxpayer has not been at
fault for terminating a prior agreement under the program or another agreement
in which the taxpayer was allowed to claim a tax credit under Iowa Code section
175.37 as it existed prior to
January 1, 2015, or Iowa Code section
16.80 as it existed prior to
January 1, 2018.
(4) If the
agreement includes the lease of a confinement feeding operation structure as
defined in Iowa Code section
459.102, the taxpayer is not a
party to a pending administrative or judicial action, including a contested
case proceeding under Iowa Code chapter 17A, relating to an alleged violation
involving an animal feeding operation as regulated by the department of natural
resources, regardless of whether the pending action is brought by the
department or the attorney general.
(5) The taxpayer is not a partner of a
partnership, shareholder of a family farm corporation, or member of a family
farm limited liability company that is the lessee of an agricultural asset that
is part of an agricultural lease agreement. If a beginning farmer has an
ownership interest in the agricultural asset that does not exceed 10 percent,
the tax credit award is reduced by an amount equivalent to the beginning
farmer's ownership percentage. For example, if a beginning farmer owns 9
percent of an agricultural asset that is the subject of the agricultural lease
agreement, the tax credit award is reduced by 9 percent.
b.
Qualified beginning
farmer. A beginning farmer must meet all of the following criteria to
be eligible for participation in the beginning farmer tax credit program:
(1) Is a resident of the state. If the
beginning farmer is a partnership, all partners must be residents of the state.
If the beginning farmer is a family farm corporation, all shareholders must be
residents of the state. If the beginning farmer is a family farm limited
liability company, all members must be residents of the state.
(2) Has sufficient education, training, or
experience in farming. If the beginning farmer is a partnership, at least one
partner who is not a minor must have sufficient education, training, or
experience in farming. If the beginning farmer is a family farm corporation, at
least one shareholder who is not a minor must have sufficient education,
training, or experience in farming. If the beginning farmer is a family farm
limited liability company, at least one member who is not a minor must have
sufficient education, training, or experience in farming.
(3) Has access to adequate working capital
and production items.
(4) Will
materially and substantially participate in farming. If the beginning farmer is
a partnership, family farm corporation, or family farm limited liability
company, at least one of the partners, shareholders, or members who is not a
minor must materially and substantially participate in farming.
(5) Does not own more than 10 percent
ownership interest in an agricultural asset included in the
agreement.
(6) Is of majority age
pursuant to Iowa Code section
599.1 and is legally able to
enter into a contract.
(2)
General provisions.
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 Iowa Code section
16.78. The tax credit is allowed
regardless of whether the principal agricultural asset is soil, pasture, or a
building or other structure used in farming.
b. A tax credit in excess of the eligible
taxpayer's tax liability for the tax year is not refundable but may be credited
to the tax liability for a period set forth in Iowa Code section
16.82, if unused in the tax year
the credits are earned. A tax credit shall not be carried back to a tax year
prior to the tax year in which the eligible taxpayer redeems the tax credit.
The term of the credit shall begin in the crop year in which the IAD board
approves the award. The maximum term of the credit shall not exceed the term of
the agricultural lease agreement.
(3)
Application.
a. The authority shall prepare and make
available appropriate forms to be used in making application for the tax
credit, including forms for both the taxpayer and the qualified beginning
farmer.
b. Each application shall
include, but not be limited to, the following:
(1) Taxpayer information: name, address, and
social security number or tax identification number. The taxpayer shall also
indicate the length of the lease, the type of lease, and the location of the
agricultural asset to be leased.
(2) Qualified beginning farmer information:
name and address. In addition, the application shall have attached to it a copy
of the qualified beginning farmer's current financial statement (generally
prepared one month preceding application submission). The application will also
include a background letter on the qualified beginning farmer documenting to
the satisfaction of the authority that the beginning farmer has sufficient
education, training, or experience in farming and has access to adequate
working capital and production items. This letter may be submitted by one or
more of the following: the qualified beginning farmer, the taxpayer or another
third party.
(3) A copy of the
agricultural lease agreement that conforms to the requirements set forth in
subrule 44.6(4).
c.
Complete applications shall be processed in the order they are received by the
authority.
d. Authority staff will
review applications for completeness and eligibility and make recommendations
to the IAD board. The IAD board will review applications and recommendations
from authority staff and make recommendations to the authority. Upon review of
the recommendations of the IAD board, the authority will approve, defer, or
deny each application.
e. Any
applicant wishing to appeal a decision of the IAD board can appeal directly to
the IAD board.
f. Upon submission
of the application or a request to amend an agricultural lease agreement, the
authority shall collect the application fee. The authority shall collect fees
in the amounts based upon the acreage of the land that is the subject of the
agreement and the length of the lease, as indicated in the chart below.
Application Fees Chart
|
Length of Lease in Years |
||||
|
Leased Acres |
2 |
3 |
4 |
5 |
|
100 or fewer |
$300 |
$350 |
$400 |
$450 |
|
101 to 250 |
$400 |
$450 |
$500 |
$550 |
|
251 or more |
$500 |
$550 |
$600 |
$650 |
g. For
any amendment to a previously approved agricultural lease agreement, an
amendment fee of $100 shall be paid at the time the amendment is
submitted.
(4)
Requirements of an agricultural lease agreement.
a. The agricultural lease agreement must meet
the following requirements:
(1) The agreement
must include the lease of agricultural land located in this state or
agricultural improvements located in this state and may provide for the rental
of agricultural equipment as defined in Iowa Code section
322F.1.
(2) The agreement must include provisions
which describe the consideration paid for the agreement in a manner that allows
the authority to calculate the value of the lease in order to determine the tax
credit amount as provided in Iowa Code section
16.82.
(3) The agreement must be in writing and
signed by all parties.
(4) 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. At the end of the approved agricultural lease agreement term, a new
application must be submitted to the authority. However, an eligible taxpayer
shall not participate in the program for more than 15 years. For the purposes
of this subparagraph, 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 also
participate in the program for not more than 15 years.
(5) The agreement shall not include a lease
or rental of equipment intended as a security.
b. An eligible taxpayer may apply and be
approved to enter into agreements with different qualified beginning
farmers.
c. The agreement cannot be
assigned, and the agricultural land subject to the agreement shall not be
subleased.
d. The agricultural
assets shall not be leased or rented at a rate that is substantially higher
than the market rate for similar agricultural assets leased or rented within
the same community. As used in this paragraph, when referring to an
agricultural asset that is cropland, "substantially higher" means not more than
30 percent above the average cash rent paid for cropland rented in the same
county according to the most recent cash rent survey for cropland published by
a unit of Iowa State University of Science and Technology recognized by the
authority.
(5)
Changes to an agricultural lease agreement.
a. The underlying lease for agricultural land
may only be amended without submitting a new application if any of the
following apply:
(1) The terms of the amended
lease are more favorable to the qualified beginning farmer, including but not
limited to the rent payment being reduced.
(2) A party has changed their name.
(3) The owner of an agricultural asset is
changed to the owner's estate or trust upon the eligible taxpayer's
death.
b. If the eligible
taxpayer and the qualified beginning farmer are amending an agricultural lease
agreement but none of the conditions of paragraph 44.6(5)"a"
apply, then the eligible taxpayer must submit a new application for a tax
credit.
c. If an amendment to an
agreement changes the total amount that will be paid to the eligible taxpayer
under the agreement, the eligible taxpayer shall notify the authority in a
manner and form prescribed by the authority within 30 days of the date the
amendment is executed by the parties.
(1) If
the amendment will reduce the total amount paid to the eligible taxpayer under
the agreement, the authority shall recalculate and reduce the eligible
taxpayer's tax credit award under 2019 Iowa Acts, House File 768, section
12.
(2) If the amendment will
increase the total amount paid to the eligible taxpayer under the agreement,
the tax credit award shall not be increased unless the eligible taxpayer
submits an amended application to the authority on the relevant form available
on the authority's website and that meets the requirements of 2019 Iowa Acts,
House File 768, section 10. If the amended application is approved under 2019
Iowa Acts, House File 768, section 10, the authority may increase the amount of
the tax credit award. The increased amount of the tax credit award shall be
subject to the aggregate award limitation in 2019 Iowa Acts, House File 768,
section 12, for the calendar year in which the increased award is
made.
d. Paragraph
44.6(5)"c" does not apply to an amendment to an agreement that
requires a new application under paragraph 44.6(5)"b" in order
to be valid.
e. An eligible
taxpayer or qualified beginning farmer may terminate an agreement as provided
in the agreement or by law. The eligible taxpayer must notify the authority of
the termination within 30 days of the date of termination in the manner and
form prescribed by the authority.
f. Expiration of lease. Prior to the
expiration of the lease, the qualified beginning farmer will continue to be
eligible for the term of the lease. Upon expiration of the lease, both the
taxpayer and qualified beginning farmer must reapply to continue the tax
credit.
(6)
Procedure for calculating tax credit awards.
a. The amount of the tax credit for a cash
rent agreement equals 5 percent of the amount of rent received for each
year.
b. For a commodity share
agreement, the amount of the tax credit shall equal 15 percent of the gross
amount that the eligible taxpayer would receive as a rent payment from the sale
of the eligible taxpayer's share of the crop in each harvest year.
c. To calculate the credit for a commodity
share agreement, the authority will use the following assumptions:
(1) Fifty percent of the leased land is
allocated to corn and 50 percent of the leased land is allocated to soybeans,
unless the lease specifies a different allocation of corn and soybeans. If the
lease specifies a different allocation of corn and soybeans, then the leased
land will be allocated proportionally, in accordance with the terms of the
lease.
(2) For all years of the
lease, the prices used for corn and soybeans will be the average prices for the
last five years excluding the highest and lowest prices based on the USDA-NASS
statewide data calculated at the time the application is approved.
(3) For all years of the lease, the commodity
yields used for corn and soybeans will be the past ten-year average per-bushel
yields for the same county where the leased land is located excluding the years
of highest and lowest per-bushel yields based on the USDA-NASS data calculated
at the time the application is approved.
(4) If the lease specifies a crop other than
corn and soybeans, the relevant price and yield data from USDA-NASS for that
crop will be used.
d. To
calculate the credit for a commodity share agreement, the authority will use
the following formula: (1/2 acres leased multiplied by corn yield multiplied by
corn price multiplied by percentage of owner's share multiplied by .15) plus
(1/2 acres leased multiplied by soybean yield multiplied by soybean price
multiplied by owner's share multiplied by .15) = the amount of the tax credit.
If the lease specifies a different allocation of corn and soybeans, then the
leased acres will be in accordance with the terms of the lease.
e. The amount of the tax credit for a flex
lease agreement equals the sum of the following amounts:
(1) The portion of the lease that is based on
rent will be calculated as a cash rent agreement.
(2) The portion of the lease that is based on
crop yield will be calculated as a commodity share agreement.
(3) If the flexible or bonus portion of the
lease is based on crop production, the annual yield used to calculate the bonus
will be the yield defined in subparagraph 44.6(6)"c"(3). If
the annual yield is above the yield needed to trigger the bonus, the taxpayer
will be awarded additional tax credits. The formula for calculating the tax
credit will be yield above lease bonus trigger multiplied by price multiplied
by percentage of owner's share multiplied by 0.15.
(4) For other factors used in a flex lease
agreement, the relevant data used will be the past ten-year average per-bushel
yield for the same county where the leased land is located excluding the
highest and lowest years based on the USDA-NASS data.
f. The amount of the tax credit shall be
reduced by the percent ownership interest of the qualifying beginning farmer in
the agricultural asset.
Notes
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