Illinois Administrative Code
Title 74 - PUBLIC FINANCE
Part 1100 - ILLINOIS FINANCE AUTHORITY
Subpart G - FARM DEVELOPMENT PROGRAM
Section 1100.710 - Bond Programs and Rules Applicable to Each
Universal Citation: 74 IL Admin Code ยง 1100.710
Current through Register Vol. 48, No. 12, March 22, 2024
a) Beginning Farmer Bond and Contract Bond Programs
1) Purpose. The purpose of the
Beginning Farmer Bond and Contract Bond Programs is to provide affordable
financing to new, low net worth farmers for financing capital purchases. IFA
works with the applicant's local lender or contract seller to provide this
financing. IFA issues a tax-exempt bond for the amount and with the terms of
the loan. Because the interest income to the lender or contract seller is
exempt from federal income tax, the lender or contract seller is able to charge
a lower rate to the applicant. The loan and the bond are secured solely by the
collateral required by the lender or contract seller and are not obligations of
IFA or of the State of Illinois. Because the lender or contract seller assumes
all credit risk, the lender or contract seller makes all credit
decisions.
2) Eligible Applicants
A) The applicant must have net worth of not
more than $250,000 at the time of application. Net worth means total assets
less total liabilities of the individual and the individual's spouse and minor
children, if any.
i) Total assets shall
include, but not be limited to, the following: cash crops or feed on hand;
livestock held for sale; breeding stock; marketable bonds and securities;
securities (not readily marketable); accounts receivable; notes receivable;
cash invested in growing crops; net cash value of life insurance; machinery and
equipment; cars and trucks; farm and other real estate including life estates
and personal residence; value of beneficial interests in trusts; government
payments or grants; and all other assets. [20 ILCS
3501/801-10 ] Total assets shall not include items
used for personal, family or household purposes by the applicant, but in no
event shall such property be excluded to the extent that a deduction for
depreciation is allowable for federal income tax purposes. All assets shall be
valued at fair market value by the participating lender. Such value shall be
what a willing buyer would pay a willing seller in the locality. A deduction of
ten percent may be made from fair market value of farm and other real
estate.
ii) Total liabilities shall
include, but not be limited to, the following: accounts payable; notes or other
indebtedness owed to any source; taxes; rent; amounts owed on real estate
contracts or real estate mortgages; judgments; accrued interest payable; and
all other liabilities. [20 ILCS 3501/801-10]
B) The applicant must be an individual, not a
corporation, partnership, trust, or any other legal entity.
C) The applicant must be the sole owner and
principal user of the project.
D)
The applicant must not have had any prior direct or indirect ownership interest
in a substantial amount of land. A substantial amount of land is a parcel that
exceeds 30% of the median farm size in the county in which the land is located,
or which had at any time during ownership a fair market value in excess of
$125,000. An individual with prior ownership of land may still be eligible if
the individual did not participate in the operation of the farm. Ownership or
material participation by an individual's spouse or minor child shall be
treated as ownership or material participation by an individual.
3) Loan Amount. The maximum loan
amount is $250,000 per person.
4)
Eligible Purchases. Loan proceeds may be used for the following capital
purchases only:
A) Land located in the State
of Illinois that is suitable for use in farming and that is or will be operated
as a farm.
B) Agricultural
Improvements. Any improvements, buildings, structures or fixtures suitable for
use in farming that are located on agricultural land. IFA will finance the
purchase of new improvements on agricultural land. IFA can finance used
agricultural improvements only in situations in which:
i) the improvements are purchased in
conjunction with agricultural land and used in the operation of a farm to be
operated on the agricultural land being purchased; or
ii) a sufficient amount of qualified
rehabilitation expenditures are incurred by the borrower with respect to the
agricultural improvements within two years from the date of the issue of the
bond.
C) Depreciable
Agricultural Property. Personal property suitable for use in farming for which
an income tax deduction for depreciation is allowable in computing federal
income tax under the Internal Revenue Code. Examples include, but are not
limited to, farm machinery and trucks. Feeder livestock, seed, feed,
fertilizer, and other types of inventory or supplies do not qualify as
depreciable agricultural property. IFA will finance the purchase of any new
depreciable agricultural property. IFA can also finance used depreciable
agricultural property if it is purchased in conjunction with agricultural land
and used in the operation of a farm to be operated on the agricultural land
being purchased. The total loan proceeds allocated to the purchase price of
used equipment may not exceed $62,500.
D) No portion of the loan proceeds may be
used for the purchase of a residence. If the project includes a residence, the
applicant must make a down payment or obtain conventional financing for the
value of the residence.
5) Purchase from Related Persons. The IRS
states that the following, among others, are deemed to be "related persons" of
any individual: grandfather, grandmother, father, mother, brother, sister
(whether whole or half blood), child grandchild, or spouse. In addition, a
partnership and each of its partners (and their spouses and minor children) are
related persons, as are an S corporation and each of its shareholders (and
their spouses and minor children). Related persons also include certain related
corporations and partnerships. It should be pointed out that the foregoing list
is not all-inclusive. There are certain other entities and individuals that
could also be considered related persons. It should also be noted that certain
individuals are not related persons. For example, an uncle, aunt, nephew,
niece, brother-in-law or sister-in-law would not be treated as a related
person. IFA loan proceeds may be used to purchase property from a related
person in some circumstances:
A) The
Beginning Farmer Bond Program may be used to purchase eligible property from a
related person if the following conditions are met:
i) The applicant must certify and provide
supporting documentation that the purchase price of the project is equal to the
market value of the project.
ii)
The applicant must certify that the seller will have no continuing financial
interest in the project and will not be a principal user of the project, and
will have no other direct or indirect ownership or use of the
project.
B) The
Beginning Farmer Contract Bond Program may never be used to purchase property
from a related person.
6) Security for the Loan. To facilitate the
making of the loan, the Lender Loan Agreement or Contract Seller Agreement
provides that the lender or contract seller will act as agent and fiduciary for
IFA in connection with the loan. The principal and interest of the bond are
payable solely out of the revenue derived from the Borrower's Promissory Note,
which is secured by collateral furnished by the borrower. Please note that cash
and cash equivalents may not be used as collateral. The bond that is issued by
IFA and purchased by the lender or contract seller is a non-recourse
obligation. The principal and interest on the bond do not constitute an
indebtedness of IFA or a charge against its general credit or general
fund.
7) Fees. The Authority
charges a non-refundable application fee of $100 that must be submitted with
the application. There is also a closing fee of one and one-half percent of the
loan amount, less the $100 application fee, due when the loan is closed. The
lender under the Beginning Farmer Bond Program may charge a closing fee of up
to one-half of one percent of the loan amount. No other fees may be charged.
However, the lender may pass on to the borrower any recording or filing fees
associated with the loan. The contract seller under the Beginning Farmer
Contract Bond Program may charge no fees. However, the contract seller may pass
on to the borrower any recording or filing fees associated with the
loan.
8) This program takes effect
upon adoption pursuant to this Part.
b) Agricultural Manufacturing Bond Program
1) Purpose. This program is designed to
encourage the development and expansion of agribusiness manufacturing
operations in Illinois. The intention of this program is to enhance economic
growth in Illinois by creating and saving jobs in the rural areas of the
State.
2) Eligibility Requirements
Particular to the Agricultural Manufacturing Bond Program.
A) The applicant must be an agribusiness as
defined in the Act and in Section
1100.700 of this
Part. The applicant must also be a "manufacturing facility" as defined in
section 144(a)(12)(C) of the Internal Revenue Code of 1986. This means any
facility which is used in the manufacturing or production of tangible personal
property (including the processing resulting in a change in the condition of
such property).
B) The applicant,
including all affiliates and subsidiaries, must have no more than 100 employees
at the time of application or have had gross income of no more than $2 million
for the calendar year preceding the date of application. "Gross income" for
this purpose means the amount of gross income properly reportable for federal
income tax purposes for the taxable year under the provisions of the Internal
Revenue Code.
C) The IFA shall
waive the requirements of subsection (b)(2)(B) for any Agricultural
Manufacturing Facility which at the time of application does not operate a
facility within the State of Illinois.
3) The amount of a loan authorized herein to
any agricultural manufacturing facility shall be limited by section
144(a)(4)(A) of the Internal Revenue Code with respect to the issuance of small
issue industrial development bonds. In no event shall any loan to any one
agricultural manufacturing facility exceed $10 million.
4) Issuance of Bond. Following approval of
the loan, the Authority shall issue a bond, in the amount of and fitting the
terms of the loan, to be purchased by the participating lender.
5) This program takes effect upon adoption
pursuant to this Part.
6) The
applicant must pay a $100 fee at the time of application.
Disclaimer: These regulations may not be the most recent version. Illinois may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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