Iowa Administrative Code
Agency 265 - Iowa Finance Authority
Chapter 44 - Iowa Agricultural Development Division
Rule 265-44.6 - Beginning Farmer Tax Credit Program
Universal Citation: IA Admin Code 265-44.6
Current through Register Vol. 47, No. 13, December 25, 2024
(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.
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