Current through Register Vol. 49, No. 18, September 16, 2024
PURPOSE: This rule describes the operation of the
program, defines terms, and establishes the procedures for certification of a
qualifying beginning farmer and farm owner which may be used by the farm owner
to apply to the Missouri Department of Revenue for a deduction from Missouri
adjusted gross income.
(1)
General Organization.
(A) The Missouri
Department of Agriculture is authorized to establish a process certifying the
qualifications of a beginning farmer and farm seller under section
143.121,
RSMo.
(2) Definitions.
(A) Authority means the Missouri Agricultural
and Small Business Development Authority (MASBDA) created in section
348.020, RSMo.
(B) Beginning farmer is a taxpayer who-
1. Has filed at least one (1) but not more
than ten (10) Internal Revenue Service Schedule F (Form 1040) Profit or Loss
from Farming forms since turning eighteen (18) years of age; or
2. Is approved for a beginning farmer loan
through the United States Department of Agriculture Farm Service Agency
Beginning Farmer direct or guaranteed loan program; or
3. Has a farming operation that is determined
by the Missouri Department of Agriculture to be new production agriculture but
is the principal operator of a farm and has substantial farming knowledge;
or
4. Has been determined by the
Missouri Department of Agriculture to be a MASBDA qualified family
member.
(C) Farmland. Real
property for sale, rent, lease, or under a crop-share arrangement, and
primarily used for, or suitable for, the cultivation and sale of crops
(including forestry, fruit/nut trees and horticulture), raising and sale of
livestock or poultry (including aquaculture), including the sale of products
from such crops, livestock, or poultry.
(D) Farm owner is an individual (including an
entity that is disregarded, for tax purposes, as separate from the individual)
who owns farmland and disposes of or relinquishes use of all or some portion of
such farmland as follows:
1. A sale to a
beginning farmer; or
2. A lease or
rental agreement not exceeding ten (10) years with a beginning farmer;
or
3. A crop-share arrangement not
exceeding ten (10) years with a beginning farmer.
(E) Production agriculture. The active
cultivation of farmland with the intent of sale through marketing or
distribution channels or direct sale to the public.
(F) Qualified family member is an individual
who is related to a farm owner within the fourth degree by blood, marriage, or
adoption and who is purchasing or leasing or is in a crop-share arrangement for
land from all or a portion of such farm owner's farming
operation.
(3) Amount of
Tax Deduction. A farm owner who sells farmland to a beginning farmer may
subtract from his/her Missouri adjusted gross income an amount, to the extent
included in federal adjusted gross income, equal to the portion of capital
gains received from the sale of such farmland that such farm owner receives in
the tax year for which such owner subtracts such capital gain according to the
following:
|
Capital Gain Amount: |
Percentage of Capital Gains Subtraction: |
|
$0-$2 million |
100% |
|
$2,000,001-$3,000,000 |
80% |
|
$3,000,001-$4,000,000 |
60% |
|
$4,000,001-$5,000,000 |
40% |
|
$5,000,001-$6,000,000 |
20% |
A farm owner who rents, leases, or enters into a crop-share
arrangement, (not exceeding ten (10) years) with a qualified beginning farmer
can reduce his/her Missouri adjusted gross income (cash rent income, in the
case of a lease) equal to the amount of income received by the farm owner under
the agreement to the extent included in federal adjusted gross income, up to
twenty-five thousand dollars ($25,000) per tax year.
(4) Operation of the Program.
(A) Application. Farm owners who wish to
apply for the certification shall apply to the authority on forms provided by
the authority, and provide the following information:
1. Farm owner certification-
A. For certification related to the sale of
farmland occurring on or after August 28, 2023-
(I) Copy of the sales contract, signed and
dated by both parties;
(II) Copy of
the final settlement statement confirming the transaction has taken place;
and
(III) Copy of legal description
documenting the farmland's location;
B. For certification related to the
rent/lease/crop-share of farmland entered into on or after August 28, 2023-
(I) Copy of the rental/lease/crop-share
agreement signed and dated by both parties, clearly stating-
(a) Beginning and end date;
(b) Financial arrangement (annual payment,
crop-share arrangement);
(c) Process
of renewal or extension; and
(d)
Process of cancellation by either party; and
(II) The certification for a
rental/lease/crop-share arrangement will be valid for one (1) year and must be
renewed annually (not to exceed ten (10) years) to confirm the lease/crop-share
arrangement is still in effect;
2. Beginning farmer certification-
A. A copy of the most recent IRS Schedule F
(Form 1040) Profit or Loss from Farming; or
B. A copy of the United States Department of
Agriculture (USDA) Farm Service Agency (FSA) approval for a direct beginning
farmer loan or a guaranteed farm loan; or
C. Documentation from a primary lender,
landlord, current/previous farm employer if employed by a farm owner,
agricultural service provider, etc. confirming the beginning farmer's intent to
be the principal operator of the farm purchased or leased and the level of
farming knowledge of the beginning farmer; or
D. A certification by the beginning farmer
that the familial relationship with the farm owner is within the fourth degree
by blood, marriage, or adoption.
(B) Annual certification of
rental/lease/crop-share arrangement. Farm owners who wish to renew an annual
certification verifying the lease/crop share arrangement is still in effect
shall apply to the authority on a form provided by the authority, and provide
the following information:
1. A current copy
of the lease/crop-share arrangement, containing beginning and end dates of the
arrangement; and
2. Verification by
the beginning farmer the lease/crop-share arrangement is still in
effect.
(C) Fees. The
authority may charge an application fee for the initial certification and, in
the case of an annual certification of a lease/crop-share arrangement, an
annual certification fee in an amount as set by the authority to cover the
costs associated with the administration of the program.
(D) Issuance of certification. Upon receipt
and verification of the qualifications of the farm owner and beginning farmer,
a certification letter will be provided to the farm owner and beginning farmer
to be used by the farm owner when requesting the tax deduction.
(E) Audit. The authority reserves the right
to audit approved beginning farmers and farm owners to ensure compliance with
program requirements for a period of seven (7) years from the date of the
certification.
