HF 608

1st Engrossment - 90th Legislature (2017 - 2018) Posted on 04/12/2018 04:38pm

A bill for an act
relating to agriculture; providing an income tax credit for sales or rentals of
agricultural assets to beginning farmers; providing an income tax credit for
beginning farmer financial management programs; establishing duties for the Rural
Finance Authority; amending Minnesota Statutes 2016, section 290.06, by adding
subdivisions; proposing coding for new law in Minnesota Statutes, chapter 41B.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [41B.0391] BEGINNING FARMER PROGRAM; TAX CREDITS.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given.
new text end

new text begin (b) "Agricultural assets" means agricultural land, livestock, facilities, buildings, and
machinery used for farming in Minnesota.
new text end

new text begin (c) "Beginning farmer" means a resident of Minnesota who:
new text end

new text begin (1) is seeking entry, or has entered within the last ten years, into farming;
new text end

new text begin (2) intends to farm land located within the state borders of Minnesota;
new text end

new text begin (3) is not related by blood or marriage to the owner of the agricultural assets from whom
the beginning farmer is seeking to purchase or rent agricultural assets;
new text end

new text begin (4) is not related by blood or marriage to a partner, member, shareholder, or trustee of
the owner of agricultural assets from whom the beginning farmer is seeking to purchase or
rent agricultural assets; and
new text end

new text begin (5) meets the following eligibility requirements as determined by the authority:
new text end

new text begin (i) has a net worth that does not exceed the limit provided under section 41B.03,
subdivision 3, paragraph (a), clause (2);
new text end

new text begin (ii) provides the majority of the day-to-day physical labor and management of the farm;
new text end

new text begin (iii) has, by the judgment of the authority, adequate farming experience or demonstrates
knowledge in the type of farming for which the beginning farmer seeks assistance from the
authority;
new text end

new text begin (iv) demonstrates to the authority a profit potential by submitting projected earnings
statements;
new text end

new text begin (v) asserts to the satisfaction of the authority that farming will be a significant source
of income for the beginning farmer;
new text end

new text begin (vi) participates in a financial management program approved by the authority or the
commissioner of agriculture; and
new text end

new text begin (vii) has other qualifications as specified by the authority.
new text end

new text begin (d) "Farm product" means plants and animals useful to humans and includes, but is not
limited to, forage and sod crops, oilseeds, grain and feed crops, dairy and dairy products,
poultry and poultry products, livestock, fruits, and vegetables.
new text end

new text begin (e) "Farming" means the active use, management, and operation of real and personal
property for the production of a farm product.
new text end

new text begin (f) "Owner of agricultural assets" means an individual, trust, or pass-through entity that
is the owner in fee of agricultural land or has legal title to any other agricultural asset. Owner
of agricultural assets does not mean an equipment dealer or comparable entity engaged in
the business of selling agricultural assets for profit.
new text end

new text begin (g) "Share rent agreement" means a rental agreement in which the principal consideration
given to the owner of agricultural assets is a predetermined portion of the production of
farm products produced from the rented agricultural assets and which provides for sharing
production costs or risk of loss, or both.
new text end

new text begin Subd. 2. new text end

new text begin Tax credit for owners of agricultural assets. new text end

new text begin (a) An owner of agricultural
assets may take a credit against the tax due under chapter 290 for the sale or rental of
agricultural assets to a beginning farmer. An owner of agricultural assets may take a credit
equal to:
new text end

new text begin (1) five percent of the sale price of the agricultural asset;
new text end

new text begin (2) ten percent of the gross rental income in each of the first, second, and third years of
a rental agreement; or
new text end

new text begin (3) 15 percent of the cash equivalent of the gross rental income in each of the first,
second, and third years of a share rent agreement.
new text end

new text begin (b) A qualifying rental agreement includes cash rent of agricultural assets or a share rent
agreement. The agricultural asset must be rented at prevailing community rates as determined
by the authority. The credit may be claimed only after approval and certification by the
authority.
new text end

new text begin (c) An owner of agricultural assets or beginning farmer may terminate a rental agreement,
including a share rent agreement, for reasonable cause upon approval of the authority. If a
rental agreement is terminated without the fault of the owner of agricultural assets, the tax
credits shall not be retroactively disallowed. If an agreement is terminated with fault by the
owner of agricultural assets, any prior tax credits claimed under this subdivision by the
owner of agricultural assets shall be disallowed and must be repaid to the commissioner of
revenue.
new text end

new text begin (d) The credit is limited to the liability for tax as computed under chapter 290 for the
taxable year. If the amount of the credit determined under this section for any taxable year
exceeds this limitation, the excess is a beginning farmer incentive credit carryover according
to section 290.06, subdivision 37.
new text end

new text begin Subd. 3. new text end

new text begin Beginning farmer management tax credit. new text end

new text begin (a) A beginning farmer may take
a credit against the tax due under chapter 290 for participating in a financial management
program approved by the authority. The credit is equal to 100 percent of the cost of
participating in the program. The credit is available for up to three years while the farmer
is in the program. The authority shall maintain a list of approved financial management
programs and establish a procedure for approving equivalent programs that are not on the
list.
new text end

new text begin (b) The credit is limited to the liability for tax as computed under chapter 290 for the
taxable year. If the amount of the credit determined under this section for any taxable year
exceeds this limitation, the excess is a beginning farmer management credit carryover
according to section 290.06, subdivision 38.
new text end

new text begin Subd. 4. new text end

new text begin Authority duties. new text end

new text begin The authority shall:
new text end

new text begin (1) approve and certify beginning farmers as eligible for the program under this section;
new text end

new text begin (2) approve and certify owners of agricultural assets as eligible for the tax credit under
subdivision 2;
new text end

new text begin (3) provide necessary and reasonable assistance and support to beginning farmers for
qualification and participation in financial management programs approved by the authority;
and
new text end

new text begin (4) refer beginning farmers to agencies and organizations that may provide additional
pertinent information and assistance.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 2.

Minnesota Statutes 2016, section 290.06, is amended by adding a subdivision to
read:

new text begin Subd. 37. new text end

new text begin Beginning farmer incentive credit. new text end

new text begin (a) A beginning farmer incentive credit
is allowed against the tax due under this chapter for the sale or rental of agricultural assets
to a beginning farmer according to section 41B.0391, subdivision 2.
new text end

new text begin (b) The credit may be claimed only after approval and certification by the Rural Finance
Authority according to section 41B.0391.
new text end

new text begin (c) The credit is limited to the liability for tax, as computed under this chapter, for the
taxable year. If the amount of the credit determined under this subdivision for any taxable
year exceeds this limitation, the excess is a beginning farmer incentive credit carryover to
each of the 15 succeeding taxable years. The entire amount of the excess unused credit for
the taxable year is carried first to the earliest of the taxable years to which the credit may
be carried and then to each successive year to which the credit may be carried. The amount
of the unused credit which may be added under this paragraph must not exceed the taxpayer's
liability for tax, less the beginning farmer incentive credit for the taxable year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 3.

Minnesota Statutes 2016, section 290.06, is amended by adding a subdivision to
read:

new text begin Subd. 38. new text end

new text begin Beginning farmer management credit. new text end

new text begin (a) A taxpayer who is a beginning
farmer may take a credit against the tax due under this chapter for participation in a financial
management program according to section 41B.0391, subdivision 3.
new text end

new text begin (b) The credit may be claimed only after approval and certification by the Rural Finance
Authority according to section 41B.0391.
new text end

new text begin (c) The credit is limited to the liability for tax, as computed under this chapter, for the
taxable year. If the amount of the credit determined under this subdivision for any taxable
year exceeds this limitation, the excess is a beginning farmer management credit carryover
to each of the three succeeding taxable years. The entire amount of the excess unused credit
for the taxable year is carried first to the earliest of the taxable years to which the credit
may be carried and then to each successive year to which the credit may be carried. The
amount of the unused credit which may be added under this paragraph must not exceed the
taxpayer's liability for tax, less the beginning farmer management credit for the taxable
year.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end