HF 5144

Introduction - 94th Legislature (2025 - 2026)

Posted on 05/14/2026 09:47 a.m.

A bill for an act
relating to agriculture; modifying the nonprofit corporation exemption under the
corporate farm law; amending Minnesota Statutes 2024, section 500.24, subdivision
2.

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

Section 1.

Minnesota Statutes 2024, section 500.24, subdivision 2, is amended to read:

Subd. 2.

Definitions.

The definitions in this subdivision apply to this section.

(a) "Farming" means the production of (1) agricultural products; (2) livestock or livestock
products; (3) milk or milk products; or (4) fruit or other horticultural products. It does not
include the processing, refining, or packaging of said products, nor the provision of spraying
or harvesting services by a processor or distributor of farm products. It does not include the
production of timber or forest products, the production of poultry or poultry products, or
the feeding and caring for livestock that are delivered to a corporation for slaughter or
processing for up to 20 days before slaughter or processing.

(b) "Family farm" means an unincorporated farming unit owned by one or more persons
residing on the farm or actively engaging in farming.

(c) "Family farm corporation" means a corporation founded for the purpose of farming
and the ownership of agricultural land in which the majority of the stock is held by and the
majority of the stockholders are persons, the spouses of persons, or current beneficiaries of
one or more family farm trusts in which the trustee holds stock in a family farm corporation,
related to each other within the third degree of kindred according to the rules of the civil
law, and at least one of the related persons is residing on or actively operating the farm, and
none of whose stockholders are corporations; provided that a family farm corporation shall
not cease to qualify as such hereunder by reason of any:

(1) transfer of shares of stock to a person or the spouse of a person related within the
third degree of kindred according to the rules of civil law to the person making the transfer,
or to a family farm trust of which the shareholder, spouse, or related person is a current
beneficiary; or

(2) distribution from a family farm trust of shares of stock to a beneficiary related within
the third degree of kindred according to the rules of civil law to a majority of the current
beneficiaries of the trust, or to a family farm trust of which the shareholder, spouse, or
related person is a current beneficiary.

For the purposes of this section, a transfer may be made with or without consideration,
either directly or indirectly, during life or at death, whether or not in trust, of the shares in
the family farm corporation, and stock owned by a family farm trust are considered to be
owned in equal shares by the current beneficiaries.

(d) "Family farm trust" means:

(1) a trust in which:

(i) a majority of the current beneficiaries are persons or spouses of persons who are
related to each other within the third degree of kindred according to the rules of civil law;

(ii) all of the current beneficiaries are natural persons or nonprofit corporations or trusts
described in the Internal Revenue Code, section 170(c), as amended, and the regulations
under that section; and

(iii) one of the family member current beneficiaries is residing on or actively operating
the farm; or the trust leases the agricultural land to a family farm unit, a family farm
corporation, an authorized farm corporation, an authorized livestock farm corporation, a
family farm limited liability company, a family farm trust, an authorized farm limited liability
company, a family farm partnership, or an authorized farm partnership; or

(2) a charitable remainder trust as defined in the Internal Revenue Code, section 664,
as amended, and the regulations under that section, and a charitable lead trust as set forth
in the Internal Revenue Code, section 170(f), and the regulations under that section.

(e) "Authorized farm corporation" means a corporation meeting the following standards:

(1) it has no more than five shareholders, provided that for the purposes of this section,
spouses are considered one shareholder;

(2) all its shareholders, other than any estate, are natural persons or a family farm trust;

(3) it does not have more than one class of shares;

(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
20 percent of its gross receipts;

(5) shareholders holding 51 percent or more of the interest in the corporation reside on
the farm or are actively engaging in farming;

(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
more than 1,500 acres of agricultural land; and

(7) none of its shareholders are shareholders in other authorized farm corporations that
directly or indirectly in combination with the corporation own more than 1,500 acres of
agricultural land.

(f) "Authorized livestock farm corporation" means a corporation formed for the
production of livestock and meeting the following standards:

(1) it is engaged in the production of livestock other than dairy cattle;

(2) all its shareholders, other than any estate, are natural persons, family farm trusts, or
family farm corporations;

(3) it does not have more than one class of shares;

(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
20 percent of its gross receipts;

(5) shareholders holding 75 percent or more of the control, financial, and capital
investment in the corporation are farmers, and at least 51 percent of the required percentage
of farmers are actively engaged in livestock production;

(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
more than 1,500 acres of agricultural land; and

(7) none of its shareholders are shareholders in other authorized farm corporations that
directly or indirectly in combination with the corporation own more than 1,500 acres of
agricultural land.

(g) "Agricultural land" means real estate used for farming or capable of being used for
farming in this state.

(h) "Pension or investment fund" means a pension or employee welfare benefit fund,
however organized, a mutual fund, a life insurance company separate account, a common
trust of a bank or other trustee established for the investment and reinvestment of money
contributed to it, a real estate investment trust, or an investment company as defined in
United States Code, title 15, section 80a-3.

(i) "Farm homestead" means a house including adjoining buildings that has been used
as part of a farming operation or is part of the agricultural land used for a farming operation.

(j) "Family farm partnership" means a limited partnership formed for the purpose of
farming and the ownership of agricultural land in which the majority of the interests in the
partnership is held by and the majority of the partners are natural persons or current
beneficiaries of one or more family farm trusts in which the trustee holds an interest in a
family farm partnership related to each other within the third degree of kindred according
to the rules of the civil law, and at least one of the related persons is residing on the farm,
actively operating the farm, or the agricultural land was owned by one or more of the related
persons for a period of five years before its transfer to the limited partnership, and none of
the partners is a corporation. A family farm partnership does not cease to qualify as a family
farm partnership because of a:

(1) transfer of a partnership interest to a person or spouse of a person related within the
third degree of kindred according to the rules of civil law to the person making the transfer
or to a family farm trust of which the partner, spouse, or related person is a current
beneficiary; or

(2) distribution from a family farm trust of a partnership interest to a beneficiary related
within the third degree of kindred according to the rules of civil law to a majority of the
current beneficiaries of the trust, or to a family farm trust of which the partner, spouse, or
related person is a current beneficiary.

For the purposes of this section, a transfer may be made with or without consideration,
either directly or indirectly, during life or at death, whether or not in trust, of a partnership
interest in the family farm partnership, and interest owned by a family farm trust is considered
to be owned in equal shares by the current beneficiaries.

(k) "Authorized farm partnership" means a limited partnership meeting the following
standards:

(1) it has been issued a certificate from the secretary of state or is registered with the
county recorder and farming and ownership of agricultural land is stated as a purpose or
character of the business;

(2) it has no more than five partners;

(3) all its partners, other than any estate, are natural persons or family farm trusts;

(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
20 percent of its gross receipts;

(5) its general partners hold at least 51 percent of the interest in the land assets of the
partnership and reside on the farm or are actively engaging in farming not more than 1,500
acres as a general partner in an authorized limited partnership;

(6) its limited partners do not participate in the business of the limited partnership
including operating, managing, or directing management of farming operations;

(7) it does not, directly or indirectly, own or otherwise have an interest in any title to
more than 1,500 acres of agricultural land; and

(8) none of its limited partners are limited partners in other authorized farm partnerships
that directly or indirectly in combination with the partnership own more than 1,500 acres
of agricultural land.

(l) "Family farm limited liability company" means a limited liability company founded
for the purpose of farming and the ownership of agricultural land in which the majority of
the membership interests is held by and the majority of the members are natural persons,
or current beneficiaries of one or more family farm trusts in which the trustee holds an
interest in a family farm limited liability company related to each other within the third
degree of kindred according to the rules of the civil law, and at least one of the related
persons is residing on the farm, actively operating the farm, or the agricultural land was
owned by one or more of the related persons for a period of five years before its transfer to
the limited liability company, and none of the members is a corporation or a limited liability
company. A family farm limited liability company does not cease to qualify as a family
farm limited liability company because of:

(1) a transfer of a membership interest to a person or spouse of a person related within
the third degree of kindred according to the rules of civil law to the person making the
transfer or to a family farm trust of which the member, spouse, or related person is a current
beneficiary; or

(2) distribution from a family farm trust of a membership interest to a beneficiary related
within the third degree of kindred according to the rules of civil law to a majority of the
current beneficiaries of the trust, or to a family farm trust of which the member, spouse, or
related person is a current beneficiary.

For the purposes of this section, a transfer may be made with or without consideration,
either directly or indirectly, during life or at death, whether or not in trust, of a membership
interest in the family farm limited liability company, and interest owned by a family farm
trust is considered to be owned in equal shares by the current beneficiaries. Except for a
state or federally chartered financial institution acquiring an encumbrance for the purpose
of security or an interest under paragraph (x), a member of a family farm limited liability
company may not transfer a membership interest, including a financial interest, to a person
who is not otherwise eligible to be a member under this paragraph.

(m) "Authorized farm limited liability company" means a limited liability company
meeting the following standards:

(1) it has no more than five members;

(2) all its members, other than any estate, are natural persons or family farm trusts;

(3) it does not have more than one class of membership interests;

(4) its revenue from rent, royalties, dividends, interest, and annuities does not exceed
20 percent of its gross receipts;

(5) members holding 51 percent or more of both the governance rights and financial
rights in the limited liability company reside on the farm or are actively engaged in farming;

(6) it does not, directly or indirectly, own or otherwise have an interest in any title to
more than 1,500 acres of agricultural land; and

(7) none of its members are members in other authorized farm limited liability companies
that directly or indirectly in combination with the authorized farm limited liability company
own more than 1,500 acres of agricultural land.

Except for a state or federally chartered financial institution acquiring an encumbrance
for the purpose of security or an interest under paragraph (x), a member of an authorized
farm limited liability company may not transfer a membership interest, including a financial
interest, to a person who is not otherwise eligible to be a member under this paragraph.

(n) "Farmer" means a natural person who regularly participates in physical labor or
operations management in the person's farming operation and files "Schedule F" as part of
the person's annual Form 1040 filing with the United States Internal Revenue Service.

(o) "Actively engaged in livestock production" means performing day-to-day physical
labor or day-to-day operations management that significantly contributes to livestock
production and the functioning of a livestock operation.

(p) "Research or experimental farm" means a corporation, limited partnership, pension,
investment fund, or limited liability company that owns or operates agricultural land for
research or experimental purposes, provided that any commercial sales from the operation
are incidental to the research or experimental objectives of the corporation. A corporation,
limited partnership, limited liability company, or pension or investment fund seeking initial
approval by the commissioner to operate agricultural land for research or experimental
purposes must first submit to the commissioner a prospectus or proposal of the intended
method of operation containing information required by the commissioner including a copy
of any operational contract with individual participants.

(q) "Breeding stock farm" means a corporation, limited partnership, or limited liability
company, that owns or operates agricultural land for the purpose of raising breeding stock,
including embryos, for resale to farmers or for the purpose of growing seed, wild rice,
nursery plants, or sod. An entity that is organized to raise livestock other than dairy cattle
under this paragraph that does not qualify as an authorized farm corporation must:

(1) sell all castrated animals to be fed out or finished to farming operations that are
neither directly nor indirectly owned by the business entity operating the breeding stock
operation; and

(2) report its total production and sales annually to the commissioner.

(r) "Aquatic farm" means a corporation, limited partnership, or limited liability company,
that owns or leases agricultural land as a necessary part of an aquatic farm as defined in
section 17.47, subdivision 3.

(s) "Religious farm" means a corporation formed primarily for religious purposes whose
sole income is derived from agriculture.

(t) "Utility corporation" means a corporation regulated under Minnesota Statutes 1974,
chapter 216B, that owns agricultural land for purposes described in that chapter, or an
electric generation or transmission cooperative that owns agricultural land for use in its
business if the land is not used for farming except under lease to a family farm unit, a family
farm corporation, a family farm trust, a family farm partnership, or a family farm limited
liability company.

(u) "Development organization" means a corporation, limited partnership, limited liability
company, or pension or investment fund that has an interest in agricultural land for which
the corporation, limited partnership, limited liability company, or pension or investment
fund has documented plans to use and subsequently uses the land within six years from the
date of purchase for a specific nonfarming purpose, or if the land is zoned nonagricultural,
or if the land is located within an incorporated area. A corporation, limited partnership,
limited liability company, or pension or investment fund may hold agricultural land in the
amount necessary for its nonfarm business operation; provided, however, that pending the
development of agricultural land for nonfarm purposes, the land may not be used for farming
except under lease to a family farm unit, a family farm corporation, a family farm trust, an
authorized farm corporation, an authorized livestock farm corporation, a family farm
partnership, an authorized farm partnership, a family farm limited liability company, or an
authorized farm limited liability company, or except when controlled through ownership,
options, leaseholds, or other agreements by a corporation that has entered into an agreement
with the United States under the New Community Act of 1968 (Title IV of the Housing and
Urban Development Act of 1968, United States Code, title 42, sections 3901 to 3914) as
amended, or a subsidiary or assign of such a corporation.

(v) "Exempt land" means agricultural land owned or leased by a corporation as of May
20, 1973 deleted text begin , deleted text end new text begin ; new text end agricultural land owned or leased by a pension or investment fund as of May 12,
1981 deleted text begin , deleted text end new text begin ; new text end agricultural land owned or leased by a limited partnership as of May 1, 1988 deleted text begin , or deleted text end new text begin ; new text end
agricultural land owned or leased by a trust as of the effective date of Laws 2000, chapter
477 deleted text begin , deleted text end new text begin ; or agricultural land leased by a nonprofit corporation to an eligible entity as of July
31, 2026, new text end including the normal expansion of that ownership at a rate not to exceed 20 percent
of the amount of land owned as of May 20, 1973, for a corporation; May 12, 1981, for a
pension or investment fund; May 1, 1988, for a limited partnership deleted text begin , or deleted text end new text begin ; new text end the effective date
of Laws 2000, chapter 477, for a trust deleted text begin , deleted text end new text begin ; or July 31, 2026, for a nonprofit corporation leasing
to an eligible entity, new text end measured in acres, in any five-year period, and including additional
ownership reasonably necessary to meet the requirements of pollution control rules. A
corporation, limited partnership, or pension or investment fund that is eligible to own or
lease agricultural land under this section prior to May 1997 deleted text begin , or deleted text end new text begin ; new text end a corporation that is eligible
to own or lease agricultural land as a benevolent trust under this section prior to the effective
date of Laws 2000, chapter 477 deleted text begin , deleted text end new text begin ; new text end new text begin or a nonprofit corporation that is eligible to lease agricultural
land prior to August 1, 2026, new text end may continue to own or lease agricultural land subject to the
same conditions and limitations as previously allowed.

(w) "Gifted land" means agricultural land acquired as a gift, either by grant or devise,
by an educational, religious, or charitable nonprofit corporation, limited partnership, limited
liability company, or pension or investment fund if all land so acquired is disposed of within
ten years after acquiring the title.

(x) "Repossessed land" means agricultural land acquired by a corporation, limited
partnership, limited liability company, or pension or investment fund by process of law in
the collection of debts, or by any procedure for the enforcement of a lien or claim on the
land, whether created by mortgage or otherwise if all land so acquired is disposed of within
five years after acquiring the title. The five-year limitation is a covenant running with the
title to the land against any grantee, assignee, or successor of the pension or investment
fund, corporation, limited partnership, or limited liability company. The land so acquired
must not be used for farming during the five-year period, except under a lease to a family
farm unit, a family farm corporation, a family farm trust, an authorized farm corporation,
an authorized livestock farm corporation, a family farm partnership, an authorized farm
partnership, a family farm limited liability company, or an authorized farm limited liability
company. Notwithstanding the five-year divestiture requirement under this paragraph, a
financial institution may continue to own the agricultural land if the agricultural land is
leased to the immediately preceding former owner, but must dispose of the agricultural land
within ten years of acquiring the title. Livestock acquired by a pension or investment fund,
corporation, limited partnership, or limited liability company in the collection of debts, or
by a procedure for the enforcement of lien or claim on the livestock whether created by
security agreement or otherwise after August 1, 1994, must be sold or disposed of within
one full production cycle for the type of livestock acquired or 18 months after the livestock
is acquired, whichever is earlier.

(y) "Commissioner" means the commissioner of agriculture.

(z) "Nonprofit corporation" means a nonprofit corporation organized under state nonprofit
corporation or trust law or qualified for tax-exempt status under federal tax law that: (1)
uses the land for a specific nonfarming purpose; (2) leases deleted text begin the deleted text end new text begin less than 200 acres of new text end
agricultural land to a family farm unit, a family farm corporation, an authorized farm
corporation, an authorized livestock farm corporation, a family farm limited liability
company, a family farm trust, an authorized farm limited liability company, a family farm
partnership, or an authorized farm partnership; or (3) actively farms less than 160 acres that
were acquired by the nonprofit corporation prior to August 1, 2010, or actively farms less
than 40 acres that were acquired by the nonprofit corporation after August 1, 2010, and the
nonprofit corporation uses all profits from the agricultural land for educational purposes.

(aa) "Current beneficiary" means a person who at any time during a year is entitled to,
or at the discretion of any person may, receive a distribution from the income or principal
of the trust. It does not include a distributee trust, other than a trust described in section
170(c) of the Internal Revenue Code, as amended, but does include the current beneficiaries
of the distributee trust. It does not include a person in whose favor a power of appointment
could be exercised until the holder of the power of appointment actually exercises the power
of appointment in that person's favor. It does not include a person who is entitled to receive
a distribution only after a specified time or upon the occurrence of a specified event until
the time or occurrence of the event. For the purposes of this section, a distributee trust is a
current beneficiary of a family farm trust.

(bb) "De minimis" means that any corporation, pension or investment fund, limited
liability company, or limited partnership that directly or indirectly owns, acquires, or
otherwise obtains any interest in 40 acres or less of agricultural land and annually receives
less than $150 per acre in gross revenue from rental or agricultural production.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2026.
new text end