SF 1144

as introduced - 87th Legislature (2011 - 2012) Posted on 02/23/2012 09:58am

A bill for an act
relating to taxation; income; providing beginning farmer program tax credits;
amending Minnesota Statutes 2010, 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.

[41B.0391] BEGINNING FARMER PROGRAM; TAX CREDITS.

Subdivision 1.

Definitions.

(a) The definitions in this subdivision apply to this
section.

(b) "Agricultural assets" means agricultural land, livestock, farming or livestock
production facilities or buildings, and machinery used for farming or livestock production
located in Minnesota.

(c) "Beginning farmer or livestock producer" means a resident of Minnesota who:

(1) is seeking entry or has entered within the last ten years into farming or livestock
production;

(2) intends to farm or raise crops or livestock on land located within the state borders
of Minnesota;

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

(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 or livestock producer
is seeking to purchase or rent agricultural assets; and

(5) meets the following eligibility requirements as determined by the authority:

(i) has a net worth of not more than $200,000, including any holdings by a spouse
or dependent, based on fair market value;

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

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

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

(v) asserts to the satisfaction of the authority that farming or livestock production
will be a significant source of income for the beginning farmer or livestock producer;

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

(vii) has other such qualifications as specified by the authority.

(d) "Farm" means any tract of land over ten acres in area used for or devoted to the
commercial production of farm products.

(e) "Farming or livestock production" means the active use, management, and
operation of real and personal property for the production of a farm product.

(f) "Farm product" means those plants and animals useful to humans and includes,
but is not limited to, forage and sod crops, grain and feed crops, dairy and dairy products,
poultry and poultry products, livestock, fruits, and vegetables.

(g) "Owner of agricultural assets" means a person who is the owner in fee of
agricultural land or who has legal title to any other agricultural asset.

(h) "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.

Subd. 2.

Tax credit for owners of agricultural assets.

(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 or livestock producer. An owner of agricultural
assets may take a credit equal to:

(1) five percent of the sale price of the agricultural asset;

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

(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.

(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.

(c) An owner of agricultural assets or beginning farmer or livestock producer 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.

(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 36.

Subd. 3.

Beginning farmer management tax credit.

(a) A beginning farmer or
livestock producer 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 or $700, whichever is less. 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.

(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 37.

Subd. 4.

Authority's duties.

The authority shall:

(1) approve and certify beginning farmers and livestock producers as eligible for
the program under this section;

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

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

(4) refer beginning farmers and livestock producers to agencies and organizations
that may provide additional pertinent information and assistance.

Sec. 2.

Minnesota Statutes 2010, section 290.06, is amended by adding a subdivision
to read:

Subd. 36.

Beginning farmer incentive credit.

(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 or livestock producer according to section 41B.0391,
subdivision 2.

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

(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 under this paragraph must not exceed the
taxpayer's liability for tax in a taxable year.

Sec. 3.

Minnesota Statutes 2010, section 290.06, is amended by adding a subdivision
to read:

Subd. 37.

Beginning farmer management credit.

(a) A taxpayer who is a
beginning farmer or livestock producer 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.

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

(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 under this paragraph must not exceed the
taxpayer's liability for tax in a taxable year.

Sec. 4. EFFECTIVE DATE.

Sections 1 to 3 are effective for taxable years beginning after December 31, 2010.