SF 1879

1st Engrossment - 93rd Legislature (2023 - 2024) Posted on 06/13/2023 09:45am

A bill for an act
relating to agriculture; modifying eligibility for beginning farmer tax credit for
the sale of an agricultural asset; requiring a report; repealing the sunset of the
credit; amending Minnesota Statutes 2022, section 41B.0391, subdivisions 2, 4,
6; repealing Minnesota Statutes 2022, section 41B.0391, subdivision 7.

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

Section 1.

Minnesota Statutes 2022, section 41B.0391, subdivision 2, is amended to read:

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 in the amount allocated by the authority under
subdivision 4. An owner of agricultural assets is eligible for allocation of a credit equal to:

(1) deleted text begin five deleted text end new text begin eight new text end percent of the lesser of the sale price or the fair market value of the
agricultural asset, up to a maximum of deleted text begin $32,000 deleted text end new text begin $50,000 new text end ;

(2) ten percent of the gross rental income in each of the first, second, and third years of
a rental agreement, up to a maximum of $7,000 per year; 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, up to a maximum of $10,000 per year.

(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.

(c) The credit may be claimed only after approval and certification by the authority, and
is limited to the amount stated on the certificate issued under subdivision 4. An owner of
agricultural assets must apply to the authority for certification and allocation of a credit, in
a form and manner prescribed by the authority.

(d) 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. In determining reasonable cause, the authority
must look at which party was at fault in the termination of the agreement. If the authority
determines the owner of agricultural assets did not have reasonable cause, the owner of
agricultural assets must repay all credits received as a result of the rental agreement to the
commissioner of revenue. The repayment is additional income tax for the taxable year in
which the authority makes its decision or when a final adjudication under subdivision 5,
paragraph (a), is made, whichever is later.

(e) 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 begin (f) Notwithstanding subdivision 1, paragraph (c), for purposes of the credit for the sale
of an agricultural asset under paragraph (a), clause (1), the family member definitional
exclusions in subdivision 1, paragraph (c), clauses (4) and (5), do not apply.
new text end

new text begin (g) For a sale to a family member to qualify for the credit under paragraph (a), clause
(1), the sales price of the agricultural asset must equal or exceed the assessed value of the
asset as of the date of the sale. If there is no assessed value, the sales price must equal or
exceed 80 percent of the fair market value of the asset as of the date of the sale.
new text end

new text begin (h) For the purposes of this section, "sale to a family member" means a sale to a beginning
farmer in which the beginning farmer or the beginning farmer's spouse is a family member
of:
new text end

new text begin (1) the owner of the agricultural land asset; or
new text end

new text begin (2) a partner, member, shareholder, or trustee of the owner of the agricultural asset.
new text end

new text begin (i) For a sale to a socially disadvantaged farmer or rancher, the credit rate under paragraph
(a), clause (1), is twelve percent rather than eight percent. For the purposes of this section,
"socially disadvantaged farmer or rancher" has the meaning given in United States Code,
title 7, section 2279(a)(5).
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, 2022.
new text end

Sec. 2.

Minnesota Statutes 2022, section 41B.0391, subdivision 4, is amended to read:

Subd. 4.

Authority duties.

(a) The authority shall:

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

(2) approve and certify or recertify owners of agricultural assets as eligible for the tax
credit under subdivision 2 subject to the allocation limits in paragraph (c);

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

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

(5) notwithstanding section 41B.211, the Rural Finance Authority must share information
with the commissioner of revenue to the extent necessary to administer provisions under
this subdivision and section 290.06, subdivisions 37 and 38. The Rural Finance Authority
must annually notify the commissioner of revenue of approval and certification or
recertification of beginning farmers and owners of agricultural assets under this section.
For credits under subdivision 2, the notification must include the amount of credit approved
by the authority and stated on the credit certificate.

(b) The certification of a beginning farmer or an owner of agricultural assets under this
section is valid for the year of the certification and the two following years, after which
time the beginning farmer or owner of agricultural assets must apply to the authority for
recertification.

(c) For credits for owners of agricultural assets allowed under subdivision 2, the authority
must not allocate more than deleted text begin $5,000,000 for taxable years beginning after December 31,
2017, and before January 1, 2019, and must not allocate more than $6,000,000 for taxable
years beginning after December 31, 2018 deleted text end new text begin $6,000,000 for each taxable year new text end . The authority
must allocate credits on a first-come, first-served basis beginning on January 1 of each year,
except that recertifications for the second and third years of credits under subdivision 2,
paragraph (a), clauses (1) and (2), have first priority. Any amount authorized but not allocated
in any taxable year does not cancel and is added to the allocation for the next taxable year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2022.
new text end

Sec. 3.

Minnesota Statutes 2022, section 41B.0391, subdivision 6, is amended to read:

Subd. 6.

Report to legislature.

(a) No later than February 1, deleted text begin 2022 deleted text end new text begin 2024 new text end , the Rural
Finance Authority, in consultation with the commissioner of revenue, must provide a report
to the chairs and ranking minority members of the legislative committees having jurisdiction
over agriculture, economic development, rural development, and taxes, in compliance with
sections 3.195 and 3.197, on the beginning farmer tax credits under this section issued in
tax years beginning after December 31, 2017, and before January 1, deleted text begin 2022 deleted text end new text begin 2024 new text end .

(b) The report must include background information on beginning farmers in Minnesota
and any other information the commissioner and authority find relevant to evaluating the
effect of the credits on increasing opportunities for and the number of beginning farmers.

(c) For credits issued under subdivision 2, paragraph (a), clauses (1) to (3), the report
must include:

(1) the number and amount of credits issued under each clause;

(2) the geographic distribution of credits issued under each clause;

(3) the type of agricultural assets for which credits were issued under clause (1);

(4) the number and geographic distribution of beginning farmers whose purchase or
rental of assets resulted in credits for the seller or owner of the asset;

(5) the number and amount of credits disallowed under subdivision 2, paragraph (d);

(6) data on the number of beginning farmers by geographic region in calendar years
2017 through deleted text begin 2021 deleted text end new text begin 2023, including:
new text end

new text begin (i) the number of beginning farmers by race and ethnicity, as those terms are applied in
the 2020 United States Census; and
new text end

new text begin (ii) to the extent available, the number of beginning farmers who are members of a
socially disadvantaged group, as defined in United States Code, title 7, section 2279(a)(6) new text end ;
and

(7) the number and amount of credit applications that exceeded the allocation available
in each year.

(d) For credits issued under subdivision 3, the report must include:

(1) the number and amount of credits issued;

(2) the geographic distribution of credits;

(3) a listing and description of each approved financial management program for which
credits were issued; and

(4) a description of the approval procedure for financial management programs not on
the list maintained by the authority, as provided in subdivision 3, paragraph (a).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2022, section 41B.0391, subdivision 7, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

APPENDIX

Repealed Minnesota Statutes: S1879-1

41B.0391 BEGINNING FARMER PROGRAM; TAX CREDITS.

Subd. 7.

Sunset.

This section expires for taxable years beginning after December 31, 2023.