1.1                          A bill for an act 
  1.2             relating to agriculture; adding turkey and turkey 
  1.3             products under the corporate farm law; restricting 
  1.4             farming and the ownership of farmland by certain 
  1.5             entities; amending Minnesota Statutes 2002, section 
  1.6             500.24, subdivision 2. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2002, section 500.24, 
  1.9   subdivision 2, is amended to read: 
  1.10     Subd. 2.  [DEFINITIONS.] The definitions in this 
  1.11  subdivision apply to this section. 
  1.12     (a) "Farming" means the production of (1) agricultural 
  1.13  products; (2) livestock or livestock products; (3) milk or milk 
  1.14  products; ~~or~~ (4) turkey or turkey products; or (5) fruit or 
  1.15  other horticultural products.  It does not include the 
  1.16  processing, refining, or packaging of said products, nor the 
  1.17  provision of spraying or harvesting services by a processor or 
  1.18  distributor of farm products.  It does not include the 
  1.19  production of timber or forest products, the production of 
  1.20  poultry or poultry products other than turkey or turkey 
  1.21  products, or the feeding and caring for livestock or turkeys 
  1.22  that are delivered to a corporation for slaughter or processing 
  1.23  for up to 20 days before slaughter or processing. 
  1.24     (b) "Family farm" means an unincorporated farming unit 
  1.25  owned by one or more persons residing on the farm or actively 
  1.26  engaging in farming. 
  2.1      (c) "Family farm corporation" means a corporation founded 
  2.2   for the purpose of farming and the ownership of agricultural 
  2.3   land in which the majority of the stock is held by and the 
  2.4   majority of the stockholders are persons, the spouses of 
  2.5   persons, or current beneficiaries of one or more family farm 
  2.6   trusts in which the trustee holds stock in a family farm 
  2.7   corporation, related to each other within the third degree of 
  2.8   kindred according to the rules of the civil law, and at least 
  2.9   one of the related persons is residing on or actively operating 
  2.10  the farm, and none of whose stockholders are corporations; 
  2.11  provided that a family farm corporation shall not cease to 
  2.12  qualify as such hereunder by reason of any: 
  2.13     (1) transfer of shares of stock to a person or the spouse 
  2.14  of a person related within the third degree of kindred according 
  2.15  to the rules of civil law to the person making the transfer, or 
  2.16  to a family farm trust of which the shareholder, spouse, or 
  2.17  related person is a current beneficiary; or 
  2.18     (2) distribution from a family farm trust of shares of 
  2.19  stock to a beneficiary related within the third degree of 
  2.20  kindred according to the rules of civil law to a majority of the 
  2.21  current beneficiaries of the trust, or to a family farm trust of 
  2.22  which the shareholder, spouse, or related person is a current 
  2.23  beneficiary. 
  2.24     For the purposes of this section, a transfer may be made 
  2.25  with or without consideration, either directly or indirectly, 
  2.26  during life or at death, whether or not in trust, of the shares 
  2.27  in the family farm corporation, and stock owned by a family farm 
  2.28  trust are considered to be owned in equal shares by the current 
  2.29  beneficiaries. 
  2.30     (d) "Family farm trust" means: 
  2.31     (1) a trust in which: 
  2.32     (i) a majority of the current beneficiaries are persons or 
  2.33  spouses of persons who are related to each other within the 
  2.34  third degree of kindred according to the rules of civil law; 
  2.35     (ii) all of the current beneficiaries are natural persons 
  2.36  or nonprofit corporations or trusts described in the Internal 
  3.1   Revenue Code, section 170(c), as amended, and the regulations 
  3.2   under that section; and 
  3.3      (iii) one of the family member current beneficiaries is 
  3.4   residing on or actively operating the farm; or 
  3.5      (2) a charitable remainder trust as defined in the Internal 
  3.6   Revenue Code, section 664, as amended, and the regulations under 
  3.7   that section, and a charitable lead trust as set forth in the 
  3.8   Internal Revenue Code, section 170(f), and the regulations under 
  3.9   that section, if the lead period does not exceed ten years and 
  3.10  the majority of remainder beneficiaries are related to the 
  3.11  grantor within the third degree of kindred according to the 
  3.12  rules of civil law. 
  3.13     For the purposes of this section, if a distributee trust 
  3.14  becomes entitled to, or at the discretion of any person may 
  3.15  receive, a distribution from income or principal of a family 
  3.16  farm trust, then the distributee trust must independently 
  3.17  qualify as a family farm trust. 
  3.18     (e) "Authorized farm corporation" means a corporation 
  3.19  meeting the following standards: 
  3.20     (1) it has no more than five shareholders, provided that 
  3.21  for the purposes of this section, a husband and wife are 
  3.22  considered one shareholder; 
  3.23     (2) all its shareholders, other than any estate, are 
  3.24  natural persons; 
  3.25     (3) it does not have more than one class of shares; 
  3.26     (4) its revenue from rent, royalties, dividends, interest, 
  3.27  and annuities does not exceed 20 percent of its gross receipts; 
  3.28     (5) shareholders holding 51 percent or more of the interest 
  3.29  in the corporation reside on the farm or are actively engaging 
  3.30  in farming; 
  3.31     (6) it does not, directly or indirectly, own or otherwise 
  3.32  have an interest in any title to more than 1,500 acres of 
  3.33  agricultural land; and 
  3.34     (7) none of its shareholders are shareholders in other 
  3.35  authorized farm corporations that directly or indirectly in 
  3.36  combination with the corporation own more than 1,500 acres of 
  4.1   agricultural land. 
  4.2      (f) "Authorized livestock farm corporation" means a 
  4.3   corporation formed for the production of livestock and meeting 
  4.4   the following standards: 
  4.5      (1) it is engaged in the production of livestock other than 
  4.6   dairy cattle; 
  4.7      (2) all its shareholders, other than any estate, are 
  4.8   natural persons or family farm corporations; 
  4.9      (3) it does not have more than one class of shares; 
  4.10     (4) its revenue from rent, royalties, dividends, interest, 
  4.11  and annuities does not exceed 20 percent of its gross receipts; 
  4.12     (5) shareholders holding 75 percent or more of the control, 
  4.13  financial, and capital investment in the corporation are farmers 
  4.14  residing in Minnesota and at least 51 percent of the required 
  4.15  percentage of farmers are actively engaged in livestock 
  4.16  production; 
  4.17     (6) it does not, directly or indirectly, own or otherwise 
  4.18  have an interest in any title to more than 1,500 acres of 
  4.19  agricultural land; and 
  4.20     (7) none of its shareholders are shareholders in other 
  4.21  authorized farm corporations that directly or indirectly in 
  4.22  combination with the corporation own more than 1,500 acres of 
  4.23  agricultural land. 
  4.24     (g) "Agricultural land" means real estate used for farming 
  4.25  or capable of being used for farming in this state. 
  4.26     (h) "Pension or investment fund" means a pension or 
  4.27  employee welfare benefit fund, however organized, a mutual fund, 
  4.28  a life insurance company separate account, a common trust of a 
  4.29  bank or other trustee established for the investment and 
  4.30  reinvestment of money contributed to it, a real estate 
  4.31  investment trust, or an investment company as defined in United 
  4.32  States Code, title 15, section 80a-3.  
  4.33     (i) "Farm homestead" means a house including adjoining 
  4.34  buildings that has been used as part of a farming operation or 
  4.35  is part of the agricultural land used for a farming operation. 
  4.36     (j) "Family farm partnership" means a limited partnership 
  5.1   formed for the purpose of farming and the ownership of 
  5.2   agricultural land in which the majority of the interests in the 
  5.3   partnership is held by and the majority of the partners are 
  5.4   persons, the spouses of persons, or current beneficiaries of one 
  5.5   or more family farm trusts in which the trustee holds an 
  5.6   interest in a family farm partnership related to each other 
  5.7   within the third degree of kindred according to the rules of the 
  5.8   civil law, at least one of the related persons is residing on 
  5.9   the farm, actively operating the farm, or the agricultural land 
  5.10  was owned by one or more of the related persons for a period of 
  5.11  five years before its transfer to the limited partnership, and 
  5.12  none of the partners are corporations.  A family farm 
  5.13  partnership does not cease to qualify as a family farm 
  5.14  partnership because of a: 
  5.15     (1) transfer of a partnership interest to a person or 
  5.16  spouse of a person related within the third degree of kindred 
  5.17  according to the rules of civil law to the person making the 
  5.18  transfer or to a family farm trust of which the partner, spouse, 
  5.19  or related person is a current beneficiary; or 
  5.20     (2) distribution from a family farm trust of a partnership 
  5.21  interest to a beneficiary related within the third degree of 
  5.22  kindred according to the rules of civil law to a majority of the 
  5.23  current beneficiaries of the trust, or to a family farm trust of 
  5.24  which the partner, spouse, or related person is a current 
  5.25  beneficiary. 
  5.26     For the purposes of this section, a transfer may be made 
  5.27  with or without consideration, either directly or indirectly, 
  5.28  during life or at death, whether or not in trust, of a 
  5.29  partnership interest in the family farm partnership, and 
  5.30  interest owned by a family farm trust is considered to be owned 
  5.31  in equal shares by the current beneficiaries. 
  5.32     (k) "Authorized farm partnership" means a limited 
  5.33  partnership meeting the following standards:  
  5.34     (1) it has been issued a certificate from the secretary of 
  5.35  state or is registered with the county recorder and farming and 
  5.36  ownership of agricultural land is stated as a purpose or 
  6.1   character of the business; 
  6.2      (2) it has no more than five partners; 
  6.3      (3) all its partners, other than any estate, are natural 
  6.4   persons; 
  6.5      (4) its revenue from rent, royalties, dividends, interest, 
  6.6   and annuities does not exceed 20 percent of its gross receipts; 
  6.7      (5) its general partners hold at least 51 percent of the 
  6.8   interest in the land assets of the partnership and reside on the 
  6.9   farm or are actively engaging in farming not more than 1,500 
  6.10  acres as a general partner in an authorized limited partnership; 
  6.11     (6) its limited partners do not participate in the business 
  6.12  of the limited partnership including operating, managing, or 
  6.13  directing management of farming operations; 
  6.14     (7) it does not, directly or indirectly, own or otherwise 
  6.15  have an interest in any title to more than 1,500 acres of 
  6.16  agricultural land; and 
  6.17     (8) none of its limited partners are limited partners in 
  6.18  other authorized farm partnerships that directly or indirectly 
  6.19  in combination with the partnership own more than 1,500 acres of 
  6.20  agricultural land.  
  6.21     (l) "Family farm limited liability company" means a limited 
  6.22  liability company founded for the purpose of farming and the 
  6.23  ownership of agricultural land in which the majority of the 
  6.24  membership interests are held by and the majority of the members 
  6.25  are persons or the spouses of persons, or current beneficiaries 
  6.26  of one or more family farm trusts in which the trustee holds 
  6.27  stock in a family farm limited liability company related to each 
  6.28  other within the third degree of kindred according to the rules 
  6.29  of the civil law, at least one of the related persons is 
  6.30  actively operating the farm, and none of the members are 
  6.31  corporations or limited liability companies.  A family farm 
  6.32  limited liability company does not cease to qualify as a family 
  6.33  farm limited liability company because of: 
  6.34     (1) a transfer of a membership interest to a person or 
  6.35  spouse of a person related within the third degree of kindred 
  6.36  according to the rules of civil law to the person making the 
  7.1   transfer or to a family farm trust of which the member, spouse, 
  7.2   or related person is a current beneficiary; or 
  7.3      (2) distribution from a family farm trust of a membership 
  7.4   interest to a beneficiary related within the third degree of 
  7.5   kindred according to the rules of civil law to a majority of the 
  7.6   current beneficiaries of the trust, or to a family farm trust of 
  7.7   which the member, spouse, or related person is a current 
  7.8   beneficiary. 
  7.9      For the purposes of this section, a transfer may be made 
  7.10  with or without consideration, either directly or indirectly, 
  7.11  during life or at death, whether or not in trust, of a 
  7.12  membership interest in the family farm limited liability 
  7.13  company, and interest owned by a family farm trust is considered 
  7.14  to be owned in equal shares by the current beneficiaries.  
  7.15  Except for a state or federally chartered financial institution 
  7.16  acquiring an encumbrance for the purpose of security or an 
  7.17  interest under paragraph (x), a member of a family farm limited 
  7.18  liability company may not transfer a membership interest, 
  7.19  including a financial interest, to a person who is not otherwise 
  7.20  eligible to be a member under this paragraph. 
  7.21     (m) "Authorized farm limited liability company" means a 
  7.22  limited liability company meeting the following standards: 
  7.23     (1) it has no more than five members; 
  7.24     (2) all its members, other than any estate, are natural 
  7.25  persons; 
  7.26     (3) it does not have more than one class of membership 
  7.27  interests; 
  7.28     (4) its revenue from rent, royalties, dividends, interest, 
  7.29  and annuities does not exceed 20 percent of its gross receipts; 
  7.30     (5) members holding 51 percent or more of both the 
  7.31  governance rights and financial rights in the limited liability 
  7.32  company reside on the farm or are actively engaged in farming; 
  7.33     (6) it does not, directly or indirectly, own or otherwise 
  7.34  have an interest in any title to more than 1,500 acres of 
  7.35  agricultural land; and 
  7.36     (7) none of its members are members in other authorized 
  8.1   farm limited liability companies that directly or indirectly in 
  8.2   combination with the authorized farm limited liability company 
  8.3   own more than 1,500 acres of agricultural land. 
  8.4      Except for a state or federally chartered financial 
  8.5   institution acquiring an encumbrance for the purpose of security 
  8.6   or an interest under paragraph (x), a member of an authorized 
  8.7   farm limited liability company may not transfer a membership 
  8.8   interest, including a financial interest, to a person who is not 
  8.9   otherwise eligible to be a member under this paragraph. 
  8.10     (n) "Farmer" means a natural person who regularly 
  8.11  participates in physical labor or operations management in the 
  8.12  person's farming operation and files "Schedule F" as part of the 
  8.13  person's annual Form 1040 filing with the United States Internal 
  8.14  Revenue Service. 
  8.15     (o) "Actively engaged in livestock production" means 
  8.16  performing day-to-day physical labor or day-to-day operations 
  8.17  management that significantly contributes to livestock 
  8.18  production and the functioning of a livestock operation. 
  8.19     (p) "Research or experimental farm" means a corporation, 
  8.20  limited partnership, pension, investment fund, or limited 
  8.21  liability company that owns or operates agricultural land for 
  8.22  research or experimental purposes, provided that any commercial 
  8.23  sales from the operation are incidental to the research or 
  8.24  experimental objectives of the corporation.  A corporation, 
  8.25  limited partnership, limited liability company, or pension or 
  8.26  investment fund seeking initial approval by the commissioner to 
  8.27  operate agricultural land for research or experimental purposes 
  8.28  must first submit to the commissioner a prospectus or proposal 
  8.29  of the intended method of operation containing information 
  8.30  required by the commissioner including a copy of any operational 
  8.31  contract with individual participants. 
  8.32     (q) "Breeding stock farm" means a corporation, limited 
  8.33  partnership, or limited liability company, that owns or operates 
  8.34  agricultural land for the purpose of raising breeding stock, 
  8.35  including embryos, for resale to farmers or for the purpose of 
  8.36  growing seed, wild rice, nursery plants, or sod.  An entity that 
  9.1   is organized to raise livestock other than dairy cattle under 
  9.2   this paragraph that does not qualify as an authorized farm 
  9.3   corporation must:  
  9.4      (1) sell all castrated animals to be fed out or finished to 
  9.5   farming operations that are neither directly nor indirectly 
  9.6   owned by the business entity operating the breeding stock 
  9.7   operation; and 
  9.8      (2) report its total production and sales annually to the 
  9.9   commissioner.  
  9.10     (r) "Aquatic farm" means a corporation, limited 
  9.11  partnership, or limited liability company, that owns or leases 
  9.12  agricultural land as a necessary part of an aquatic farm as 
  9.13  defined in section 17.47, subdivision 3.  
  9.14     (s) "Religious farm" means a corporation formed primarily 
  9.15  for religious purposes whose sole income is derived from 
  9.16  agriculture.  
  9.17     (t) "Utility corporation" means a corporation regulated 
  9.18  under Minnesota Statutes 1974, chapter 216B, that owns 
  9.19  agricultural land for purposes described in that chapter, or an 
  9.20  electric generation or transmission cooperative that owns 
  9.21  agricultural land for use in its business if the land is not 
  9.22  used for farming except under lease to a family farm unit, a 
  9.23  family farm corporation, a family farm trust, a family farm 
  9.24  partnership, or a family farm limited liability company.  
  9.25     (u) "Development organization" means a corporation, limited 
  9.26  partnership, limited liability company, or pension or investment 
  9.27  fund that has an interest in agricultural land for which the 
  9.28  corporation, limited partnership, limited liability company, or 
  9.29  pension or investment fund has documented plans to use and 
  9.30  subsequently uses the land within six years from the date of 
  9.31  purchase for a specific nonfarming purpose, or if the land is 
  9.32  zoned nonagricultural, or if the land is located within an 
  9.33  incorporated area.  A corporation, limited partnership, limited 
  9.34  liability company, or pension or investment fund may hold 
  9.35  agricultural land in the amount necessary for its nonfarm 
  9.36  business operation; provided, however, that pending the 
 10.1   development of agricultural land for nonfarm purposes, the land 
 10.2   may not be used for farming except under lease to a family farm 
 10.3   unit, a family farm corporation, a family farm trust, an 
 10.4   authorized farm corporation, an authorized livestock farm 
 10.5   corporation, a family farm partnership, an authorized farm 
 10.6   partnership, a family farm limited liability company, or an 
 10.7   authorized farm limited liability company, or except when 
 10.8   controlled through ownership, options, leaseholds, or other 
 10.9   agreements by a corporation that has entered into an agreement 
 10.10  with the United States under the New Community Act of 1968 
 10.11  (Title IV of the Housing and Urban Development Act of 1968, 
 10.12  United States Code, title 42, sections 3901 to 3914) as amended, 
 10.13  or a subsidiary or assign of such a corporation.  
 10.14     (v) "Exempt land" means agricultural land owned or leased 
 10.15  by a corporation as of May 20, 1973, agricultural land owned or 
 10.16  leased by a pension or investment fund as of May 12, 1981, 
 10.17  agricultural land owned or leased by a limited partnership as of 
 10.18  May 1, 1988, ~~or~~ agricultural land owned or leased by a trust as 
 10.19  of ~~the effective date of Laws 2000, chapter 477,~~ May 16, 2000, 
 10.20  or agricultural land owned or leased by an entity for the 
 10.21  production of turkey or turkey products as of the effective date 
 10.22  of this section, including the normal expansion of that 
 10.23  ownership at a rate not to exceed 20 percent of the amount of 
 10.24  land owned as of May 20, 1973, for a corporation; May 12, 1981, 
 10.25  for a pension or investment fund; May 1, 1988, for a limited 
 10.26  partnership~~, or the effective date of Laws 2000, chapter 477~~; 
 10.27  May 16, 2000, for a trust; or the effective date of this 
 10.28  section, for an entity involved in the production of turkey or 
 10.29  turkey products, measured in acres, in any five-year period, and 
 10.30  including additional ownership reasonably necessary to meet the 
 10.31  requirements of pollution control rules.  A corporation, limited 
 10.32  partnership, or pension or investment fund that is eligible to 
 10.33  own or lease agricultural land under this section prior to May 
 10.34  1997, ~~or~~ a corporation that is eligible to own or lease 
 10.35  agricultural land as a benevolent trust under this section prior 
 10.36  to ~~the effective date of Laws 2000, chapter 477,~~ May 16, 2000, 
 11.1   or an entity involved in the production of turkey or turkey 
 11.2   products that is eligible to own or lease agricultural land 
 11.3   prior to the effective date of this section, may continue to own 
 11.4   or lease agricultural land subject to the same conditions and 
 11.5   limitations as previously allowed.  
 11.6      (w) "Gifted land" means agricultural land acquired as a 
 11.7   gift, either by grant or devise, by an educational, religious, 
 11.8   or charitable nonprofit corporation, limited partnership, 
 11.9   limited liability company, or pension or investment fund if all 
 11.10  land so acquired is disposed of within ten years after acquiring 
 11.11  the title.  
 11.12     (x) "Repossessed land" means agricultural land acquired by 
 11.13  a corporation, limited partnership, limited liability company, 
 11.14  or pension or investment fund by process of law in the 
 11.15  collection of debts, or by any procedure for the enforcement of 
 11.16  a lien or claim on the land, whether created by mortgage or 
 11.17  otherwise if all land so acquired is disposed of within five 
 11.18  years after acquiring the title.  The five-year limitation is a 
 11.19  covenant running with the title to the land against any grantee, 
 11.20  assignee, or successor of the pension or investment fund, 
 11.21  corporation, limited partnership, or limited liability company.  
 11.22  The land so acquired must not be used for farming during the 
 11.23  five-year period, except under a lease to a family farm unit, a 
 11.24  family farm corporation, an authorized farm corporation, an 
 11.25  authorized livestock farm corporation, a family farm 
 11.26  partnership, an authorized farm partnership, a family farm 
 11.27  limited liability company, or an authorized farm limited 
 11.28  liability company.  Notwithstanding the five-year divestiture 
 11.29  requirement under this paragraph, a financial institution may 
 11.30  continue to own the agricultural land if the agricultural land 
 11.31  is leased to the immediately preceding former owner, but must 
 11.32  dispose of the agricultural land within ten years of acquiring 
 11.33  the title.  Livestock acquired by a pension or investment fund, 
 11.34  corporation, limited partnership, or limited liability company 
 11.35  in the collection of debts, or by a procedure for the 
 11.36  enforcement of lien or claim on the livestock whether created by 
 12.1   security agreement or otherwise after August 1, 1994, must be 
 12.2   sold or disposed of within one full production cycle for the 
 12.3   type of livestock acquired or 18 months after the livestock is 
 12.4   acquired, whichever is earlier.  
 12.5      (y) "Commissioner" means the commissioner of agriculture.  
 12.6      (z) "Nonprofit corporation" means a nonprofit corporation 
 12.7   organized under state nonprofit corporation law or qualified for 
 12.8   tax-exempt status under federal tax law that uses the land for a 
 12.9   specific nonfarming purpose or leases the agricultural land to a 
 12.10  family farm unit, a family farm corporation, an authorized farm 
 12.11  corporation, an authorized livestock farm corporation, a family 
 12.12  farm limited liability company, an authorized farm limited 
 12.13  liability company, a family farm partnership, or an authorized 
 12.14  farm partnership. 
 12.15     (aa) "Current beneficiary" means a person who at any time 
 12.16  during a year is entitled to, or at the discretion of any person 
 12.17  may, receive a distribution from the income or principal of the 
 12.18  trust.  It does not include a distributee trust, other than a 
 12.19  trust described in section 170(c) of the Internal Revenue Code, 
 12.20  as amended, but does include the current beneficiaries of the 
 12.21  distributee trust.  It does not include a person in whose favor 
 12.22  a power of appointment could be exercised until the holder of 
 12.23  the power of appointment actually exercises the power of 
 12.24  appointment in that person's favor.  It does not include a 
 12.25  person who is entitled to receive a distribution only after a 
 12.26  specified time or upon the occurrence of a specified event until 
 12.27  the time or occurrence of the event.  For the purposes of this 
 12.28  section, a distributee trust is a current beneficiary of a 
 12.29  family farm trust. 
 12.30     (bb) "De minimis" means that any corporation, pension or 
 12.31  investment fund, limited liability company, or limited 
 12.32  partnership that directly or indirectly owns, acquires, or 
 12.33  otherwise obtains any interest in 40 acres or less of 
 12.34  agricultural land and annually receives less than $150 per acre 
 12.35  in gross revenue from rental or agricultural production.