ARC 6067C

ARC 6067C

IOWA FINANCE AUTHORITY[265]

Notice of Intended Action

Proposing rule making related to beginning farmer tax credit program

and providing an opportunity for public comment

The Iowa Finance Authority hereby proposes to amend Chapter 44, "Iowa Agricultural Development Division," Iowa Administrative Code.

Legal Authority for Rule Making

This rule making is proposed under the authority provided in Iowa Code sections 16.5 and 16.81.

State or Federal Law Implemented

This rule making implements, in whole or in part, Iowa Code sections 16.77, 16.79A, 16.81 and 16.82 as amended by 2021 Iowa Acts, Senate File 619.

Purpose and Summary

Division XIX of 2021 Iowa Acts, Senate File 619, amends various elements of the Beginning Farmer Tax Credit Program to encourage the increased utilization of the tax credit by allowing eligible taxpayers and beginning farmers to enter into leases solely for the transfer of agricultural improvements, allowing eligible taxpayers to participate in the program for 15 years, allowing eligible taxpayers to enter into agreements with different qualified beginning farmers, and changing the cap on the tax credit so eligible taxpayers are limited to $50,000 per lease agreement, rather than $50,000 for all agreements. This rule making is proposed to conform Chapter 44 to the changes outlined in 2021 Iowa Acts, Senate File 619.

This rule making also proposes a change to the fee schedule. The change to the fee schedule for beginning farmer tax credit applications is prompted by Iowa Code section 16.81, which sets forth a fee schedule that shall remain in place on an interim basis until December 31, 2021, and Iowa Code section 16.81 repeals the schedule on January 1, 2022. Iowa Code section 16.81 requires that the Authority adopt rules to "impose, assess, and collect application fees."

Fiscal Impact

The fees are expected to have a fiscal impact of less than $100,000 annually or $500,000 over five years.

Jobs Impact

The Authority anticipates that the benefits offered by the amendments to the program may encourage more new farmers to begin farming in Iowa.

Waivers

Any person who believes that the application of the discretionary provisions of this rule making would result in hardship or injustice to that person may petition the Authority for a waiver of the discretionary provisions, if any, pursuant to 265—Chapter 18.

Public Comment

Any interested person may submit written comments concerning this proposed rule making. Written comments in response to this rule making must be received by the Authority no later than 4:30 p.m. on December 21, 2021. Comments should be directed to:

Public Hearing

No public hearing is scheduled at this time. As provided in Iowa Code section 17A.4(1)"b," an oral presentation regarding this rule making may be demanded by 25 interested persons, a governmental subdivision, the Administrative Rules Review Committee, an agency, or an association having 25 or more members.

Review by Administrative Rules Review Committee

The Administrative Rules Review Committee, a bipartisan legislative committee which oversees rule making by executive branch agencies, may, on its own motion or on written request by any individual or group, review this rule making at its regular monthly meeting or at a special meeting. The Committee's meetings are open to the public, and interested persons may be heard as provided in Iowa Code section 17A.8(6).

The following rule-making actions are proposed:

Item 1. Amend rule 265—44.2(16), definitions of "Agricultural asset," "Agricultural improvements," "Agricultural land" and "Agricultural lease agreement," as follows:

"Agricultural asset" means agricultural land located in this state, including any agricultural improvements, machinery, equipment, and crops, livestock, or other depreciable agricultural property.

"Agricultural improvements improvement" means any improvements, including buildings, structures or fixtures suitable for use in farming which are if located on any size parcel of agricultural land. "Agricultural improvements" includes a single-family dwelling located on agricultural land which is or will be occupied by the beginning farmer and structures attached to or incidental to the use of the dwelling.

"Agricultural land" means land located in Iowa suitable for use in farming, any portion of which may include an agricultural improvement, and which is or will be operated as a farm.

"Agricultural lease agreement" or "agreement" means an agreement for the transfer of agricultural assets , that must at least include a lease of agricultural land, from an eligible taxpayer to a qualified beginning farmer as provided in 2019 Iowa Acts, House File 768, section 9 Iowa Code section 16.79A.

Item 2. Amend subparagraph 44.6(1)"a"(5) as follows:

(5)The taxpayer is not a partner of a partnership, shareholder of a family farm corporation, or member of a family farm limited liability company that is the lessee of an agricultural asset that is part of an agricultural lease agreement. If a beginning farmer has an ownership interest in the agricultural asset that does not exceed 10 percent, the tax credit award is reduced by an amount equivalent to the beginning farmer's ownership percentage. For example, if a beginning farmer owns 9 percent of an agricultural asset that is the subject of the agricultural lease agreement, the tax credit award is reduced by 9 percent.

Item 3. Amend paragraph 44.6(2)"a" as follows:

a. A beginning farmer tax credit is allowed only for agricultural assets that are subject to an agricultural lease agreement entered into by an eligible taxpayer and a qualifying beginning farmer participating in the beginning farmer tax credit program established pursuant to 2019 Iowa Acts, House File 768, section 7 Iowa Code section 16.78. The tax credit is allowed regardless of whether the principal agricultural asset is soil, pasture, or a building or other structure used in farming.

Item 4. Adopt the following new paragraphs 44.6(3)"f" and "g":

f. Upon submission of the application or a request to amend an agricultural lease agreement, the authority shall collect the total amount of the application processing fee and annual servicing fees for all lease years. The authority shall collect fees in the amounts based upon the acreage of the land that is the subject of the agreement and the length of the lease.

(1)For agreements leasing 100 or fewer acres: $200.

(2)For agreements leasing 101 to 250 acres: $300.

(3)For agreements leasing 251 or more acres: $400.

(4)For each year of the lease: $50.

g. For any amendment to a previously approved agricultural lease agreement, an amendment fee of $100 shall be paid at the time the amendment is submitted.

Item 5. Amend subrule 44.6(4) as follows:

44.6(4) Requirements of an agricultural lease agreement.

a. The agricultural lease agreement must meet the following requirements:

(1)The agreement must include the lease of agricultural land located in this state , including any or agricultural improvements , located in this state and may provide for the rental of agricultural equipment as defined in Iowa Code section 322F.1.

(2)The agreement must include provisions which describe the consideration paid for the agreement in a manner that allows the authority to calculate the value of the lease in order to determine the tax credit amount as provided in 2019 Iowa Acts, House File 768, section 11 Iowa Code section 16.82.

(3)No change.

(4)The agreement must be for at least two years, but not more than five years. The agreement may be renewed any number of times by the eligible taxpayer and qualified beginning farmer for a term of at least two years, but not more than five years. At the end of the approved agricultural lease agreement term, a new application must be submitted to the authority. However, an eligible taxpayer shall not participate in the program for more than 15 years. For the purposes of this subparagraph, an eligible taxpayer first participating in the beginning farmer tax credit program on or after January 1, 2019, as provided in 2019 Iowa Acts, chapter 161, for a tax year beginning on or after that date, may also participate in the program for not more than 15 years.

(5)No change.

b. An eligible taxpayer may apply and be approved to enter into agreements with different qualified beginning farmers.

b. c.The agreement cannot be assigned, and the agricultural land subject to the agreement shall not be subleased.

c. d.The agricultural assets shall not be leased or rented at a rate that is substantially higher than the market rate for similar agricultural assets leased or rented within the same community. As used in this paragraph, when referring to an agricultural asset that is cropland, "substantially higher" means not more than 30 percent above the average cash rent paid for cropland rented in the same county according to the most recent cash rent survey for cropland published by a unit of Iowa State University of Science and Technology recognized by the authority.