Minnesota West professors Brad Verly, Linda Carter, and Lori Van Overbeke put together a presentation about the new Beginning Farmer Tax Credit. As the name implies, the credit is supposed to make it easier for new farmers to “get in the game,” and help farmers looking to retire pass on their set-ups.
On May 30, 2017, Governor Mark Dayton signed into law a Tax Credit for Minnesota beginning farmers. The new law will provide tax credits for the rent or sale of farm land or a variety of farm assets to beginning farmers. While similar to tax credits in Iowa or Nebraska, Minnesota will become the first state to provide incentives for the sale of farm land.
There are credits for any kind of agricultural asset, which includes land, livestock, facilities, buildings, and machinery.
There are stipulations to help make it so large corporations and equipment or livestock dealers aren’t the ones scooping up the money. The lease must be signed by an individual, not an LLC.
The new farmer must have farmed for less than 10 years, based on the number of Schedule F’s submitted. The new farmer must have a net worth below $800,000, and do the majority of the farm labor and management. Also, the new farmer must have adequate farming experience, and is required to take an approved financial management program.
Most importantly, the Asset Owner cannot be family, or family of a spouse, defined by being a grandparent, parent, children, grandchildren, brother, or sister. The tax credit can only go to a farmer who will provide the majority of the labor and management of the farm that is located in Minnesota.
The credits for the asset owner take a credit against Minnesota state taxes.
•5% of the lesser of the sale price or fair market value of the agriculture asset, up to $32,000.
•10% of the gross rental income in each of the 1st, 2nd, and 3rd years of the rental agreement, up to a maximum of $7000 per year, or
•15% of the cash equivalent of the gross rental income in each of the 1st, 2nd, and 3rd years of a share rent agreement, up to a maximum of $10,000 per year.
Applications are on the Minnesota Department of Agriculture website. Both the beginning farmer and the asset owner need to complete applications.
The tax credit is overseen by the Rural Finance Authority (RFA). The RFA is responsible for identifying new farmers and with assisting beginning farmers with locating eligible financial management program options in their area. The RFA also is responsible for certifying that owners of agricultural assets are eligible for the tax credit. This is a first come, first served initiative. The maximum amount available in 2018 is $5 million. This increases to $6 million per year in 2019 thru tax year 2023.
The program is going to start January 1st, 2018. There is a total of $5 million available during the first year, then it goes to $6 million per year until the program sunsets at the end of 2023.