Illinois Administrative Code › Title 74 - PUBLIC FINANCE › Part 1100 - ILLINOIS FINANCE AUTHORITY › Subpart G - FARM DEVELOPMENT PROGRAM › Section 1100.710 - Bond Programs and Rules Applicable to Each

Current through Register Vol. 48, No. 28, July 12, 2024
a) Beginning Farmer Bond and Contract Bond
				Programs
1) Purpose. The purpose of the
				Beginning Farmer Bond and Contract Bond Programs is to provide affordable
				financing to new, low net worth farmers for financing capital purchases. IFA
				works with the applicant's local lender or contract seller to provide this
				financing. IFA issues a tax-exempt bond for the amount and with the terms of
				the loan. Because the interest income to the lender or contract seller is
				exempt from federal income tax, the lender or contract seller is able to charge
				a lower rate to the applicant. The loan and the bond are secured solely by the
				collateral required by the lender or contract seller and are not obligations of
				IFA or of the State of Illinois. Because the lender or contract seller assumes
				all credit risk, the lender or contract seller makes all credit
				decisions.
2) Eligible Applicants
A) The applicant must have net worth of not
				more than $250,000 at the time of application. Net worth means total assets
				less total liabilities of the individual and the individual's spouse and minor
				children, if any.
i) Total assets shall
				include, but not be limited to, the following: cash crops or feed on hand;
				livestock held for sale; breeding stock; marketable bonds and securities;
				securities (not readily marketable); accounts receivable; notes receivable;
				cash invested in growing crops; net cash value of life insurance; machinery and
				equipment; cars and trucks; farm and other real estate including life estates
				and personal residence; value of beneficial interests in trusts; government
				payments or grants; and all other assets. [20 ILCS
				3501/801-10 ] Total assets shall not include items
				used for personal, family or household purposes by the applicant, but in no
				event shall such property be excluded to the extent that a deduction for
				depreciation is allowable for federal income tax purposes. All assets shall be
				valued at fair market value by the participating lender. Such value shall be
				what a willing buyer would pay a willing seller in the locality. A deduction of
				ten percent may be made from fair market value of farm and other real
				estate.
ii) Total liabilities shall
				include, but not be limited to, the following: accounts payable; notes or other
				indebtedness owed to any source; taxes; rent; amounts owed on real estate
				contracts or real estate mortgages; judgments; accrued interest payable; and
				all other liabilities. [20 ILCS 3501/801-10]
B) The applicant must be an individual, not a
				corporation, partnership, trust, or any other legal entity.
C) The applicant must be the sole owner and
				principal user of the project.
D)
				The applicant must not have had any prior direct or indirect ownership interest
				in a substantial amount of land. A substantial amount of land is a parcel that
				exceeds 30% of the median farm size in the county in which the land is located,
				or which had at any time during ownership a fair market value in excess of
				$125,000. An individual with prior ownership of land may still be eligible if
				the individual did not participate in the operation of the farm. Ownership or
				material participation by an individual's spouse or minor child shall be
				treated as ownership or material participation by an individual.
3) Loan Amount. The maximum loan
				amount is $250,000 per person.
4)
				Eligible Purchases. Loan proceeds may be used for the following capital
				purchases only:
A) Land located in the State
				of Illinois that is suitable for use in farming and that is or will be operated
				as a farm.
B) Agricultural
				Improvements. Any improvements, buildings, structures or fixtures suitable for
				use in farming that are located on agricultural land. IFA will finance the
				purchase of new improvements on agricultural land. IFA can finance used
				agricultural improvements only in situations in which:
i) the improvements are purchased in
				conjunction with agricultural land and used in the operation of a farm to be
				operated on the agricultural land being purchased; or
ii) a sufficient amount of qualified
				rehabilitation expenditures are incurred by the borrower with respect to the
				agricultural improvements within two years from the date of the issue of the
				bond.
C) Depreciable
				Agricultural Property. Personal property suitable for use in farming for which
				an income tax deduction for depreciation is allowable in computing federal
				income tax under the Internal Revenue Code. Examples include, but are not
				limited to, farm machinery and trucks. Feeder livestock, seed, feed,
				fertilizer, and other types of inventory or supplies do not qualify as
				depreciable agricultural property. IFA will finance the purchase of any new
				depreciable agricultural property. IFA can also finance used depreciable
				agricultural property if it is purchased in conjunction with agricultural land
				and used in the operation of a farm to be operated on the agricultural land
				being purchased. The total loan proceeds allocated to the purchase price of
				used equipment may not exceed $62,500.
D) No portion of the loan proceeds may be
				used for the purchase of a residence. If the project includes a residence, the
				applicant must make a down payment or obtain conventional financing for the
				value of the residence.
5) Purchase from Related Persons. The IRS
				states that the following, among others, are deemed to be "related persons" of
				any individual: grandfather, grandmother, father, mother, brother, sister
				(whether whole or half blood), child grandchild, or spouse. In addition, a
				partnership and each of its partners (and their spouses and minor children) are
				related persons, as are an S corporation and each of its shareholders (and
				their spouses and minor children). Related persons also include certain related
				corporations and partnerships. It should be pointed out that the foregoing list
				is not all-inclusive. There are certain other entities and individuals that
				could also be considered related persons. It should also be noted that certain
				individuals are not related persons. For example, an uncle, aunt, nephew,
				niece, brother-in-law or sister-in-law would not be treated as a related
				person. IFA loan proceeds may be used to purchase property from a related
				person in some circumstances:
A) The
				Beginning Farmer Bond Program may be used to purchase eligible property from a
				related person if the following conditions are met:
i) The applicant must certify and provide
				supporting documentation that the purchase price of the project is equal to the
				market value of the project.
ii)
				The applicant must certify that the seller will have no continuing financial
				interest in the project and will not be a principal user of the project, and
				will have no other direct or indirect ownership or use of the
				project.
B) The
				Beginning Farmer Contract Bond Program may never be used to purchase property
				from a related person.
6) Security for the Loan. To facilitate the
				making of the loan, the Lender Loan Agreement or Contract Seller Agreement
				provides that the lender or contract seller will act as agent and fiduciary for
				IFA in connection with the loan. The principal and interest of the bond are
				payable solely out of the revenue derived from the Borrower's Promissory Note,
				which is secured by collateral furnished by the borrower. Please note that cash
				and cash equivalents may not be used as collateral. The bond that is issued by
				IFA and purchased by the lender or contract seller is a non-recourse
				obligation. The principal and interest on the bond do not constitute an
				indebtedness of IFA or a charge against its general credit or general
				fund.
7) Fees. The Authority
				charges a non-refundable application fee of $100 that must be submitted with
				the application. There is also a closing fee of one and one-half percent of the
				loan amount, less the $100 application fee, due when the loan is closed. The
				lender under the Beginning Farmer Bond Program may charge a closing fee of up
				to one-half of one percent of the loan amount. No other fees may be charged.
				However, the lender may pass on to the borrower any recording or filing fees
				associated with the loan. The contract seller under the Beginning Farmer
				Contract Bond Program may charge no fees. However, the contract seller may pass
				on to the borrower any recording or filing fees associated with the
				loan.
8) This program takes effect
				upon adoption pursuant to this Part.