Iowa Administrative Code › Agency 701 - Revenue Department › Title IV - Individual Income Tax › Chapter 304 - Adjustments to Computed Tax and Tax Credits › Rule 701-304.36 - Agricultural Assets Transfer Tax Credit and Custom Farming Contract Tax Credit

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Agricultural assets transfer tax credit.
For tax years
				beginning on or after January 1, 2007, but before January 1, 2013, an owner of
				agricultural assets that rents assets to qualified beginning farmers may claim
				an agricultural assets transfer tax credit for Iowa individual income tax equal
				to 5 percent of the rental income received by the owner for cash rental
				agreements and 15 percent of the rental income received by the owner for
				commodity share agreements. Effective for tax years beginning on or after
				January 1, 2013, an owner of agricultural assets that rents assets to qualified
				beginning farmers may claim an agricultural assets transfer tax credit for Iowa
				individual income tax equal to 7 percent of the rental income received by the
				owner for cash rental agreements and 17 percent of the rental income received
				by the owner for commodity share agreements.
Also effective for tax years beginning on or after January 1,
				  2013, if the beginning farmer is a veteran, the credit is equal to 8 percent of
				  the rental income received by the owner for cash rental agreements, and the
				  credit is equal to 18 percent of the rental income received by the owner for
				  commodity share agreements for the first year that the credit is allowed.
				  However, the taxpayer may only claim 7 percent of the rental income for cash
				  rental agreements and 17 percent of the rental income for commodity share
				  agreements in subsequent years if the agreement is renewed or a new agreement
				  is executed by the same parties. The administrative rules for the agricultural
				  assets transfer tax credit for the Iowa finance authority may be found under
				  265-Chapter 44.
To qualify for the tax credit, an owner of agricultural
				  assets must enter into a lease or rental agreement with a beginning farmer for
				  a term of at least two years, but not more than five years. Both the owner of
				  agricultural assets and the beginning farmer must meet certain qualifications
				  set forth by the Iowa finance authority, and the beginning farmer must be
				  eligible to receive financial assistance under Iowa Code section
				  16.75.
The Iowa finance authority will issue a tax credit
				  certificate to the owner of agricultural assets which will include the name,
				  address and tax identification number of the owner, the amount of the credit,
				  and the tax period for which the credit may be applied. To claim the tax
				  credit, the owner must include the tax credit certificate with the tax return
				  for the tax period set forth on the certificate. The tax credit certificates
				  will be issued on a first-come, first-served basis. For fiscal years beginning
				  on or after July 1, 2009, but before July 1, 2013, the amount of tax credit
				  certificates issued by the Iowa agricultural development authority for the
				  agricultural assets transfer tax credit program cannot exceed $6 million. For
				  fiscal years beginning on or after July 1, 2013, the amount of the tax credit
				  certificates issued by the Iowa finance authority for the agricultural assets
				  transfer tax credit program cannot exceed $8 million and the amount of the
				  credit issued to an individual taxpayer cannot exceed $50,000. However,
				  effective December 31, 2017, the amount of tax credits issued by the Iowa
				  finance authority for the agricultural assets transfer tax credit shall revert
				  back to $6 million.
Any credit in excess of the tax liability for the tax year
				  may be credited to the tax liability for the following five years or until
				  used, whichever is the earlier. However, for any agricultural assets transfer
				  tax credits originally issued for tax years beginning on or after January 1,
				  2008, any credit in excess of the tax liability may be credited to the tax
				  liability for the following ten years. The tax credit shall not be carried back
				  to a tax year prior to the year in which the owner redeems the credit. The
				  credit is not transferable to any other person other than the taxpayer's estate
				  or trust upon the death of the taxpayer.
If an owner of agricultural assets is a partnership, limited
				  liability company, S corporation, or an estate or trust electing to have the
				  income taxed directly to the individual, an individual may claim the credit.
				  The amount claimed by an individual must be based on the individual's pro rata
				  share of the individual's earnings of the partnership, limited liability
				  company, S corporation, or estate or trust.
The lease or rental agreement may be terminated by either the
				  owner or the beginning farmer. If the Iowa finance authority determines that
				  the owner is not at fault for the termination, the authority will not issue a
				  tax credit certificate for subsequent years, but any prior tax credit
				  certificates issued will be allowed. If the Iowa finance authority determines
				  that the owner is at fault for the termination, any prior tax credit
				  certificates will be disallowed. The amount of tax credits previously allowed
				  will be recaptured, and the owner will be required to repay the entire amount
				  of tax credits previously claimed on Iowa returns.
(2)
Custom farming contract tax
				credit.
Effective for tax years beginning on or after January 1, 2013,
				a landowner that hires a beginning farmer to custom farm agricultural land in
				this state may claim a custom farming contract tax credit for Iowa individual
				income tax. The credit is equal to 7 percent of the value of the contract. If
				the beginning farmer is a veteran, the credit is equal to 8 percent of the
				value of the contract for the first year. However, the taxpayer may only claim
				7 percent of the value of the contract in subsequent years if the agreement is
				renewed or a new agreement is executed by the same parties. The administrative
				rules for the custom farming contract tax credit for the Iowa finance authority
				may be found under 265-Chapter 44.
To qualify for the tax credit, the taxpayer must enter into a
				  lease or rental agreement with a beginning farmer for a term of at least two
				  years but not more than five years. Both the taxpayer and the beginning farmer
				  must meet certain qualifications set forth by the Iowa finance authority, and
				  the beginning farmer must be eligible to receive financial assistance under
				  Iowa Code section 16.75.
The Iowa finance authority will issue a tax credit
				  certificate to the taxpayer which will include the name, address and tax
				  identification number of the owner, the amount of the credit, and the tax
				  period for which the credit may be applied. To claim the tax credit, the owner
				  must include the tax credit certificate with the tax return for the tax period
				  set forth on the certificate. For fiscal years beginning on or after July 1,
				  2013, the amount of tax credit certificates issued by the Iowa finance
				  authority for the custom farming contract tax credit program cannot exceed $4
				  million, and the credit certificates will be issued on a first-come,
				  first-served basis. The amount of the credit issued to an individual taxpayer
				  cannot exceed $50,000. However, effective December 31, 2017, the Iowa finance
				  authority will no longer issue custom farming contract tax credits.
Any credit in excess of the tax liability for the tax year
				  may be credited to the tax liability for the following ten years or until used,
				  whichever is the earlier. The tax credit shall not be carried back to a tax
				  year prior to the year in which the owner redeems the credit. The credit is not
				  transferable to any other person other than the taxpayer's estate or trust upon
				  the death of the taxpayer.
If the party entering into the custom farming contract with
				  the beginning farmer is a partnership, limited liability company, S
				  corporation, or an estate or trust electing to have the income taxed directly
				  to the individual, an individual may claim the credit. The amount claimed by an
				  individual must be based on the individual's pro rata share of the individual's
				  earnings of the partnership, limited liability company, S corporation, or
				  estate or trust.
The custom farming contract may be terminated by either the
				  taxpayer or the beginning farmer. If the Iowa finance authority determines that
				  the taxpayer is not at fault for the termination, the authority will not issue
				  a tax credit certificate for subsequent years, but any prior tax credit
				  certificates issued will be allowed. If the Iowa finance authority determines
				  that the taxpayer is at fault for the termination, any prior tax credit
				  certificates will be disallowed. The amount of tax credits previously allowed
				  will be recaptured, and the taxpayer will be required to repay the entire
				  amount of tax credits previously claimed on Iowa returns.
This rule is intended to implement Iowa Code section
				  422.11M; 2014 Iowa Acts, Senate
				  File 2328, sections 60 and 61, as amended by 2014 Iowa Acts, House File 2454;
				  and 2014 Iowa Acts, Senate File 2328, sections 120 and 122.