SB 168

Sponsor
Session
Regular Session 2018
Title
Income, business privilege tax credit, for sales/rent of agricultural assets to beginning farmers
Description

Currently, there are specific tax credits allowed to be taken against income tax and business privilege tax liability

This bill would provide for a tax credit on income tax or business privilege tax for the sale and rental of agricultural assets to beginning farmers

To provide for an income tax credit or a business privilege tax credit for the sale and rental of agricultural assets to beginning farmers.

Subjects
Taxation
View Original PDF: SB 168 - Introduced - PDF

Currently, there are specific tax credits allowed to be taken against income tax and business privilege tax liability

This bill would provide for a tax credit on income tax or business privilege tax for the sale and rental of agricultural assets to beginning farmers

To provide for an income tax credit or a business privilege tax credit for the sale and rental of agricultural assets to beginning farmers.

Section 1

As used in this section, the following words shall have the following meanings: (1) AGRICULTURAL ASSETS. Agricultural land, livestock, facilities, buildings, and machinery used for farming in Alabama. (2) BEGINNING FARMER. An individual who: a. is a resident of Alabama; b. is seeking entry, or has entered within the last ten years, into farming; c. intends to farm land located within the state borders of Alabama; d. is not and whose spouse is not a family member of the owner of the agricultural assets from whom the beginning farmer is seeking to purchase or rent agricultural assets; e. is not and whose spouse is not a family member of a partner, member, shareholder, or trustee of the owner of agricultural assets from whom the beginning farmer is seeking to purchase or rent agricultural assets; and f. meets the following eligibility requirements determined by the authority: 1. has a net worth, including assets and liabilities of the spouse and dependents, that does not exceed $800,000 in tax year 2019 and an amount in subsequent years which is adjusted for inflation by multiplying that amount by the cumulative inflation rate as determined by the United States All-Items Consumer Price Index; 2. provides the majority of the day-to-day physical labor and management of the farm; 3. asserts to the satisfaction of the Department of Agriculture and Industries that farming will be a significant source of income for the beginning farmer; and 4. participates in a financial management program approved by the Commissioner of Agriculture and Industries. (3) DEPARTMENT. Department of Agriculture and Industries. (4) FAMILY MEMBER. A family member within the meaning of the Internal Revenue Code, Section 267(c)(4). (5) FARM PRODUCT. Plants and animals useful to humans and includes, but is not limited to, forage and sod crops, oilseeds, grain and feed crops, dairy and dairy products, poultry and poultry products, livestock, fruits, and vegetables. (6) FARMING. The active use, management, and operation of real and personal property for the production of a farm product. (7) OWNER OF AGRICULTURAL ASSETS. An individual, trust, or pass-through entity that is the owner in fee of agricultural land or has legal title to any other agricultural land or has legal title to any other agricultural asset. Owner of agricultural assets does not mean an equipment dealer, livestock dealer, or comparable entity that is engaged in the business of selling agricultural assets for profit and that is not engaged in farming as its primary business activity. An owner of agricultural assets approved and certified by the department under section 3 of this act must notify the department if the owner no longer meets the definition in this paragraph within the three-year certification period and is then no longer eligible for credits under this section. (8) SHARE RENT AGREEMENT. A rental agreement in which the principal consideration given to the owner of agricultural assets is a predetermined portion of the production of farm products produced from the rented agricultural assets and which provides for sharing production costs or risk of loss, or both.

Section 2

(a) An owner of agricultural assets may take a credit against the tax due under Chapters 14A and 18 of Title 40 for the sale or rental of agricultural assets to a beginning farmer in the amount allocated by the department under section 3 of this act. An owner of agricultural assets is eligible for allocation of a credit equal to: (1) five percent of the gross rental income in each of the first, second, and third years of a rental agreement, up to a maximum of $7,000 per year; (2) ten percent of the cash equivalent of the gross rental income in each of the first, second, and third years of a share rent agreement, up to a maximum of $10,000 per year; or (3) fifteen percent of the lesser of the sale price or the fair market value of the agricultural asset, up to a maximum of $32,000. (b) A qualifying rental agreement includes cash rent of agricultural assets or a share rent agreement. The agricultural asset must be rented at prevailing community rates as determined by the department. (c) The credit may be claimed only after approval and certification by the department. An owner of agricultural assets must apply to the department for certification of a credit, in a form and manner prescribed by the department. (d) If a rental agreement, including a share rent agreement, is terminated, the tax credits shall not be retroactively disallowed. (e) The credit is limited to the liability for tax as computed under Chapters 14A and 18 of Title 40 for the taxable year. If the amount of the credit determined under this section for any taxable year exceeds this limitation, the excess is a beginning farmer incentive credit carryforward to each of the fifteen succeeding taxable years.

Section 3

(a) The department shall: (1) approve and certify or recertify beginning farmers as eligible for the program under this section; (2) approve and certify owners of agricultural assets as eligible for the tax credit under section 2 subject to the allocation limits in subsection (c); (3) refer beginning farmers to agencies and organizations that may provide additional pertinent information and assistance; and (4) share information with the Commissioner of Revenue to the extent necessary to administer provisions of this act. The department shall annually notify the Commissioner of Revenue of approval and certification or recertification of beginning farmers and owners of agricultural assets. (b) The certification of a beginning farmer or an owner of agricultural assets is valid for the year of the certification and the two following years, after which time the beginning farmer or owner of agricultural assets must apply to the department for recertification.

Section 4

(a) Any decision of the department under this section may be challenged. A proceeding must be initiated within 60 days of the date of written notification by the office. (b) If a taxpayer challenges a decision of the department under this subdivision, upon perfection of the appeal the department must notify the Commissioner of Revenue of the challenge within 5 days. (c) Nothing in this subdivision affects the Commissioner of Revenue's authority to audit, review, correct, or adjust returns claiming the credit.

Section 5

(a) No later than February 1, 2023, the department, in consultation with the Commissioner of Revenue, must provide a report to the Legislature on the beginning farmer tax credits issued in tax years beginning after December 31, 2018, and before January 1, 2023. (b) The report must include background information on beginning farmers in Alabama and any other information the commissioner and department find relevant to evaluating the effect of the credits on increasing opportunities for and the number of beginning farmers. (c) For credits issued under Section 2, the report shall include: (1) the number of credits issued under each clause; (2) the geographic distribution of credits issued under each clause; (3) the type of agricultural assets for which credits were issued; (4) the number and geographic distribution of beginning farmers whose purchase or rental of assets resulted in credits for the seller or owner of the asset; (5) the number of credits disallowed; and (6) data on the number of beginning farmers by geographic region in calendar years 2019 through 2023.

Section 6

This act shall become effective immediately following its passage and approval by the Governor for taxable years beginning after December 31, 2018.

No articles found.
Action Date Chamber Action
March 8, 2018SFinance and Taxation Education first Amendment Offered
March 8, 2018SFurther Consideration
March 8, 2018SWhatley motion to Carry Over to the Call of the Chair adopted Voice Vote
March 8, 2018SThird Reading Carried Over to Call of the Chair
March 6, 2018SWhatley motion to Carry Over to the Call of the Chair adopted Voice Vote
March 6, 2018SWhatley motion to Adopt adopted Roll Call 651
March 6, 2018SFinance and Taxation Education Amendment Offered
March 6, 2018SThird Reading Carried Over to Call of the Chair
March 6, 2018SOrr motion to Carry Over to the Call of the Chair adopted Voice Vote
March 6, 2018SThird Reading Carried Over to Call of the Chair
February 8, 2018SRead for the second time and placed on the calendar 1 amendment
January 11, 2018SRead for the first time and referred to the Senate committee on Finance and Taxation Education
2018-03-06
Chamber: Senate
Result: Passed