Stricken language would be deleted from and underlined language would be added to present law.
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State of Arkansas As Engrossed: H3/13/23 1
94th General Assembly A Bill 2
Regular Session, 2023 HOUSE BILL 1003 3
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By: Representatives J. Mayberry, D. Garner, Haak, Wooten, Lynch, Puryear, K. Brown 5
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For An Act To Be Entitled 7
AN ACT TO CREATE INC OME TAX CREDITS FOR BEGINNING 8
FARMERS AND OWNERS O F AGRICULTURAL ASSET S; TO REQUIRE 9
THE SECRETARY OF THE DEPARTMENT OF AGRICU LTURE TO 10
CERTIFY BEGINNING FARMERS AN D FINANCIAL MANAGEME NT 11
PROGRAMS FOR PURPOSE S OF THE INCOME TAX CREDITS; AND 12
FOR OTHER PURPOSES. 13
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Subtitle 16
TO CREATE INCOME TAX CREDITS FOR 17
BEGINNING FARMERS AND OWNERS OF 18
AGRICULTURAL ASSETS. 19
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BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 22
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SECTION 1. DO NOT CODIFY. Title. 24
This act shall be known and may be cited as "AR Next Gen". 25
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SECTION 2. Arkansas Code § 25 -38-202(b), concerning the Secretary of 27
the Department of Agriculture, is amended to add an additi onal subdivision to 28
read as follows: 29
(5) The secretary shall: 30
(A) Certify financial management programs that would 31
qualify a beginning farmer for the income tax credit allowed under § 26 -51-32
517; 33
(B) Establish by rule a procedure for certifying financial 34
management programs; and 35
(C) Maintain a list of certified financial management 36 As Engrossed: H3/13/23 HB1003
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programs on the website of the department. 1
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SECTION 2. Arkansas Code Title 26, Chapter 51, Subchapter 5, is 3
amended to add an additional section to read as follo ws: 4
26-51-517. Beginning farmer — Owner of agricultural assets — 5
Definitions. 6
(a) As used in this section: 7
(1) "Agricultural asset" means agricultural land, livestock, 8
facilities, buildings, and machinery used for agricultural production in this 9
state; 10
(2) "Agricultural land" means land that is composed of tracts, 11
lots, or parcels that total: 12
(A) At least ten (10) acres and are devoted to 13
agricultural production; or 14
(B) Less than ten (10) acres that are devoted to 15
agricultural production and that produce an average yearly gross income of at 16
least two thousand five hundred dollars ($2,500) from agricultural 17
production; 18
(3)(A) "Agricultural production" means: 19
(i) Commercial aquaculture, algaculture, apiculture, 20
animal husbandry, or poultry husbandry; 21
(ii) The production for a commercial purpose of 22
timber, field crops, tobacco, fruits, vegetables, nursery stock, ornamental 23
shrubs, ornamental trees, flowers, or sod; 24
(iii) The growth of timber for a noncommercial 25
purpose if the land on which the timber is grown is contiguous to or part of 26
a parcel of land under common ownership that is otherwise devoted exclusively 27
to agricultural use; and 28
(iv) Any combination o f the activities described in 29
subdivisions (a)(3)(A)(i) -(iii) of this section. 30
(B) "Agricultural production" includes: 31
(i) The processing, drying, storage, and marketing 32
of agricultural products when those activities are conducted in conjunction 33
with one (1) or more of the activities described in subdivisions 34
(a)(3)(A)(i)-(iii) of this section; and 35
(ii) Conservation practices, if all or a portion of 36 As Engrossed: H3/13/23 HB1003
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the tracts, lots, or parcels of land that are used for conservation practices 1
comprise not more than twenty-five percent (25%) of the total tracts, lots, 2
or parcels of land that are otherwise devoted exclusively to agricultural 3
use; 4
(4) "Beginning farmer" means an individual certified by the 5
Secretary of the Department of Agriculture as a beginning farmer under this 6
section; 7
(5)(A) "Owner of agricultural assets" means a person that is the 8
owner in fee of agricultural land or that has legal title to any other 9
agricultural asset. 10
(B) "Owner of agricultural assets" does not include an 11
equipment dealer or comparable entity engaged in the business of selling 12
agricultural assets for profit; and 13
(6) "Share rent agreement" means a rental agreement in which the 14
principal consideration given to the owner of agricultural assets is a 15
predetermined portion of the production of the agricultural products produced 16
from the rented agricultural assets and that provides for sharing production 17
costs or risk of loss. 18
(b)(1) There is allowed an income tax credit against the income tax 19
imposed by this chapter in the amount determined under subsection (c) of this 20
section for: 21
(A) An owner of agricultural assets who sells or rents 22
agricultural assets to a beginning farmer; and 23
(B) A beginning farmer. 24
(2) The rental of an agricultural asset qual ifies for the credit 25
allowed under this section only if the agricultural asset is rented at 26
prevailing community rates, as determined by the Secretary of the Department 27
of Agriculture. 28
(c) The amount of the credit allowed under this section is equal to: 29
(1) For an owner of agricultural assets: 30
(A)(i) Five percent (5%) of the sale price of the 31
agricultural asset. 32
(ii) A credit under subdivision (c)(1)(A)(i) of this 33
section shall be claimed for the taxable year in which the sale of the 34
agricultural asset is consummated; 35
(B)(i) Ten percent (10%) of the gross rental income 36 As Engrossed: H3/13/23 HB1003
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received during each of the first three (3) years of a rental agreement. 1
(ii) A credit under subdivision (c)(1)(B)(i) of this 2
section shall be claimed for the three (3) taxable years ending during the 3
first three (3) years of the rental agreement. 4
(iii) A taxpayer shall not claim a credit under 5
subdivision (c)(1)(B)(i) of this section for more than one (1) rental 6
agreement involving the rental of the same agricultura l asset to the same 7
beginning farmer; and 8
(C)(i) Fifteen percent (15%) of the cash equivalent of the 9
gross rental income received during each of the first three (3) years of a 10
share rent agreement. 11
(ii) A credit under subdivision (c)(1)(C)(i) of this 12
section shall be claimed for the three (3) taxable years ending during the 13
first three (3) years of the share rent agreement. 14
(iii) A taxpayer shall not claim a credit under 15
subdivision (c)(1)(C)(i) of this section for more than one (1) share ren t 16
agreement involving the rental of the same agricultural asset to the same 17
beginning farmer; and 18
(2) For a beginning farmer, the cost of participating in a 19
financial management program certified by the Secretary of the Department of 20
Agriculture under § 25-38-202 during the taxable year. 21
(d)(1) The total amount of the income tax credits allowed under this 22
section that may be claimed by a taxpayer in a tax year shall not exceed the 23
amount of income tax due by the taxpayer. 24
(2) Any unused income tax c redit under this section may be 25
carried forward for the following number of years following the tax year in 26
which the income tax credit was earned: 27
(A) For an income tax credit claimed under subdivision 28
(c)(1) of this section, fifteen (15) years; and 29
(B) For an income tax credit claimed under subdivision 30
(c)(2) of this section, three (3) years. 31
(e)(1) The Secretary of the Department of Agriculture shall certify an 32
individual as a beginning farmer for purposes of the income tax credit 33
allowed under this section if the individual: 34
(A) Is a resident of this state; 35
(B) Is seeking entry or has entered into farming within 36 As Engrossed: H3/13/23 HB1003
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the immediately preceding ten (10) years; 1
(C) Farms or intends to farm land in this state; 2
(D)(i) Is, except as provid ed under subdivision 3
(e)(1)(D)(ii) of this section, not related by consanguinity or affinity to: 4
(a) The owner of the agricultural assets from 5
whom the individual is seeking to purchase or rent the agricultural assets; 6
or 7
(b) A partner, member, shareholder, or trustee 8
of the owner of the agricultural assets from whom the individual is seeking 9
to purchase or rent the agricultural assets. 10
(ii) The prohibitions on consanguinity or affinity 11
under subdivision (e)(1)(D)(i) of this section shall not apply if the 12
individual purchases or rents the agricultural asset for its fair -market 13
value; 14
(E)(i) Has a total net worth, including the assets and 15
liabilities of the individual's spouse and dependents, of less than eight 16
hundred thousand dol lars ($800,000) in calendar year 2019. 17
(ii) The amount stated in subdivision (e)(1)(E)(i) 18
of this section shall be adjusted for inflation annually by multiplying the 19
amount by the cumulative inflation rate as determined by the last Consumer 20
Price Index for All Urban Consumers published by the United States Department 21
of Labor; 22
(F) Provides the majority of the day -to-day physical labor 23
for and management of the farm; 24
(G) Has adequate farming experience or demonstrates 25
knowledge in the type of fa rming for which the individual seeks assistance; 26
(H) Submits projected earnings statements and demonstrates 27
a profit potential; 28
(I) Demonstrates that farming will be a significant source 29
of income for the individual; 30
(J) Has participated in a f inancial management program 31
certified by the Secretary of the Department of Agriculture under § 25 -38-32
202(b)(5); and 33
(K) Meets any other requirements prescribed by rule by the 34
Secretary of the Department of Agriculture. 35
(2) An individual may apply t o the Secretary of the Department 36 As Engrossed: H3/13/23 HB1003
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of Agriculture for certification as a beginning farmer. 1
(3) A certification under this subsection is valid until the 2
individual no longer meets the requirements for certification. 3
(f)(1) The total amount of state inco me tax credits awarded under this 4
section shall not exceed ten million dollars ($10,000,000) per calendar year. 5
(2) The Tax Credits and Special Refunds Section of the 6
Department of Finance and Administration, or its successor, shall: 7
(A) Award the tax credits on a first -come, first-served 8
basis from the certification provided to the Tax Credits and Special Refunds 9
Section of the Department of Finance and Administration under subsection (g) 10
of this section; and 11
(B) Notify the Secretary of the Depa rtment of Agriculture 12
when the annual cap under subdivision (f)(1) of this section is met. 13
(g)(1) A taxpayer who wishes to claim the tax credit available under 14
this section shall submit to the Secretary of the Department of Agriculture 15
evidence of qualifying expenditures. 16
(2) The Secretary of the Department of Agriculture shall review 17
a taxpayer's evidence of qualifying contributions and certify the amount of 18
contributions for which the taxpayer qualifies. 19
(3) Copies of the certification under subd ivision (g)(2) of this 20
section shall be provided to the taxpayer and the Tax Credits and Special 21
Refunds Section of the Department of Finance and Administration or its 22
successor. 23
(h) The Secretary of the Department of Finance and Administration and 24
the Secretary of the Department of Agriculture may adopt rules to implement 25
this section. 26
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SECTION 3. EFFECTIVE DATE. Section 2 of this act is effective for tax 28
years beginning on or after January 1, 2024. 29
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SECTION 4. DO NOT CODIFY. Rules. 31
(a) When adopting the initial rules required under this act, the 32
Secretary of the Department of Agriculture shall file the final rules with 33
the Secretary of State for adoption under § 25 -15-204(f): 34
(1) On or before January 1, 2024; or 35
(2) If approval under § 10 -3-309 has not occurred by January 1, 36 As Engrossed: H3/13/23 HB1003
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2024, as soon as practicable after approval under § 10 -3-309. 1
(b) The Secretary of the Department of Agriculture shall file the 2
proposed rules with the Legislative Council under § 10 -3-309(c) sufficiently 3
in advance of January 1, 2024, so that the Legislative Council may consider 4
the rules for approval before January 1, 2024. 5
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/s/J. Mayberry 7
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