Senate File 59 - Introduced SENATE FILE 59 BY SALMON A BILL FOR An Act relating to the farm tenancy net income exclusion 1 available against the individual income tax, and including 2 effective date and retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1093XS (1) 91 jm/jh
S.F. 59 Section 1. Section 422.7, subsection 14, paragraph e, Code 1 2025, is amended by striking the paragraph and inserting in 2 lieu thereof the following: 3 e. Net income from a farm tenancy agreement earned, 4 received, or reported by an entity taxed as a disregarded 5 entity, partnership for federal tax purposes, an S corporation, 6 a trust, or estate is eligible for the election and deduction 7 in this subsection for the portion of net income derived from 8 a farm tenancy agreement if the eligible individual receives 9 or is entitled to receive the portion of net income through 10 distributions from an entity taxed as a disregarded entity, 11 a partnership, an S corporation, a trust, or an estate, to 12 the same extent that an eligible individual could subtract 13 net income received directly from the farm tenant rather than 14 passing to the eligible individual through an entity taxed 15 as a disregarded entity, a partnership, an S corporation, a 16 trust, or an estate. For purposes of this paragraph, net 17 income accruing to a grantor trust or to a business entity 18 that is a disregarded entity shall be deemed to have been 19 distributed to its sole owner to the extent the sole owner of 20 such disregarded entity or trust has the right to withdraw or 21 compel distribution of such net income. 22 Sec. 2. EFFECTIVE DATE. This Act, being deemed of immediate 23 importance, takes effect upon enactment. 24 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies 25 retroactively to January 1, 2024, for tax years beginning on 26 or after that date. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanations substance by the members of the general assembly. 30 Current law excludes from the individual income tax a 31 retired farmers total net income received pursuant to a 32 farm tenancy agreement covering real property held by the 33 retired farmer for 10 or more years, if the farmer materially 34 participated in a farming business for 10 or more years. Under 35 -1- LSB 1093XS (1) 91 jm/jh 1/ 2
S.F. 59 current law, net income from a farm tenancy agreement earned by 1 an entity taxed as a partnership for federal tax purposes, an S 2 corporation, or a trust or estate is not eligible for the farm 3 tenancy lease income exclusion. 4 This bill allows the net income from a farm tenancy 5 agreement earned, received, or reported by an entity taxed as a 6 disregarded entity, partnership for federal tax purposes, an 7 S corporation, a trust, or estate to be eligible for the farm 8 tenancy lease income exclusion in the same manner as if the 9 net income received pursuant to a farm tenancy passes directly 10 from the farm tenant to the eligible individual rather than 11 passing to the eligible individual through an entity taxed as a 12 disregarded entity, a partnership, an S corporation, a trust, 13 or an estate. The bill allows net income accruing to a grantor 14 trust or to a business entity that is a disregarded entity 15 to be deemed to have been distributed to its sole owner to 16 the extent the sole owner of such disregarded entity or trust 17 has the right to withdraw or compel distribution of such net 18 income. 19 The bill takes effect upon enactment and applies 20 retroactively to tax years beginning on or after January 1, 21 2024. 22 -2- LSB 1093XS (1) 91 jm/jh 2/ 2