Introduced Version
SENATE BILL No. 176
_____
DIGEST OF INTRODUCED BILL
Citations Affected: IC 6-3.1-42.
Synopsis: Tax credit for beginning farmers. Provides an adjusted gross
income tax credit for owners of agricultural assets who sell or rent
agricultural assets to a qualified beginning farmer. Defines "qualified
beginning farmer" and "agricultural assets" for purposes of the credit.
Allows a taxpayer to apply to the Indiana economic development
corporation (corporation) for approval and certification of the credit.
Allows a beginning farmer to apply to the corporation for certification
as a qualified beginning farmer. Provides that the credit is equal to: (1)
the lesser of 5% of the sale price or fair market value of the agricultural
asset or $32,000; or (2) 10% of the gross rental income in each of the
first, second, and third years of the rental agreement, up to a maximum
of $7,000 per year. Limits the total amount of tax credits that may be
awarded in a state fiscal year to: (1) $5,000,000 in state fiscal year
2024-2025; and (2) $6,000,000 in state fiscal year 2025-2026, and each
state fiscal year thereafter.
Effective: January 1, 2025.
Yoder
January 9, 2024, read first time and referred to Committee on Tax and Fiscal Policy.
2024 IN 176—LS 6732/DI 120 Introduced
Second Regular Session of the 123rd General Assembly (2024)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
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between statutes enacted by the 2023 Regular Session of the General Assembly.
SENATE BILL No. 176
A BILL FOR AN ACT to amend the Indiana Code concerning
taxation.
Be it enacted by the General Assembly of the State of Indiana:
1 SECTION 1. IC 6-3.1-42 IS ADDED TO THE INDIANA CODE
2 AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE
3 JANUARY 1, 2025]:
4 Chapter 42. Beginning Farmer Tax Credit
5 Sec. 1. This chapter applies to taxable years beginning after
6 December 31, 2024.
7 Sec. 2. As used in this chapter, "agricultural asset" means
8 agricultural land, livestock, facilities, buildings, and machinery
9 used for farming.
10 Sec. 3. As used in this chapter, "agricultural production" means
11 the production for commercial purposes of crops, livestock, and
12 livestock products, including the processing or retail marketing of
13 such crops, livestock, or livestock products if more than fifty
14 percent (50%) of such processed or merchandised products are
15 produced by the farm operator. The term includes use of land
16 which is devoted to and meets the requirements of and
17 qualifications for payments or other compensation pursuant to a
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1 soil conservation program under an agreement with an agency of
2 the federal government.
3 Sec. 4. As used in this chapter, "corporation" refers to the
4 Indiana economic development corporation.
5 Sec. 5. As used in this chapter, "department" refers to the
6 department of state revenue.
7 Sec. 6. As used in this chapter, "farm" means real property on
8 which farming occurs.
9 Sec. 7. As used in this chapter, "farming" means the active use,
10 management, and operation of real and personal property for
11 agricultural production.
12 Sec. 8. As used in this chapter, "lease" means a written
13 agreement between parties for the lease of real property on which
14 farming occurs.
15 Sec. 9. As used in this chapter, "owner of agricultural assets"
16 means an individual, trust, or pass through entity that is the owner
17 in fee of agricultural land or has legal title to any other
18 agricultural asset. The term does not include an equipment dealer,
19 livestock dealer, or comparable entity that is engaged in the
20 business of selling agricultural assets for profit and that is not
21 engaged in farming as its primary business activity.
22 Sec. 10. As used in this chapter, "pass through entity" means:
23 (1) a corporation that is exempt from the adjusted gross
24 income tax under IC 6-3-2-2.8(2);
25 (2) a partnership;
26 (3) a limited liability company; or
27 (4) a limited liability partnership.
28 Sec. 11. As used in this chapter, "qualified beginning farmer"
29 means a person who meets the following criteria:
30 (1) Has demonstrated experience in the agricultural industry
31 or related field or has transferable skills as determined by the
32 corporation.
33 (2) Has not received federal gross income from agricultural
34 production for more than the ten (10) most recent taxable
35 years.
36 (3) Intends to engage in agricultural production in Indiana
37 and to provide the majority of labor and management
38 involved in that agricultural production.
39 (4) Has obtained written certification from the corporation
40 confirming beginning farmer status.
41 (5) Is not, and whose spouse is not, a partner, member,
42 shareholder, or trustee of the owner of agricultural assets
2024 IN 176—LS 6732/DI 120 3
1 from whom the person seeks to purchase or rent agricultural
2 assets.
3 Sec. 12. As used in this chapter, "state tax liability" means a
4 taxpayer's total tax liability incurred under IC 6-3-1 through
5 IC 6-3-7 (the adjusted gross income tax) as computed after the
6 application of all credits that under IC 6-3.1-1-2 are to be applied
7 before the credit provided by this chapter.
8 Sec. 13. As used in this chapter, "taxpayer" means an individual
9 or entity that is an owner of agricultural assets and has any state
10 tax liability.
11 Sec. 14. (a) A taxpayer is entitled to a credit against the
12 taxpayer's state tax liability in the taxable year in which the
13 taxpayer sells or rents agricultural assets to a qualified beginning
14 farmer who has obtained the certification required under section
15 15 of this chapter.
16 (b) The amount of a credit allowed under this chapter is equal
17 to:
18 (1) the lesser of:
19 (A) five percent (5%) of the sale price or fair market value
20 of the agricultural asset; or
21 (B) thirty-two thousand dollars ($32,000); or
22 (2) ten percent (10%) of the gross rental income in each of the
23 first, second, and third years of the rental agreement, up to a
24 maximum of seven thousand dollars ($7,000) per year.
25 Sec. 15. (a) A taxpayer wishing to obtain a credit under this
26 chapter must apply to the corporation for approval and
27 certification of the credit in the form and manner prescribed by the
28 corporation. The application must:
29 (1) identify the qualified beginning farmer who has been
30 certified by the corporation under this section and to whom
31 the agricultural assets are sold or rented;
32 (2) specify whether the qualified beginning farmer is a
33 brother, sister, ancestor, or lineal descendant of the applicant;
34 and
35 (3) provide all other information required by the corporation.
36 (b) A person may apply to the corporation for certification as a
37 qualified beginning farmer for purposes of this chapter. The
38 application shall be in the form and manner prescribed by the
39 corporation and shall require that the applicant provide the
40 following:
41 (1) Projected earnings statements to demonstrate the profit
42 potential for the farming conducted by the applicant.
2024 IN 176—LS 6732/DI 120 4
1 (2) Verification that the farming conducted by the applicant
2 will be a significant source of income for the applicant.
3 (3) Verification that the applicant will, if certified as a
4 qualified beginning farmer by the corporation, notify the
5 corporation and the department if the farmer no longer meets
6 the certification and eligibility requirements within the three
7 (3) year certification period, in which case eligibility for the
8 tax credit ends.
9 (4) Verification that the applicant is not engaged in farming
10 by means of a joint business venture.
11 (5) Verification and documentation as necessary to meet other
12 eligibility requirements as may be established by the
13 corporation.
14 (c) The certification of a qualified beginning farmer under
15 subsection (b) or the certification of a tax credit under subsection
16 (a) is valid for the year of the certification and the two (2) following
17 years, after which time the qualified beginning farmer or the
18 taxpayer must apply to the corporation for recertification under
19 this section.
20 Sec. 16. To obtain a credit under this chapter, a taxpayer must
21 claim the credit on the taxpayer's annual state tax return or
22 returns in the manner prescribed by the department. The taxpayer
23 shall submit to the department the certification by the corporation
24 required under section 15 of this chapter each taxable year in
25 which the credit is claimed and provide all information that the
26 department determines is necessary for the calculation of the credit
27 provided by this chapter.
28 Sec. 17. If a pass through entity is entitled to a tax credit under
29 this chapter but does not have state tax liability against which the
30 tax credit may be applied, a shareholder, partner, or member of
31 the pass through entity is entitled to a tax credit equal to:
32 (1) the tax credit determined for the pass through entity for
33 the taxable year; multiplied by
34 (2) the percentage of the pass through entity's distributive
35 income to which the shareholder, partner, or member is
36 entitled.
37 Sec. 18. (a) A taxpayer is not entitled to a carryover, carryback,
38 or refund of any unused credit under this chapter.
39 (b) A taxpayer may not sell, assign, convey, or otherwise
40 transfer a tax credit provided under this chapter.
41 Sec. 19. The total amount of tax credits awarded under this
42 chapter may not exceed:
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1 (1) five million dollars ($5,000,000) in the state fiscal year
2 beginning July 1, 2024, and ending June 30, 2025; and
3 (2) six million dollars ($6,000,000) in the state fiscal year
4 beginning July 1, 2025, and ending June 30, 2026, and each
5 state fiscal year thereafter.
2024 IN 176—LS 6732/DI 120