| 1 | 1 | | SENATE BILL NO. 13 A bill to amend 1967 PA 281, entitled "Income tax act of 1967," (MCL 206.1 to 206.847) by adding section 279. the people of the state of michigan enact: Sec. 279. (1) Subject to the limitations under this section, for tax years that begin on and after January 1, 2025, a taxpayer that is an owner of agricultural assets may claim a credit against the tax imposed by this part for the sale of agricultural assets to a beginning farmer or the rental of agricultural assets pursuant to a qualified rental agreement or share rent agreement to a beginning farmer not to exceed the amount certified for that tax year by the department, in consultation with the department of agriculture and rural development, as follows: (a) For the sale of an agricultural asset, 5% of the lesser of the sale price or the fair market value of the agricultural asset, up to a maximum of $32,000.00. (b) Subject to subdivision (d), for a qualified rental agreement of an agricultural asset, 10% of the gross rental income in each of the first, second, and third years of a rental agreement, up to a maximum of $7,000.00 per year. (c) Subject to subdivision (d), for a share rent agreement of an agricultural asset, 15% 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 $10,000.00 per year. (d) A credit under subdivision (b) or (c) must be calculated based only on gross rental income actually received or accrued, consistent with the taxpayer's method of accounting for federal income tax purposes, during the tax year for which the credit is claimed. (2) A taxpayer shall not claim a credit under this section unless the department, in consultation with the department of agriculture and rural development, has issued a certificate to the taxpayer. The department, in consultation with the department of agriculture and rural development, shall not issue a certificate under this subsection after December 31, 2029. This subsection does not prevent a taxpayer that receives a certificate before January 1, 2030 from claiming a credit under this section after December 31, 2029. (3) The taxpayer shall attach both of the following to the annual return filed under this part on which a credit under this section is claimed: (a) The certificate required by subsection (2). (b) If the taxpayer is claiming a credit under subsection (1)(b) or (c), proof that the qualified rental agreement or share rent agreement was active during the tax year or portion of the tax year for which the credit was claimed. For purposes of this subdivision, an agreement is not active if the agreement is terminated or the beginning farmer no longer engages in farming. (4) The certificate required by subsection (2) shall state all of the following: (a) That the taxpayer is an owner of an agricultural asset. (b) That the recipient of the agricultural asset is certified by the department of agriculture and rural development as a beginning farmer. (c) The maximum amount of the credit that may be claimed under this section by the owner of the agricultural asset for the applicable tax year or tax years. For a sale of an agricultural asset, the applicable tax year is the tax year in which the sale is completed. For a qualified rental agreement of an agricultural asset or a share rent agreement of an agricultural asset, the applicable tax years are the tax years in which the gross rental income attributable to the first, second, and third years of the agreement is received or accrued, consistent with the taxpayer's method of accounting for federal income tax purposes. (d) The taxpayer's federal employer identification number or the Michigan department of treasury number assigned to the taxpayer. (5) The total of all credits approved under this section shall not exceed $5,000,000.00 per calendar year. However, if the department, in consultation with the department of agriculture and rural development, approves a total of all credits under this section of less than $5,000,000.00 in a calendar year, the department, in consultation with the department of agriculture and rural development, may carry forward for 1 year only the difference between $5,000,000.00 and the total of all credits approved under this section in the immediately preceding calendar year or $1,000,000.00, whichever is less. (6) If the credit allowed under this section exceeds the tax liability of the taxpayer for the tax year, that excess shall not be refunded, but may be carried forward to offset tax liability in subsequent years for 5 years or until it is used up, whichever occurs first. (7) Beginning February 1, 2026 and each February 1 thereafter through the first year in which no certificates issued under subsection (2) remain in effect, the department, in consultation with the department of agriculture and rural development, shall submit an annual report to the chairperson of the senate finance, insurance, and consumer protection committee and senate agriculture committee, the chairperson of the house tax policy committee and house agriculture committee, the director of the senate fiscal agency, and the director of the house fiscal agency concerning the operation and effectiveness of the credit under this section. The report must include background information on beginning farmers in this state and any other information relevant to evaluating the effect of the credits on increasing opportunities for the number of beginning farmers. The report must also include all of the following: (a) The number and amount of credits issued under subsection (1)(a), (b), and (c). (b) The geographic distribution of credits issued under subsection (1)(a), (b), and (c). (c) The type of agricultural assets for which credits were issued under this section. (d) 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. (e) The number of beginning farmers by geographic region in each calendar year. (f) The number and amount of credit applications that exceeded the allocation available each year. (8) As used in this section: (a) "Agricultural assets" means agricultural land, livestock, facilities, buildings, and machinery used for farming in this state. (b) "Beginning farmer" means an individual who satisfies each of the following: (i) Is a resident of this state. (ii) Is seeking entry, or has entered within the last 10 years, into farming. (iii) Intends to farm land located within the borders of this state. (iv) 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. (v) 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. (vi) Has a net worth that does not exceed $800,000.00. The maximum amount under this subparagraph shall be adjusted annually for inflation by multiplying that amount by the cumulative inflation rate as determined by the United States Consumer Price Index for all urban consumers as defined and reported by the United States Department of Labor, Bureau of Labor Statistics. As used in this subparagraph, "net worth" means the amount remaining after the deduction of liabilities from assets as determined according to generally accepted accounting principles. (vii) Provides the majority of the day-to-day physical labor and management of the farm. (viii) Has, as determined by the department of agriculture and rural development, adequate farming experience or demonstrates knowledge in the type of farming for which the beginning farmer seeks assistance. (ix) Demonstrates to the department of agriculture and rural development a profit potential by submitting projected earnings statements. (x) Asserts to the satisfaction of the department of agriculture and rural development that farming will be a significant source of income for the beginning farmer. (c) "Family member" means the family of an individual as provided under section 267(c)(4) of the internal revenue code. (d) "Farm product" means 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. (e) "Farming" means the active use, management, and operation of real and personal property for the production of a farm product. (f) "Owner of agricultural assets" means an individual, trust, or flow-through entity that is the owner in fee of 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 of agriculture and rural development under this section must notify the department of agriculture and rural development if the owner no longer meets this definition within the tax year. (g) "Qualified rental agreement" means a cash rental agreement for agricultural assets that are rented at prevailing community rates as determined by the department of agriculture and rural development. (h) "Share rent agreement" means 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 that provides for sharing production costs or risk of loss, or both. |
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| 23 | 23 | | SENATE BILL NO. 13 |
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| 24 | 24 | | |
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| 26 | 26 | | |
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| 27 | 27 | | A bill to amend 1967 PA 281, entitled |
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| 28 | 28 | | |
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| 29 | 29 | | "Income tax act of 1967," |
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| 30 | 30 | | |
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| 31 | 31 | | (MCL 206.1 to 206.847) by adding section 279. |
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| 32 | 32 | | |
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| 33 | 33 | | the people of the state of michigan enact: |
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| 34 | 34 | | |
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| 35 | 35 | | Sec. 279. (1) Subject to the limitations under this section, for tax years that begin on and after January 1, 2025, a taxpayer that is an owner of agricultural assets may claim a credit against the tax imposed by this part for the sale of agricultural assets to a beginning farmer or the rental of agricultural assets pursuant to a qualified rental agreement or share rent agreement to a beginning farmer not to exceed the amount certified for that tax year by the department, in consultation with the department of agriculture and rural development, as follows: |
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| 36 | 36 | | |
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| 37 | 37 | | (a) For the sale of an agricultural asset, 5% of the lesser of the sale price or the fair market value of the agricultural asset, up to a maximum of $32,000.00. |
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| 38 | 38 | | |
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| 39 | 39 | | (b) Subject to subdivision (d), for a qualified rental agreement of an agricultural asset, 10% of the gross rental income in each of the first, second, and third years of a rental agreement, up to a maximum of $7,000.00 per year. |
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| 40 | 40 | | |
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| 41 | 41 | | (c) Subject to subdivision (d), for a share rent agreement of an agricultural asset, 15% 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 $10,000.00 per year. |
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| 42 | 42 | | |
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| 43 | 43 | | (d) A credit under subdivision (b) or (c) must be calculated based only on gross rental income actually received or accrued, consistent with the taxpayer's method of accounting for federal income tax purposes, during the tax year for which the credit is claimed. |
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| 44 | 44 | | |
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| 45 | 45 | | (2) A taxpayer shall not claim a credit under this section unless the department, in consultation with the department of agriculture and rural development, has issued a certificate to the taxpayer. The department, in consultation with the department of agriculture and rural development, shall not issue a certificate under this subsection after December 31, 2029. This subsection does not prevent a taxpayer that receives a certificate before January 1, 2030 from claiming a credit under this section after December 31, 2029. |
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| 46 | 46 | | |
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| 47 | 47 | | (3) The taxpayer shall attach both of the following to the annual return filed under this part on which a credit under this section is claimed: |
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| 48 | 48 | | |
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| 49 | 49 | | (a) The certificate required by subsection (2). |
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| 50 | 50 | | |
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| 51 | 51 | | (b) If the taxpayer is claiming a credit under subsection (1)(b) or (c), proof that the qualified rental agreement or share rent agreement was active during the tax year or portion of the tax year for which the credit was claimed. For purposes of this subdivision, an agreement is not active if the agreement is terminated or the beginning farmer no longer engages in farming. |
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| 52 | 52 | | |
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| 53 | 53 | | (4) The certificate required by subsection (2) shall state all of the following: |
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| 54 | 54 | | |
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| 55 | 55 | | (a) That the taxpayer is an owner of an agricultural asset. |
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| 56 | 56 | | |
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| 57 | 57 | | (b) That the recipient of the agricultural asset is certified by the department of agriculture and rural development as a beginning farmer. |
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| 58 | 58 | | |
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| 59 | 59 | | (c) The maximum amount of the credit that may be claimed under this section by the owner of the agricultural asset for the applicable tax year or tax years. For a sale of an agricultural asset, the applicable tax year is the tax year in which the sale is completed. For a qualified rental agreement of an agricultural asset or a share rent agreement of an agricultural asset, the applicable tax years are the tax years in which the gross rental income attributable to the first, second, and third years of the agreement is received or accrued, consistent with the taxpayer's method of accounting for federal income tax purposes. |
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| 60 | 60 | | |
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| 61 | 61 | | (d) The taxpayer's federal employer identification number or the Michigan department of treasury number assigned to the taxpayer. |
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| 62 | 62 | | |
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| 63 | 63 | | (5) The total of all credits approved under this section shall not exceed $5,000,000.00 per calendar year. However, if the department, in consultation with the department of agriculture and rural development, approves a total of all credits under this section of less than $5,000,000.00 in a calendar year, the department, in consultation with the department of agriculture and rural development, may carry forward for 1 year only the difference between $5,000,000.00 and the total of all credits approved under this section in the immediately preceding calendar year or $1,000,000.00, whichever is less. |
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| 64 | 64 | | |
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| 65 | 65 | | (6) If the credit allowed under this section exceeds the tax liability of the taxpayer for the tax year, that excess shall not be refunded, but may be carried forward to offset tax liability in subsequent years for 5 years or until it is used up, whichever occurs first. |
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| 66 | 66 | | |
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| 67 | 67 | | (7) Beginning February 1, 2026 and each February 1 thereafter through the first year in which no certificates issued under subsection (2) remain in effect, the department, in consultation with the department of agriculture and rural development, shall submit an annual report to the chairperson of the senate finance, insurance, and consumer protection committee and senate agriculture committee, the chairperson of the house tax policy committee and house agriculture committee, the director of the senate fiscal agency, and the director of the house fiscal agency concerning the operation and effectiveness of the credit under this section. The report must include background information on beginning farmers in this state and any other information relevant to evaluating the effect of the credits on increasing opportunities for the number of beginning farmers. The report must also include all of the following: |
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| 68 | 68 | | |
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| 69 | 69 | | (a) The number and amount of credits issued under subsection (1)(a), (b), and (c). |
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| 70 | 70 | | |
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| 71 | 71 | | (b) The geographic distribution of credits issued under subsection (1)(a), (b), and (c). |
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| 72 | 72 | | |
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| 73 | 73 | | (c) The type of agricultural assets for which credits were issued under this section. |
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| 74 | 74 | | |
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| 75 | 75 | | (d) 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. |
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| 76 | 76 | | |
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| 77 | 77 | | (e) The number of beginning farmers by geographic region in each calendar year. |
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| 78 | 78 | | |
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| 79 | 79 | | (f) The number and amount of credit applications that exceeded the allocation available each year. |
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| 80 | 80 | | |
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| 81 | 81 | | (8) As used in this section: |
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| 82 | 82 | | |
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| 83 | 83 | | (a) "Agricultural assets" means agricultural land, livestock, facilities, buildings, and machinery used for farming in this state. |
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| 84 | 84 | | |
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| 85 | 85 | | (b) "Beginning farmer" means an individual who satisfies each of the following: |
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| 86 | 86 | | |
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| 87 | 87 | | (i) Is a resident of this state. |
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| 88 | 88 | | |
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| 89 | 89 | | (ii) Is seeking entry, or has entered within the last 10 years, into farming. |
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| 90 | 90 | | |
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| 91 | 91 | | (iii) Intends to farm land located within the borders of this state. |
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| 92 | 92 | | |
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| 93 | 93 | | (iv) 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. |
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| 94 | 94 | | |
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| 95 | 95 | | (v) 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. |
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| 96 | 96 | | |
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| 97 | 97 | | (vi) Has a net worth that does not exceed $800,000.00. The maximum amount under this subparagraph shall be adjusted annually for inflation by multiplying that amount by the cumulative inflation rate as determined by the United States Consumer Price Index for all urban consumers as defined and reported by the United States Department of Labor, Bureau of Labor Statistics. As used in this subparagraph, "net worth" means the amount remaining after the deduction of liabilities from assets as determined according to generally accepted accounting principles. |
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| 98 | 98 | | |
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| 99 | 99 | | (vii) Provides the majority of the day-to-day physical labor and management of the farm. |
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| 100 | 100 | | |
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| 101 | 101 | | (viii) Has, as determined by the department of agriculture and rural development, adequate farming experience or demonstrates knowledge in the type of farming for which the beginning farmer seeks assistance. |
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| 102 | 102 | | |
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| 103 | 103 | | (ix) Demonstrates to the department of agriculture and rural development a profit potential by submitting projected earnings statements. |
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| 104 | 104 | | |
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| 105 | 105 | | (x) Asserts to the satisfaction of the department of agriculture and rural development that farming will be a significant source of income for the beginning farmer. |
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| 106 | 106 | | |
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| 107 | 107 | | (c) "Family member" means the family of an individual as provided under section 267(c)(4) of the internal revenue code. |
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| 108 | 108 | | |
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| 109 | 109 | | (d) "Farm product" means 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. |
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| 110 | 110 | | |
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| 111 | 111 | | (e) "Farming" means the active use, management, and operation of real and personal property for the production of a farm product. |
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| 112 | 112 | | |
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| 113 | 113 | | (f) "Owner of agricultural assets" means an individual, trust, or flow-through entity that is the owner in fee of 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 of agriculture and rural development under this section must notify the department of agriculture and rural development if the owner no longer meets this definition within the tax year. |
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| 114 | 114 | | |
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| 115 | 115 | | (g) "Qualified rental agreement" means a cash rental agreement for agricultural assets that are rented at prevailing community rates as determined by the department of agriculture and rural development. |
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| 116 | 116 | | |
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| 117 | 117 | | (h) "Share rent agreement" means 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 that provides for sharing production costs or risk of loss, or both. |
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