Regular Session 2019-2020 Senate Bill 0478 P.N. 0690

PRIOR PRINTER'S NO. 497

PRINTER'S NO. 690

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

478

Session of

2019

INTRODUCED BY VOGEL, J. WARD, STREET, GORDNER, SCHWANK, FOLMER,

YAW, KILLION, LANGERHOLC, K. WARD, BROOKS, REGAN, BAKER,

STEFANO, BLAKE AND AUMENT, MARCH 26, 2019

SENATOR HUTCHINSON, FINANCE, AS AMENDED, MAY 1, 2019

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," providing for beginning farmer tax credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, is amended by adding an article to

read:

ARTICLE XVIII-H

TAX CREDITS RELATING TO BEGINNING FARMERS

Section 1801-H. Scope of article.

This article relates to the tax credits to owners of

agricultural assets and to beginning farmers.

Section 1802-H. Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Agricultural assets." Agricultural land, livestock,

facilities, buildings and machinery used for farming.

"Beginning farmer." An individual who:

(1) Is a resident of this Commonwealth.

(2) Is seeking entry, or has entered within the last 10

years, into farming.

(3) Intends to engage in farming on land situate in this

Commonwealth.

(4) Is not and whose spouse is not a family member of

the owner of the agricultural assets from whom the individual

seeks to purchase or rent agricultural assets.

(5) 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 individual seeks to

purchase or rent agricultural assets.

(6) (5) Meets the following eligibility requirements as

determined by the department:

(i) Has a net worth that does not exceed $800,000,

subject to annual adjustment by the department in an

amount equal to the percentage change EQUIVALENT TO ANY

PERCENTAGE INCREASE in the Consumer Price Index for All

Urban Consumers for the Pennsylvania, New Jersey,

Delaware and Maryland area, for the most recent 12-month

period for which figures have been officially reported by

the United States Department of Labor, Bureau of Labor

Statistics, immediately prior to the date the adjustment

is due to take effect.

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(ii) Provides the majority of the daily physical

labor or management of a farm.

(iii) Has, by the judgment of the department,

adequate farming experience or demonstrates knowledge in

the type of farming for which the beginning farmer seeks

assistance from the department.

(iv) Demonstrates to the department a profit

potential by submitting projected earnings statements.

(v) Asserts to the satisfaction of the department

that farming will be a significant source of income for

the beginning farmer.

(vi) Agrees to notify the department if the

beginning farmer no longer meets the eligibility

requirements within the three-year certification period,

in which case the beginning farmer is no longer eligible

for tax credits.

(vii) Is not engaged in farming by means of a joint

business venture.

(viii) Has other qualifications as specified by the

department.

THE TERM DOES NOT INCLUDE THE SPOUSE OR A BUSINESS PARTNER OF

THE INDIVIDUAL.

"Department." The Department of Community and Economic

Development of the Commonwealth.

"Family member." A family member within the meaning of

section 267(c)(4) of the Internal Revenue Code of 1986 (Public

Law 99-514, 26 U.S.C. § 267(c)(4)). The term does not include

the spouse of a beginning farmer.

"Farm." Real property on which farming occurs.

"Farm product." Plants and animals useful to humans and

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includes forage and sod crops, oilseeds, grain and feed crops,

dairy and dairy products, poultry and poultry products,

livestock, fruits and vegetables.

"Farming." The active use, management and operation of real

and personal property for the production of a farm product.

"Lease." A written agreement between parties for the lease

of real property on which farming occurs.

"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 asset. The

term does not include 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.

"Tax credit." A tax credit established by this article.

Section 1803-H. Tax BEGINNING FARMER MANAGEMENT TAX credit for

owners of agricultural assets .

(a) General rule.--An owner of agricultural assets may take

a credit against the tax due under Article III for the sale or

rental of agricultural assets to a beginning farmer in the

amount allocated APPROVED by the department under section 1804-

H . An owner of agricultural assets is eligible for allocation of

a tax credit equal to:

(1) five percent of the lesser of the sale price or the

fair market value of the agricultural asset, up to a maximum

of $32,000; or

(2) ten 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.

(b) Application.--The tax credit may be claimed only after

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approval and certification by the department and is limited to

the amount stated on the certificate issued under section 1804-

H. An owner of agricultural assets must apply to the department

for certification and allocation APPROVAL of a tax credit, in a

form and manner prescribed by the department.

(1) An owner of agricultural assets or beginning farmer

may terminate a rental agreement for reasonable cause upon

approval of the department.

(2) If a rental agreement is terminated without the

fault of the owner of agricultural assets, the tax credits

shall not be retroactively disallowed.

(3) In determining reasonable cause, the department

shall consider which party was at fault in the termination of

the agreement.

(4) If the department determines the owner of

agricultural assets did not have reasonable cause, the owner

of agricultural assets must repay all tax credits received as

a result of the rental agreement to the Secretary of Revenue.

The repayment is additional income tax for the taxable year

in which the department makes its decision or when a final

adjudication under section 1805-H is made, whichever is

later.

(d) Duration of tax credit.--The credit is limited to the

liability for tax as computed under Article III for the taxable

year. The tax credit may not be carried over or assigned.

Section 1804-H. Beginning farmer management APPROVAL OF tax

credit.

(a) Departmental approval GENERAL RULE .--The tax credit may

be claimed only after approval and certification by the

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department. THE DEPARTMENT SHALL REVIEW THE APPLICATION OF A TAX

CREDIT IN CONSULTATION WITH THE DEPARTMENT OF AGRICULTURE.

(b) Duration of tax credit.--The tax credit is limited to

the liability for tax as computed under Article III for the

taxable year. If the amount of the tax credit determined under

this section for any taxable year exceeds this limitation, the

excess may be carried forward. TAX CLEARANCE.--BEFORE AN

APPLICATION IS APPROVED, THE DEPARTMENT OF REVENUE MUST FIND

THAT THE APPLICANT HAS FILED ALL REQUIRED STATE TAX REPORTS AND

RETURNS FOR ALL APPLICABLE TAXABLE YEARS AND PAID ANY BALANCE OF

STATE TAX DUE AS DETERMINED AT SETTLEMENT OR ASSESSMENT OR AS

OTHERWISE DETERMINED BY THE DEPARTMENT OF REVENUE.

Section 1805-H. Departmental duties.

(a) Duties.--The department shall:

(1) Share information with the Secretary of Revenue to

the extent necessary to administer provisions under this

article and Article III.

(2) Annually notify the Secretary of Revenue of approval

and certification or recertification of beginning farmers and

owners of agricultural assets under this section. For tax

credits under section 1803-H, the notification must include

the amount of tax credit approved by the department and

stated on the tax credit certificate.

(b) Validity of certification.--The certification of a

beginning farmer or an owner of agricultural assets under this

section 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.

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(1) For tax credits for owners of agricultural assets

allowed under section 1803-H, the department may allocate NO

more than $5,000,000 for the taxable year beginning after

December 31, 2019, and may not allocate NO more than

$6,000,000 for the taxable years beginning after December 31,

2020.

(2) The department shall allocate tax credits on a

first-come, first-served basis beginning on January 1 of each

year, except that recertifications for the second and third

years of tax credits under section 1803-H(a)(1) and (2) have

first priority. Any amount authorized but not allocated in

any taxable year does not cancel and is added to the

allocation for the next taxable year.

Section 1806-H. Report.

(a) Duty to report.--No later than February 1, 2025, the

department, in consultation with the Secretary of Revenue, shall

provide a report to the General Assembly on the tax credits

issued in tax years beginning after December 31, 2019.

(b) Contents of report.--

(1) The report must include background information on

beginning farmers and any other information the department

finds relevant to evaluating the effect of the tax credits on

increasing opportunities for and the number of beginning

farmers.

(2) For tax credits issued under section 1803-H(a)(1),

(2) and (3) 1803-H(A) , the report shall include:

(i) The number and amount of tax credits issued

under each paragraph.

(ii) The geographic distribution of tax credits

issued under each paragraph.

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(iii) The type of agricultural assets for which tax

credits were issued under section 1803-H(a)(1).

(iv) The number and geographic distribution of

beginning farmers whose purchase or rental of assets

resulted in tax credits for the seller or owner of the

asset.

(v) The number and amount of tax credits disallowed

under section 1803-H(d).

(vi) Data on the number of beginning farmers by

geographic region in the tax years covered in the report.

(vii) The number and amount of tax credit

applications that exceeded the allocation available in

each year.

(3) For tax credits issued under section 1804-H, the

report shall include:

(i) The number and amount of tax credits issued.

(ii) The geographic distribution of tax credits.

(iii) A description of the approval procedure for

financial management programs not on the list maintained

by the department as provided in section 1804-H(a).

Section 1807-H. Expiration.

This article shall expire for taxable years beginning after

December 31, 2029.

Section 2. This act shall take effect in 60 days.

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