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HOUSE AMENDED
PRIOR PRINTER'S NOS. 497, 690
PRINTER'S NO. 942
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
AS REPORTED FROM COMMITTEE ON FINANCE, HOUSE OF REPRESENTATIVES,
AS AMENDED, JUNE 11, 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.
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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.
"AGRICULTURAL COMMODITY." AGRICULTURAL, AQUACULTURAL,
HORTICULTURAL, VITICULTURAL AND DAIRY PRODUCTS, LIVESTOCK AND
THE PRODUCTS THEREOF, RANCH-RAISED FURBEARING ANIMALS AND THE
PRODUCTS THEREOF, THE PRODUCTS OF POULTRY AND BEE RAISING,
FORESTRY AND FORESTRY PRODUCTS AND ANY AND ALL PRODUCTS RAISED
OR PRODUCED ON FARMS INTENDED FOR HUMAN CONSUMPTION AND THE
PROCESSED OR MANUFACTURED PRODUCTS THEREOF INTENDED FOR HUMAN
CONSUMPTION, TRANSPORTED OR INTENDED TO BE TRANSPORTED IN
COMMERCE.
"Beginning farmer." An individual who:
(1) Is a resident of this Commonwealth.
(2) (1) Is seeking entry, or has entered within the last
10 years, into farming.
(3) (2) Intends to engage in farming on land situate in
this Commonwealth.
(4) (3) 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.
(5) (4) Meets the following eligibility requirements as
determined by the department , IN CONSULTATION WITH THE
DEPARTMENT OF AGRICULTURE :
(i) Has a net worth that does not exceed $800,000,
subject to annual adjustment by the department in an
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amount 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.
(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
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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. ยง 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
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 AN
AGRICULTURAL COMMODITY .
"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. Beginning farmer management tax credit.
(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 approved by the department. 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
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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
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 approval of a tax credit, in a form and manner prescribed by
the department.
(c) Termination of rental agreement.--
(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
COMMONWEALTH . 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
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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. Approval of tax credit.
(a) General rule .--The tax credit may be claimed only after
approval and certification by the department. The department
shall review the application of a tax credit in consultation
with the Department of Agriculture.
(b) 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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(c) Limitation on amount.--
(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 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) , 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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