265—44.7(16) Beginning farmer tax credit program.

1. 44.7(1)  Eligibility.

   1. a. Eligible taxpayer. Only eligible taxpayers that own agricultural assets included in an agricultural lease agreement are eligible for a tax credit. Pursuant to 701—subrules 302.87(3) and 302.88(3), an eligible taxpayer that elects to exclude all qualifying capital gains from the sale of real property used in a farming business and the sale of certain livestock or that elects to exclude net income pursuant to a farm tenancy agreement covering real property is not eligible for a tax credit.
   2. b. Qualified beginning farmer. A beginning farmer must meet all of the criteria in Iowa Code section 16.79(2), be of majority age pursuant to Iowa Code section 599.1, and be legally able to enter into a contract to be eligible for participation in the beginning farmer tax credit program.
2. 44.7(2)  Tax credit term. The term of the credit shall begin in the crop year in which the authority board approves the award. The maximum term of the credit shall not exceed the term of the agricultural lease agreement.

3. 44.7(3)  Application.

   1. a. The authority shall prepare and make available appropriate forms to be used in making application for the tax credit, including forms for both the taxpayer and the qualified beginning farmer.

   2. b. Each application shall include but not be limited to the following:

      1. (1) Taxpayer information: name, address, and social security number or tax identification number.
      2. (2) Qualified beginning farmer information: name and address. In addition, the application shall have attached to it a copy of the qualified beginning farmer’s current financial statement (generally prepared one month preceding application submission). The application will also include a background letter on the qualified beginning farmer documenting to the satisfaction of the authority that the beginning farmer has sufficient education, training, or experience in farming and has access to adequate working capital and production items.
      3. (3) A copy of the agricultural lease agreement that conforms to the requirements in Iowa Code section 16.79A.
   3. c. Complete applications shall be processed in the order they are received by the authority.
   4. d. Authority staff will review applications for completeness and eligibility and make recommendations to the IAD board. The IAD board will review applications and recommendations from authority staff and make recommendations to the authority. Upon review of the recommendations of the IAD board, the authority will approve, defer, or deny each application.
   5. e. Any applicant wishing to appeal a decision of the IAD board can appeal directly to the IAD board.

   6. f. Upon submission of the application or a request to amend an agricultural lease agreement, the authority shall collect the application fee. The authority shall collect fees in the amounts based upon the acreage of the land that is the subject of the agreement and the length of the lease, as indicated in the chart below.

      Application Fees Chart

      	Length of Lease in Years
      Leased Acres	2	3	4	5
      100 or fewer	$300	$350	$400	$450
      101 to 250	$400	$450	$500	$550
      251 or more	$500	$550	$600	$650

   7. g. For an amendment to a previously approved agricultural lease agreement, an amendment fee of $100 shall be paid at the time the amendment is submitted. If the amendment includes additional acres, the application fee is based on the number of additional acres being rented and the years remaining on the lease, as indicated in the chart below.

      Additional Acres Fee Chart

      	Number of Years Remaining on Lease
      # of Additional Acres	1	2	3	4	5
      100 or fewer	$250	$300	$350	$400	$450
      101 to 250	$350	$400	$450	$500	$550
      251 or more	$450	$500	$550	$600	$650

4. 44.7(4)  Requirements of an agricultural lease agreement.

   1. a. The agricultural lease agreement must be in writing and signed by all parties and must meet all of the requirements in Iowa Code section 16.79A.
   2. b. At the end of the approved agricultural lease agreement term, a new application must be submitted to the authority. For the purposes of this paragraph, an eligible taxpayer first participating in the beginning farmer tax credit program on or after January 1, 2019, for a tax year beginning on or after that date, may participate in the program for not more than 15 years.
   3. c. An eligible taxpayer may apply and be approved to enter into agreements with different qualified beginning farmers.

5. 44.7(5)  Changes to an agricultural lease agreement.

   1. a. The underlying lease for agricultural land may only be amended under the circumstances identified in Iowa Code section 16.79A(4)“b.” If the eligible taxpayer and the qualified beginning farmer are amending an agricultural lease agreement but none of the conditions in Iowa Code section 16.79A(4)“b” apply, then the eligible taxpayer must submit a new application for a tax credit.
   2. b. If an amendment to an agreement changes the total amount that will be paid to the eligible taxpayer under the agreement, the procedures in Iowa Code section 16.79A(4)“c” will apply.
   3. c. Expiration of lease. Prior to the expiration of the lease, the qualified beginning farmer will continue to be eligible for the term of the lease. Upon expiration of the lease, both the taxpayer and qualified beginning farmer must reapply to continue the tax credit.

6. 44.7(6)  Procedure for calculating tax credit awards.

   1. a. The authority will determine tax credit amounts as described in Iowa Code section 16.82(3).

   2. b. To calculate the credit for a commodity share agreement, the authority will use the following assumptions:

      1. (1) Fifty percent of the leased land is allocated to corn and 50 percent of the leased land is allocated to soybeans, unless the lease specifies a different allocation of corn and soybeans. If the lease specifies a different allocation of corn and soybeans, then the leased land will be allocated proportionally, in accordance with the terms of the lease.
      2. (2) For all years of the lease, the prices used for corn and soybeans will be the average prices for the last five years excluding the highest and lowest prices based on the USDA-NASS statewide data calculated at the time the application is approved.
      3. (3) For all years of the lease, the commodity yields used for corn and soybeans will be the past ten-year average per-bushel yields for the same county where the leased land is located excluding the years of highest and lowest per-bushel yields based on the USDA-NASS data calculated at the time the application is approved.
      4. (4) If the lease specifies a crop other than corn and soybeans, the relevant price and yield data from USDA-NASS for that crop will be used.
   3. c. To calculate the credit for a commodity share agreement, the authority will use the following formula: (1/2 acres leased multiplied by corn yield multiplied by corn price multiplied by percentage of owner’s share multiplied by the BFTC commodity share tax credit percentage) plus (1/2 acres leased multiplied by soybean yield multiplied by soybean price multiplied by owner’s share multiplied by the BFTC commodity share tax credit percentage) = the amount of the tax credit. If the lease specifies a different allocation of corn and soybeans, then the leased acres will be in accordance with the terms of the lease.

   4. d. The amount of the tax credit for a flex lease agreement equals the sum of the following amounts:

      1. (1) The portion of the lease that is based on rent will be calculated as a cash rent agreement.
      2. (2) The portion of the lease that is based on crop yield will be calculated as a commodity share agreement.
      3. (3) If the flexible or bonus portion of the lease is based on crop production, the annual yield used to calculate the bonus will be the yield defined in subparagraph 44.6(6)“c”(3). If the annual yield is above the yield needed to trigger the bonus, the taxpayer will be awarded additional tax credits. The formula for calculating the tax credit will be yield above lease bonus trigger multiplied by price multiplied by percentage of owner’s share multiplied by the BFTC commodity share tax credit percentage.
      4. (4) For other factors used in a flex lease agreement, the relevant data used will be the past ten-year average per-bushel yield for the same county where the leased land is located excluding the highest and lowest years based on the USDA-NASS data.
   5. e. The amount of the tax credit shall be reduced by the percent ownership interest of the qualifying beginning farmer in the agricultural assets.

[ARC 0177D, IAB 4/1/26, effective 5/6/26]