All Beginning Farmer and Asset Owner Tax Credit Certificates have been mailed out as of January 23rd. You should be receiving them within the week.
If you are a beginning farmer who in 2018 submitted an application that had a lease that went into 2019, you will need to complete the short recertification application in the Forms + Resources section and provide proof you took a FBM management course in 2019. Out-of-pocket costs for the course can still receive a tax credit up to $1,500. Asset Owners in this situation do not need to do anything unless the terms of the lease changed from a total dollar amount perspective.
The Minnesota Beginning Farmer Tax Credit provides tax credits for the rent or sale of farm land or a variety of farm assets to beginning farmers. This includes incentives for the sale of farm land.
A Beginning Farmer is defined as:
- A Minnesota resident (Residency Fact Sheet (PDF)) who is seeking entry, or has entered into farming within the last 10 years
- A farmer who will provide the majority of the labor and management of the farm that is located in Minnesota
- Has adequate experience and knowledge of the type of farming for which they seek assistance from the Rural Finance Authority
- Can provide positive projected earnings statements
- Is not directly related to the owner of the agricultural asset. This includes parents, grandparents, brothers, sisters, spouses, children, and grandchildren. Legal adoption shall be considered in full effect.
- Has a net worth that does not exceed the limit provided under section 41B.03, subdivision 3, paragraph (a), clause (2). This limit is $836,000 in 2018.
The beginning farmer will need to participate in an approved financial management program. Costs of financial management programs up to a maximum of $1,500 per year (for up to 3 years) may also be eligible for a tax credit. The financial management credit need not be tied to any agricultural asset sale or rental.
Definition of “Agricultural Asset”:
- Agricultural land, livestock, facilities, buildings and machinery used for farming in Minnesota
The credit to the agricultural asset owner is as follows:
- 5% of the lesser of the sale price or fair market value of the agricultural asset up to a maximum of $32,000;
- 10% of the gross rental income in each of the 1st, 2nd, and 3rd years of the rental agreement, up to a maximum of $7,000 per year, or
- 15% of the cash equivalent of the gross rental income in each of the 1st, 2nd, and 3rd years of a share rent agreement, up to a maximum of $10,000 per year.
The agricultural asset owner can claim credits in one of the above categories in a given tax year on a per-owner basis up to the maximums stated.
Role of the Rural Finance Authority (RFA)
The RFA will administer the tax credits by:
- Certifying beginning farmers
- Assisting beginning farmers with locating eligible financial management program options in their area
- Certifying that owners of agricultural assets are eligible for the tax credit. This is a first come, first served initiative. The maximum amount available in 2018 is $5 million. This increases to $6 million per year in 2019 thru tax year 2023.
The asset owner may be an individual, trust, a qualified pass-through entity. The Owner of agricultural assets cannot be an equipment dealer, livestock dealer, or comparable entity engaged in the business of selling agricultural assets for profit.