Beginning farmers must apply every year to confirm their eligibility. Asset owners must apply every year for 1-year leases and sales. If an asset owner is applying with a multi-year lease, they only need to apply every three years or sooner if the lease ends or is modified.
No. Based on the state law for this program, the beginning farmer must be an individual sole proprietor, not a business entity. Farmers who structure their businesses as LLCs (even single member), partnerships, etc. must apply as individuals with their own name (not the business name) listed on the lease or sale documents.
Asset owners, however, may be an individual, trust, LLC, partnership, S-Corp, or other qualified pass-through entity.
Yes. Applicants must apply in the first year of the contract. The asset owner will received a tax credit on the full sale price in the first year of the contract. Applicants must submit either a settlement statement or notarized contract for deed as documentation.
This is generally determined by the number of years the beginning farmer has filed farm income on their federal income taxes, Schedule F. Years filing a Schedule F while claimed as a dependent by their parents or guardian (ex. as an FFA or 4-H activity) do not count toward the 10 years, and the years do not need to be consecutive (ex. farming in 2013, 2014, 2022, and 2023 would be 4 years total).
Generally, yes. The value of the residence (or any other non-agricultural improvement) will be deducted from the sale price to calculate the tax credit. The value of a home can be determined by submitting an itemized property tax statement or by providing a copy of the appraisal.
Example:
- Sale price is $500,000
- Appraisal value of home is $200,000
- Appraisal value of farmland and agricultural buildings (barn, pole shed, etc) is $300,000
- Tax credit would be 8 or 12% of the qualifying $300,000 in agricultural assets = $24,000 or $36,000
Yes, asset owners who are not Minnesota residents are eligible. However, this tax credit is only for tax liability due to the state of Minnesota.
Yes, asset owners are eligible for the tax credit if they are selling their farm with a 1031 Exchange.
No. According to the state law for this program, an eligible asset owner is, “an individual, trust, or pass-through entity that is the owner in fee of agricultural land or has legal title to any other agricultural land.” A C-Corporation is not a “pass-through” entity as described in the law.
