House File 2426 - Introduced




                                 HOUSE FILE       
                                 BY  PRICHARD

                                      A BILL FOR

  1 An Act relating to small farm operations producing
  2    vegetables or fruit, including by establishing programs
  3    to support production and marketing, a preference for
  4    government entities when purchasing food, a tax credit and
  5    appropriation, and a property tax exemption, and including
  6    applicability date provisions.
  7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN



  1  1                           DIVISION I
  1  2                            PROGRAMS
  1  3    Section 1.  NEW SECTION.  15E.371  Purpose.
  1  4    The purposes of this division are to encourage and promote
  1  5 the production and purchase of locally and regionally produced
  1  6 vegetables or fruits, to improve nutrition for the citizens of
  1  7 Iowa, and to strengthen local and regional farm economies.
  1  8    Sec. 2.  NEW SECTION.  15E.372  Definitions.
  1  9    As used in this division, unless the context otherwise
  1 10 requires:
  1 11    1.  "Small farm operation" means agricultural land as defined
  1 12 in 9H.1 which includes not more than ten acres exclusively used
  1 13 to produce vegetables or fruit for human consumption.
  1 14    2.  "Small farm operator" means a person who is the owner or
  1 15 lessee of a small farm operation.
  1 16    Sec. 3.  NEW SECTION.  15E.373  General authority.
  1 17    1.  The authority shall administer this division and adopt
  1 18 all rules necessary to carry out the purposes of this division
  1 19 as provided in section 15E.371.
  1 20    2.  The authority shall cooperate with the Iowa finance
  1 21 authority and the department of agriculture and land
  1 22 stewardship in administering this division.
  1 23    3.  The authority may employ or contract with a consultant or
  1 24 specialist to assist in developing and implementing a plan to
  1 25 implement this division.
  1 26    Sec. 4.  NEW SECTION.  15E.374  Qualifications.
  1 27    In order to qualify to participate in a program under
  1 28 this division, a person shall meet all of the requirements
  1 29 established by the authority which shall include at least all
  1 30 of the following:
  1 31    1.  Be a small farm operator.  The small farm operator may be
  1 32 an individual, a partner in a partnership under chapter 486A, a
  1 33 shareholder of a family farm corporation as defined in section
  1 34 9H.1, or a member of a family farm limited liability company as
  1 35 defined in section 9H.1.
  2  1    2.  Be actively engaged in the small farm operation by making
  2  2 management decisions and performing physical work relating to
  2  3 the production and marketing of vegetables or fruit produced on
  2  4 the small farm operation.  The person must be actively engaged
  2  5 on a regular, continuous, and substantial basis in a manner
  2  6 that is essential to the success of the small farm operation.
  2  7 If the person is a partnership, family farm corporation, or
  2  8 family farm limited liability company, at least one partner,
  2  9 shareholder, or member must be so actively engaged.
  2 10    3.  Be a resident of this state. If the person is a
  2 11 partnership, family farm corporation, or family farm limited
  2 12 liability company, each partner, shareholder, or member must be
  2 13 a resident of this state.
  2 14    4.  Have sufficient education, training, or experience
  2 15 in farming.  If the person is a partnership, family farm
  2 16 corporation, or family farm limited liability company, each
  2 17 partner, shareholder, or member, who is not a minor, must have
  2 18 sufficient education, training, or experience in farming.
  2 19    5.  Will materially and substantially participate in the
  2 20 small farming operation. If the person is a partnership,
  2 21 family farm corporation, or family farm limited liability
  2 22 company, each partner, shareholder, or member, who is not
  2 23 a minor, must materially and substantially participate in
  2 24 farming.
  2 25    6.  Have access to adequate working capital and production
  2 26 items.
  2 27    7.  Meet the low or moderate net worth requirements
  2 28 applicable to a beginning farmer under chapter 175.
  2 29    Sec. 5.  NEW SECTION.  15E.375  Small farm operator financial
  2 30 assistance program.
  2 31    1.  A small farm operator financial assistance program is
  2 32 created within the authority.  The purpose of the program is to
  2 33 provide financial assistance to small farm operators for the
  2 34 improvement or expansion of an existing and viable small farm
  2 35 operation.
  3  1    2.  The authority may provide financial assistance in the
  3  2 form of an interest loan, low=interest loan, no=interest loan,
  3  3 forgivable loan, loan guarantee, grant, letter of credit,
  3  4 equity financing, principal buy=down, interest buy=down, or a
  3  5 combination of these forms.
  3  6    3.  The maximum amount of financial assistance for a small
  3  7 farm operator under the program is twenty=five percent of the
  3  8 amount of credit extended to the small farm operator by an
  3  9 eligible lender, as defined by the authority, up to a maximum
  3 10 of fifty thousand dollars.
  3 11    4.  The authority shall not approve an application to
  3 12 refinance an existing loan.
  3 13    Sec. 6.  NEW SECTION.  15E.376  Small farm operator marketing
  3 14 program.
  3 15    1.  A small farm operator marketing program is created
  3 16 within the authority.  The purpose of the program is to promote
  3 17 new markets for vegetables or fruits produced by small farm
  3 18 operators.
  3 19    2.  In carrying out the purpose of the program, the authority
  3 20 shall do all of the following:
  3 21    a.  Investigate the marketing of vegetables or fruits
  3 22 produced by small farm operators and recommend efficient and
  3 23 economical methods of marketing.
  3 24    b.  Promote the sale, distribution, and merchandising of
  3 25 vegetables or fruits produced by small farm operators.
  3 26    c.  Furnish information and assistance to the public
  3 27 concerning the marketing of vegetables or fruits produced by
  3 28 small farm operators.
  3 29    d.  Gather and diffuse useful information concerning all
  3 30 phases of the marketing of vegetables or fruits produced
  3 31 by small farm operators in cooperation with other public
  3 32 or private agencies.  The authority shall cooperate with
  3 33 Iowa state university of science and technology to avoid any
  3 34 unnecessary duplication of efforts.
  3 35    e.  Ascertain sources of supply of vegetables or fruits
  4  1 produced by small farm operators, and prepare and publish
  4  2 from time to time lists of names and addresses of small farm
  4  3 operators and marketers.
  4  4    Sec. 7.  NEW SECTION.  15E.377  Small farm operations fund.
  4  5    1.  A small farm operations fund is created in the state
  4  6 treasury as a revolving fund under the control of the
  4  7 authority. The fund shall consist of any moneys appropriated
  4  8 by the general assembly for deposit in the fund and any other
  4  9 moneys available to and obtained or accepted by the authority
  4 10 from the federal government or private sources for placement
  4 11 in the fund.
  4 12    2.  Moneys in the fund are appropriated exclusively to
  4 13 support the programs created in this division including as
  4 14 provided in sections 15E.374 and 15E.375.
  4 15    3.  Notwithstanding section 12C.7, interest or earnings
  4 16 on moneys in the fund shall be credited to the fund.
  4 17 Notwithstanding section 8.33, moneys credited to the fund that
  4 18 remain unexpended or unobligated at the end of a fiscal year
  4 19 shall not revert to any other fund.
  4 20    Sec. 8.  NEW SECTION.  15E.378  Certification.
  4 21    1.  Upon application, the authority shall issue an annual
  4 22 certificate to a person eligible to participate in a program
  4 23 under this division verifying that the person is a qualified
  4 24 small farm operator, regardless of whether the person actually
  4 25 participates in a program.
  4 26    2.  A person may use a certificate issued to the person under
  4 27 this section as proof of eligibility for a benefit under other
  4 28 programs benefiting small farm operators, including all of the
  4 29 following:
  4 30    a.  The selling of vegetables or fruits to the department
  4 31 of administrative services pursuant to section 8A.315, the
  4 32 commission for the blind pursuant to section 216B.3, the board
  4 33 of directors of a merged area pursuant to section 260C.19C,
  4 34 the board of regents pursuant to section 262.9, the state
  4 35 department of transportation pursuant to section 307.21, and
  5  1 the department of corrections pursuant to section 904.312.
  5  2    b.  The from small farm operation to school tax credit as
  5  3 provided in chapter 190A.
  5  4    c.  A property tax exemption as provided in section 427.1.
  5  5    Sec. 9.  CODIFICATION.  The Code editor shall organize the
  5  6 provisions of this division of this Act as a new division in
  5  7 chapter 15E.
  5  8                           DIVISION II
  5  9                 PURCHASE BY GOVERNMENT ENTITIES
  5 10    Sec. 10.  Section 8A.315, Code 2014, is amended by adding the
  5 11 following new subsection:
  5 12    NEW SUBSECTION.  9.  When providing for the purchase of
  5 13 food, the department, whenever cost competitive, shall purchase
  5 14 vegetables or fruits produced by persons certified as qualified
  5 15 small farm operators by the economic development authority
  5 16 pursuant to section 15E.378.
  5 17    Sec. 11.  Section 216B.3, Code 2014, is amended by adding the
  5 18 following new subsection:
  5 19    NEW SUBSECTION.  13A.  When providing for the purchase of
  5 20 food, give a preference to purchasing vegetables or fruits
  5 21 produced by persons certified as qualified small farm operators
  5 22 by the economic development authority pursuant to section
  5 23 15E.378.
  5 24    Sec. 12.  Section 260C.19C, Code 2014, is amended to read as
  5 25 follows:
  5 26    260C.19C  Purchase of designated biobased certain products.
  5 27    The board of directors providing services to a merged area
  5 28 shall give preference to purchasing designated all of the
  5 29 following:
  5 30    1.  Vegetables or fruits produced by persons certified as
  5 31 qualified small farm operators by the economic development
  5 32 authority pursuant to section 15E.378.
  5 33    2.  Designated biobased products in the same manner as
  5 34 provided in section 8A.317.
  5 35    Sec. 13.  Section 262.9, Code 2014, is amended by adding the
  6  1 following new subsection:
  6  2    NEW SUBSECTION.  6A.  When providing for the purchase of
  6  3 food, give a preference to purchasing vegetables or fruits
  6  4 produced by persons certified as qualified small farm operators
  6  5 by the economic development authority pursuant to section
  6  6 15E.378.
  6  7    Sec. 14.  Section 307.21, Code 2014, is amended by adding the
  6  8 following new subsection:
  6  9    NEW SUBSECTION.  6A.  The administrator shall, when
  6 10 providing for the purchase of food, give a preference to
  6 11 purchasing vegetables or fruits produced by persons certified
  6 12 as qualified small farm operators by the economic development
  6 13 authority pursuant to section 15E.378.
  6 14    Sec. 15.  Section 904.312, Code 2014, is amended by adding
  6 15 the following new subsection:
  6 16    NEW SUBSECTION.  3.  When providing for the purchase of food,
  6 17 the director shall give a preference to purchasing vegetables
  6 18 or fruits produced by persons certified as qualified small farm
  6 19 operators by the economic development authority pursuant to
  6 20 section 15E.378.
  6 21                          DIVISION III
  6 22                      IOWA STATE UNIVERSITY
  6 23    Sec. 16.  NEW SECTION.  266.31  Small farm operations.
  6 24    1.  The Iowa cooperative extension service in agriculture
  6 25 and home economics shall develop and publish materials and
  6 26 sponsor events on site or via the internet regarding best
  6 27 methods, practices, and strategies for use by small farm
  6 28 operators qualified to participate in programs created in
  6 29 chapter 15E, division XXVIII, in producing and marketing
  6 30 vegetables or fruits.
  6 31    2.  The materials and events shall be made available or
  6 32 sponsored at cost.
  6 33                           DIVISION IV
  6 34                           TAX CREDIT
  6 35    Sec. 17.  Section 2.48, subsection 3, paragraph f, Code 2014,
  7  1 is amended to read as follows:
  7  2    f.  In 2017, the:
  7  3    (1)  The from small farm operation to school tax credit under
  7  4 chapter 190A, subchapter II.
  7  5    (2)  The innovation fund investment tax credit available
  7  6 under section 15E.52.
  7  7    Sec. 18.  NEW SECTION.  190A.11  Administration == rules.
  7  8    1.  This subchapter shall be administered by the department
  7  9 of revenue.
  7 10    2.  The department of revenue shall adopt all rules necessary
  7 11 to administer this subchapter.
  7 12    3.  The department of agriculture and land stewardship, the
  7 13 department of public health, and the department of education
  7 14 shall cooperate with the department of revenue in developing
  7 15 and administering this subchapter.
  7 16    Sec. 19.  NEW SECTION.  190A.12  From small farm operation to
  7 17 school tax credit.
  7 18    A from small farm operation to school tax credit is allowed
  7 19 against the taxes imposed in chapter 422, divisions II and III,
  7 20 as provided in this subchapter.
  7 21    Sec. 20.  NEW SECTION.  190A.13  From small farm operation to
  7 22 school tax credit == eligibility.
  7 23    In order to qualify for a from small farm operation to school
  7 24 tax credit, all of the following must apply:
  7 25    1.  The taxpayer must be a small farm operator qualified
  7 26 to participate in programs created in chapter 15E, division
  7 27 XXVIII.
  7 28    2.  The taxpayer must produce the vegetables or fruits on the
  7 29 taxpayer's small farm operation.
  7 30    3.  The taxpayer must transfer title to the vegetables or
  7 31 fruits to a school district or accredited nonpublic school in
  7 32 this state.
  7 33    4.  The vegetables or fruits shall not be damaged or
  7 34 out=of=condition or declared to be unfit for human consumption
  7 35 by a federal, state, or local health official.  The condition
  8  1 of the vegetables or fruits must be at least the same as
  8  2 allowed for charitable contributions of food under section
  8  3 170(e)(3)(C) of the Internal Revenue Code.  However, the
  8  4 department may require that the vegetables or fruits comply
  8  5 with higher quality standards.
  8  6    5.  The vegetables or fruits must be used by the school
  8  7 district or school to supplement the diet of its students.
  8  8    Sec. 21.  NEW SECTION.  190A.14  From small farm operation
  8  9 to school tax credit == claims.
  8 10    1.  A certificate issued by the economic development
  8 11 authority under section 15E.378 must be attached to the
  8 12 taxpayer's tax return for the tax year for which the tax
  8 13 credit under this subchapter is claimed. The department of
  8 14 revenue must review and approve an application for a tax credit
  8 15 certificate as provided by rules adopted by the department of
  8 16 revenue.
  8 17    2.  The department of revenue may require that the taxpayer
  8 18 attach proof of the sale of vegetables or fruits to the
  8 19 department supporting the tax credit claim in a form and manner
  8 20 prescribed by the department.
  8 21    3.  An individual may claim a from small farm operation to
  8 22 school tax credit of a general partnership, limited liability
  8 23 company, S corporation, or estate electing to have income
  8 24 taxed directly to the individual. The amount claimed by the
  8 25 individual shall be based upon the pro rata share of the
  8 26 individual's earnings from the partnership, limited liability
  8 27 company, S corporation, or estate.
  8 28    Sec. 22.  NEW SECTION.  190A.15  From small farm operation to
  8 29 school tax credit == limits on claims.
  8 30    A from small farm operation to school tax credit is subject
  8 31 to all of the following limitations:
  8 32    1.  The tax credit shall not exceed a qualifying amount for
  8 33 the tax year that the tax credit is claimed. The qualifying
  8 34 amount is the lesser of the following:
  8 35    a.  Fifty percent of the total purchase price paid by all
  9  1 school districts or schools to which the vegetables or fruits
  9  2 were sold.
  9  3    b.  Ten thousand dollars.
  9  4    2.  A tax credit in excess of the taxpayer's liability for
  9  5 the tax year is not refundable but may be credited to the tax
  9  6 liability for the following five years or until depleted,
  9  7 whichever is earlier.
  9  8    3.  If a tax credit is allowed, the amount of the sale for
  9  9 which the tax credit is claimed shall not be deductible in
  9 10 determining taxable income for state tax purposes.
  9 11    4.  A tax credit shall not be carried back to a tax year
  9 12 prior to the tax year in which the taxpayer claims the tax
  9 13 credit.
  9 14    Sec. 23.  NEW SECTION.  190A.16  Tax credit certificates ==
  9 15 availability.
  9 16    1.  The amount of tax credits that may be issued to support
  9 17 the from small farm operation to school tax credit shall not
  9 18 exceed five million dollars in the aggregate in any year.
  9 19    2.  The department of revenue shall issue tax credit
  9 20 certificates to support the from small farm operation to school
  9 21 tax credit on a first=come, first=served basis.
  9 22    Sec. 24.  NEW SECTION.  422.11K  From small farm operation to
  9 23 school tax credit.
  9 24    The taxes imposed under this division, less the credits
  9 25 allowed under section 422.12, shall be reduced by a from
  9 26 small farm operation to school tax credit under chapter 190A,
  9 27 subchapter 2.
  9 28    Sec. 25.  Section 422.33, Code 2014, is amended by adding the
  9 29 following new subsection:
  9 30    NEW SUBSECTION.  22.  The taxes imposed under this division
  9 31 shall be reduced by a from small farm operation to school tax
  9 32 credit under chapter 190A, subchapter 2.
  9 33    Sec. 26.  CODIFICATION.  The Code editor shall organize
  9 34 the provisions of this division of this Act enacting sections
  9 35 190A.11 through 190A.16 as a new subchapter in chapter 190A.
 10  1    Sec. 27.  APPLICABILITY.  This division of this Act applies
 10  2 to tax years beginning on or after January 1, 2015.
 10  3                           DIVISION V
 10  4                     PROPERTY TAX EXEMPTION
 10  5    Sec. 28.  Section 427.1, Code 2014, is amended by adding the
 10  6 following new subsection:
 10  7    NEW SUBSECTION.  25.  Small farm operation.  Land which
 10  8 is a small farm operation owned or leased by a small farm
 10  9 operator certified by the economic development authority
 10 10 pursuant to section 15E.378 as qualified to participate in
 10 11 programs under chapter 15E, division XXVIII.  The economic
 10 12 development authority shall send a copy of the certificate
 10 13 to the appropriate assessor not later than February 1 of the
 10 14 assessment year for which the exemption is requested.  The
 10 15 economic development authority may subsequently withdraw the
 10 16 certificate if the small farm operator no longer qualifies to
 10 17 participate in programs under chapter 15E, division XXVIII.  In
 10 18 that case, the economic development authority shall provide the
 10 19 assessor with written notice of the decertification.
 10 20                           EXPLANATION
 10 21 The inclusion of this explanation does not constitute agreement with
 10 22 the explanation's substance by the members of the general assembly.
 10 23    GENERAL.  This bill provides assistance to a person
 10 24 classified as a small farm operator who owns or leases not more
 10 25 than 10 acres of agricultural land used to produce vegetables
 10 26 or fruits.  In order to receive assistance, the small farm
 10 27 operator must comply with certain requirements.  The person
 10 28 must be in business as an individual or an equity holder in
 10 29 an entity, including as a partner of a general partnership,
 10 30 a shareholder of a family farm corporation, or a member
 10 31 of a family farm limited liability company (Code chapter
 10 32 9H).  The individual or all equity holders in an entity must
 10 33 be Iowa residents, must demonstrate sufficient education,
 10 34 training, or experience in farming, and will materially and
 10 35 substantially participate in the small farm operation.  The
 11  1 small farm operation must have access to adequate working
 11  2 capital and production items, and meet low or moderate net
 11  3 worth requirements applicable to a beginning farmer under the
 11  4 beginning farmer loan program (Code sections 175.2(1)(p) and
 11  5 175.12).
 11  6    ASSISTANCE PROGRAMS.  The bill creates two small farm
 11  7 operation assistance programs administered by the economic
 11  8 development authority (authority).  The first is a small farm
 11  9 operator financial assistance program to provide financial
 11 10 assistance to small farm operators for the improvement or
 11 11 expansion of an existing farm operation.  The assistance may be
 11 12 in the form of an interest loan, low=interest loan, no=interest
 11 13 loan, forgivable loan, loan guarantee, grant, letter of credit,
 11 14 equity financing, principal buy=down, or interest buy=down.
 11 15 The second is a small farm operator marketing program to
 11 16 promote new markets for vegetables or fruits produced by small
 11 17 farm operators. The bill also creates  a small farm operations
 11 18 fund to support the programs.  Finally, the bill requires the
 11 19 authority to certify that a small farm operator is eligible to
 11 20 participate in other programs created in the bill.
 11 21    PREFERENCE REQUIRED BY STATE ENTITIES PURCHASING FOOD.
 11 22  The bill requires that certain governmental entities provide
 11 23 a preference to a certified small farm operator when the
 11 24 government entity purchases food. The entities include the
 11 25 department of administrative services, commission for the
 11 26 blind, merged area schools, board of regents institutions,
 11 27 the state department of transportation, and the department of
 11 28 corrections.
 11 29    IOWA STATE UNIVERSITY.  The bill requires that the Iowa
 11 30 cooperative extension service in agriculture and home economics
 11 31 at Iowa state university develop and publish materials and
 11 32 sponsor events to assist small farm operators in increasing
 11 33 profitability.
 11 34    INCOME TAX CREDIT.  The bill requires the department of
 11 35 revenue to establish a tax credit for certified small farm
 12  1 operators selling vegetables or fruits to schools. The amount
 12  2 of the tax credit cannot exceed 50 percent of the purchase
 12  3 price paid by the school or $10,000, whichever is less.  The
 12  4 bill provides for a five=year carryover period.  There is no
 12  5 carryback provision and the tax credit is nontransferable.  The
 12  6 bill imposes a maximum limit of $5 million that can be used to
 12  7 support the tax credit during any year.
 12  8    PROPERTY TAX EXEMPTION.  The bill provides that land which
 12  9 is a small farm operation owned or leased by a certified small
 12 10 farm operator is exempt from property taxes.  The authority
 12 11 must send a copy of the certificate to the appropriate county
 12 12 assessor.  The authority may decertify the small farm operator
 12 13 and send that notice to the county assessor as well.
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