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Bill would expand tax breaks for beginning farmers

Published: Tuesday, Feb. 5, 2013 12:02 p.m. CDT

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DES MOINES, Iowa (AP) — Two young farmers who serve in the Iowa Legislature are trying to make it more appealing for retiring farmers to lease their land to beginners.

Rep. Pat Grassley, 29, of New Hartford and Rep. Bobby Kaufmann, 27, of Wilton, have introduced a bill that would expand a tax credit program that gives an incentive for retiring farmers to lease or rent land to beginning farmers.

The state now provides $6 million in tax credits to retiring farmers who lease land to beginning farmers. The bill calls for doubling that amount so beginning farmers also get tax credits.

“A lot of big, wealthy farmers drive-in with a big checkbook and say I’ll cash rent your farm for an extremely high amount of money. So this expansion gives the beginning farmer a tool to compete out there,” said Steve Ferguson, executive director at Iowa Agricultural Development Authority, which gives financial help to farmers buying land, equipment or livestock.

Iowa has offered tax credits to retiring farmers who lease their land to beginners since 2007, but the measure introduced last week would give an additional tax break to new operators leasing land who have proved they are making improvements to the farm.

Farm improvements are measured by how many breeding livestock or new machinery the starting farmer has added to the leased land.

“This is also encouraging a young person to expand their farm in equipment and animals,” Kaufmann said.

Brent Drey, 19, plans on take over and expand his family’s 1,800-acre corn and soybean farm after he graduates from Iowa State University. He qualifies for the current tax credit program, which gives landowners a 5 percent tax break on their gross revenue.

“It’s a tool for beginning farmers to get their foot in the door and build relationships with potential landlords,” he says. “A lot of starting farmers can’t compete with $400 to $500 an acre rent. The tax credit doesn’t solve the problem but it helps.”

Drey says if the tax credit expansion passes, he’ll definitely use it.

“Starting farmers are like small businesses. We’re trying to get established in a cut-throat industry,” he said. “We’re not going to make much money in the first couple of years, so any little bit helps.”

But David Baker, who works with young farmers at the Iowa State Agricultural Extension’s Beginning Farmer Center, is skeptical of the proposal. Baker tries to match beginning farmers with retiring farmers looking to lease their land using a database.

Baker said he has about 570 beginning farmers registered, but they’re vying for land being offered by only a dozen retiring farmers, most of whom don’t have an interested family member willing to take on their farm. Most of the aspiring farmers are in the mid-30s and have families, he said.

“I think legislators are aiming at the wrong target,” Baker said. “I’ve got 570 young people that would go into farming without that tax credit.”

Baker said when retiring farmers sell their land to established operators, it consolidates the land and can reduce workers in an area, hurting nearby communities. He encouraged legislators to talk with farmers and encourage them to look for young successors.

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