beginning farmer
Ohio's Beginning Farmer Tax Credit Program aims to help level the playing field for beginning farmers in Ohio. It does so by providing income tax benefits for both a beginning farmer and someone who transfers farm assets to the beginning farmer. The new program first became available for the 2023 tax year, and sunsets on January 1, 2028, or when total income tax credits granted amount to $10 million. Participating in the program requires good planning, so now is the optimal time for existing and beginning farmers to consider how best to utilize the program while program funds are still available.
Our law bulletin, Ohio's Beginning Farmer Tax Credit Program, can help guide planning efforts. The bulletin explains how the program works and outlines the process for qualifying for the program's income tax credits. That process includes:
1. Meeting eligibility requirements to become certified by the Ohio Department of Agriculture (ODA) as a "qualified beginning farmer." The first step, then, is to determine whether an individual can meet the eligibility requirements, which are:
- A resident of Ohio.
- Seeking entry to or has entered farming within the last 10 years.
- Farming or intending to farm in Ohio.
- Has a total net worth of less than $800,000 in 2021, including spouse and dependent assets, as adjusted for inflation each year.
- Provides the majority of the daily physical labor and management for the farm.
- Has adequate farming experience or knowledge in the type of farming the individual is conducting.
- Submits projected earnings statements and demonstrates profit potential.
- Demonstrates farming will be a significant source of income for the individual.
- Is not a partner, member, shareholder, or trustee of the assets the individual is seeking to purchase or rent.
- Completes an ODA-approved financial management course.
2. Completing training and applying to ODA for certification as a "qualified beginning farmer." One component of attaining the program's eligibility requirements is completing a financial management course, which an individual who meets all other program requirements must do before applying to ODA to become certified. OSU Extension offers two of the 12 ODA-approved financial management programs an individual can complete to meet the training requirement.
- After completing an eligible financial management course, the individual must submit an application to ODA's Office of Farmland Preservation to be approved as a qualified beginning farmer. The application requires submitting information and documentation showing that the individual meets the eligibility requirements.
- If ODA approves the application, the individual will receive a state income tax credit certificate for the amount paid for completing the financial management course. The qualified beginning farmer can use the tax credit on the current year's tax return and can carry it forward for three succeeding tax years.
- A list of eligible financial management courses and the application to become a qualified beginning farmer are on the ODA website at https://agri.ohio.gov/programs/farmland-preservation-office/Beginning-Farmer-Tax-Credit-Program.
3. Transfer of agricultural assets to a qualified beginning farmer. The program also creates a financial incentive for owners who sell or rent agricultural assets to an individual who has been certified as a qualified beginning farmer, as long as the beginning farmer is not a partner, member, shareholder, or trustee with the owner of the agricultural assets. The asset owner will receive an Ohio income tax credit equal to 3.99% of the asset sale price or gross rental income received during a calendar year for a cash or share rental lease, and can carry the credit forward for up to seven years.
- "Agricultural assets" include land in agricultural production (10 or more or if under 10 acres, earning $2500 in average annual gross income from agriculture), livestock, facilities and buildings, and machinery (but not if the owner of machinery is an equipment dealer).
- A sale of assets must occur in the same calendar year the owner applies for the tax credit.
- In the case of a rental of assets, the credit can be claimed over the first three years of the lease.
4. Application for a tax credit by the asset owner. To receive the 3.99% income tax credit, the asset owner must submit a Beginning Farmer Tax Credit Asset Transfer Form application to ODA. The asset owner must submit a copy of the qualified beginning farmer's certification certificate with the application, which is available on the ODA website at https://agri.ohio.gov/programs/farmland-preservation-office/Beginning-Farmer-Tax-Credit-Program. If ODA approves the application, the Ohio Department of Taxation will issue a tax credit certificate to the asset owner.
It is important for both the beginning farmer and the agricultural asset owner to understand the process for qualifying for the income tax credits the new program offers. Timing is critical, as the beginning farmer must complete the training and become certified as a qualified beginning farmer before a transfer of agicultural assets occurs. It's also important for existing asset owners to coordinate program participation with estate and transition plans. Now is the time to consult with professional advisors and begin planning for program participation for the 2024 tax year.
Learn more about the Beginning Farmer Tax Credit Program in our law bulletin, available in the tax law library on https://farmoffice.osu.edu/our-library/tax-law and by visiting the ODA's website at https://agri.ohio.gov/programs/farmland-preservation-office/Beginning-Farmer-Tax-Credit-Program.
Tags: beginning farmer, tax credit, Income Tax, HB 95
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We're excited to announce that our new farm financial management online course is now available. Named "Farm On," the self-paced, on-demand farm financial management course was created by our Farm Office team under the leadership of new Farm Management Field Specialist Eric Richer. It is offered through OSU Extension’s new Farm Financial Management and Policy Institute.
We created the Farm On course to address the needs of Ohio’s new and beginning farmers who want to better prepare themselves to operate a commercial farm in Ohio and do that with a high level of economic stability while remaining profitable and responsible along the way. What’s unique about the Farm On course is that, not only does it comply with the regulations of the new Ohio House Bill 95 Beginning Farmer Tax Credit program, it also meets the borrower training requirements for the U.S. Department of Agriculture Farm Service Agency’s Beginning Farmer and Rancher Loan Program.
The 10-module Farm On course includes video lessons, quizzes, and opportunities to apply knowledge gained through graded course exercises. Students can engage with the lead course instructor through virtual office hours and scheduled appointments. The course covers the following topics:
- Farm Business Planning
- Balance Sheets
- Income Statements
- Cash Flow Projections
- Calculating Cost of Production
- Farm Record Keeping
- Farm Taxes
- Farm Financing
- Risk Management
- Farm Business Analysis
The Farm On course allows CFAES to serve the needs of all farmers through OSU Extension and our Farm Financial Management and Policy Institute, said Cathann A. Kress, Ohio State vice president for agricultural administration and dean of CFAES.
“We are excited to partner with ODA and USDA-FSA to address the farm financial training that is required for running a farm business,” Kress said. “Currently, we are the only educational institution in Ohio with a course like ‘Farm On’ that qualifies for ODA’s Beginning Farmer Tax Credit Program and FSA’s Borrower Training Requirements.
“As part of our Land-Grant mission, CFAES educates not just college students but over two million individuals across the lifespan.”
The Ohio House Bill 95 Beginning Farmer Tax Credit program went into effect in July 2022 and grants a 3.99% tax credit to landowners who sell or lease assets to a certified Ohio beginning farmer. The new law also allows an Ohio tax credit to the certified beginning farmer equal to the cost of the financial management course completed. The Farm On course costs $300 per person.
“OSU’s Farm On course is a great way to help Ohio farmers qualify for Ohio Department of Agriculture’s (ODA) new Beginning Farmer Tax Credit program, which is an important tool to help current beginning farmers and potential future farmers do what they do best,” said ODA Director Brian Baldridge. “We are thankful for this partnership that is helping to keep Ohio’s hard-working farmers at the forefront.”
According to Darren Metzger, Ohio Farm Service Agency Loan Chief, “The course is in-depth financial management training that can assist our borrowers to obtain and/or improve their knowledge in this critical area of farm management. OSU’s Farm On course is now 1 of 5 approved vendors for our borrowers in Ohio.”
CFAES’ new Farm Financial Management and Policy Institute was created last year with the goal of sharing resource-based knowledge and best practices to help Ohio farmers manage their businesses as the agricultural industry changes and evolves. Housed within OSU Extension, the goal of FFMPI is for the integration, translation, and communication of CFAES’ farm management and ag policy presence that addresses critical farm management and policy issues affecting Ohioans.
“Farm On is meeting a need of today’s modern crop farmers and it’s packaged in a way that respects the busy schedules of family farmers. It’s this type of tangible benefit that earns the support of Ohio’s corn and small grains checkoff funds. We are proud to partner with OSU Extension on this important new institute,” said Tadd Nicholson, executive Director of Ohio Corn and Wheat.
Farm On isn’t just for new and beginning farmers. The course provides an opportunity for any farmer in Ohio, whether you’re a new farmer, a seasoned farmer, a small farmer, or a large farmer. For a long time, we’ve needed to have this course in Ohio because farm management is so critical to ensuring the future of our farms.
To learn more, view our video and to sign up for Farm On, go to go.osu.edu/farmon.
Tags: Farm On, farm financial management, beginning famer tax credit, beginning farmer, Farm Service Agency
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The idea to use income tax incentives to help Ohio’s beginning farmers gain access to agricultural assets floated around for several years in the Ohio General Assembly. The idea became a reality when the Beginning Farmer Bill sponsored by Rep. Susan Manchester (R-Waynesfield) and Rep. Mary Lightbody (D-Westerville) passed the legislature, was signed by Governor DeWine and became effective on July 18, 2022. The law is now in the hands of the Ohio Department of Agriculture (ODA), charged with implementing its provisions.
The new law sets initial eligibility criteria for certifying “beginning farmers,” directs ODA to establish the certification program, and authorizes two types of income tax credits for certified beginning farmers and those who sell or lease assets to certified beginning farmers. According to ODA, the income tax credits will be available for 2023, once the certification program is up and running. The law sunsets the tax credits on January 1, 2028 and also limits the total amount of tax credits that can be awarded to $10 million.
Here’s a summary of what to expect from the new law.
Certification of beginning farmers. The ODA will establish a process for designating a farmer who meets the eligibility criteria to be a “certified beginning farmer.” The law sets initial criteria for beginning farmers designation but also allows ODA to create additional requirements. ODA may seek participation from Ohio State and Central State in the certification of beginning farmers. The initial certification conditions are:
- Resident of Ohio.
- Seeking entry to or has entered farming within the last 10 years.
- Farms or intends to farm on land in Ohio.
- Is not a partner, member, shareholder, or trustee of the assets the individual is seeking to purchase or rent.
- Has a total net worth of less than $800,000 in 2021, including spouse and dependent assets, as adjusted for inflation each year.
- Provides majority of daily physical labor and management of the farm.
- Has adequate farming experience or knowledge in the type of farming for which seeking assistance.
- Submits projected earnings statements and demonstrates profit potential.
- Demonstrates farming will be a significant source of income for the individual.
- Participates in a financial management program approved by ODA.
Financial management programs for beginning farmers. ODA must approve financial management programs that meet the certification requirement, in consultation with Ohio State and Central State. The list of approved programs will be available on ODA’s website.
Income tax credits for certified beginning farmers. An individual who attains certification as a beginning farmer may apply for a state income tax credit equal to the cost incurred during the calendar year for participating in an ODA approved financial management program or a substantially equivalent financial management program approved by the USDA. The tax credit is nonrefundable. If the tax credit exceeds the beginning farmer’s tax liability in the year granted, the excess can carry forward for not more than three succeeding tax years.
Income tax credits for owners who sell or rent assets to certified beginning farmers. An owner who sells or rents “agricultural assets” to a certified beginning farmer during the calendar year or in either of the two preceding calendar years may apply for a state income tax credit. The credit will be equal to 3.99% of the sale price or the gross rental income received during the calendar year for either a cash or share rental agreement. “Agricultural assets” includes agricultural land (at least 10 acres and in agricultural production or earning $2500 in average yearly gross income from agricultural production if under 10 acres), livestock, facilities, buildings, and machinery used for agricultural production in Ohio. The owner cannot be an equipment dealer, however, nor can the certified beginning farmer receiving the assets be a partner, member, shareholder, or trustee of the owner of the assets. Rented assets must be rented at prevailing community rates, as determined by ODA in consultation with the Ohio tax commissioner. The tax credit is nonrefundable but may be carried forward for seven succeeding tax years if it exceeds the owner’s tax liability.
Time to plan. As we await ODA’s rules and procedures for the new tax credits, beginning and existing farmers can use this time for planning. Review the new law with your attorney and accountant to determine how the income tax credits could affect you. If you are a beginning farmer seeking agricultural assets, spend time trying to connect with an existing farmer who is ready to sell or rent agricultural assets. Although the 3.99% credit for those transfers may not sound significant, run the numbers and see how they could play out. The hope of the new law is that those numbers will be enough to help a beginning farmer have greater access to those important assets that are critical to farming in Ohio.
Information on House Bill 95, the Beginning Farmer bill, is available at this link.
Tags: beginning farmer, House Bill 95, HB 96, income tax credits
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The Ohio General Assembly is off and running in its new session. Many bills that affect agriculture in Ohio are already on the move. Here’s a summary of those that are gaining the most momentum or attention.
Tax Conformity Bill – S.B. 18 and H.B. 48. The Senate has already passed its version of this bill, which conforms our state tax code with recent changes to the Internal Revenue Code made in the latest COVID-19 stimulus provisions of the Consolidated Appropriations Act. Both the Senate and the House will also exempt forgiven Paycheck Protection Program second-draw loan proceeds from the Commercial Activity Tax. The Senate version additionally exempts Bureau of Workers Compensation dividend rebates from the Commercial Activity Tax beginning in 2020, but the House bill does not. Both bills include “emergency” language that would make the provisions effective in time for 2020 tax returns.
Beginning farmers tax credits – H.B. 95. A slightly different version of this bill is returning after not passing in the last legislative session. The bi-partisan bill aims to assist beginning farmers through several temporary income tax credits:
- Businesses that sell or rent agricultural assets such as land, animals, facilities or equipment to certified beginning farmers can receive a 5% income tax credit for sales, a 10% of gross rental income credit for cash rents, and 15% of gross rental income for share rents.
- Certified beginning farmers can receive an income tax credit equal to the cost of participating in a certified financial management program.
Beginning farmers, among other requirements, are those in or seeking entry into farming in Ohio within the last ten years who are not a partner, member or shareholder with the owner of the agricultural assets and who have a net worth of less than $800,000 in 2021, which adjusts for inflation in subsequent years. Beginning farmers must be certified by the Ohio Department of Agriculture or a land grant institution. The House Agriculture and Conservation Committee will discuss the bill at its meeting on February 16.
Wind and solar facilities – S.B. 52. In addition to revising setback and safety specifications for wind turbines, this proposal would amend Ohio township zoning law to establish a referendum process for large wind and solar facility certificates. The bill would require a person applying for a certificate for a large wind or solar facility to notify the township trustees and share details of the proposed facility. That notification sets up opportunities for the township trustees or residents of the township to object to the application and submit the proposed application to a vote of township residents. A certificate would not take effect unless approved by a majority of the voters. A first hearing on S.B. 52 will be held on Tuesday, February 16 before the Senate Energy and Public Utilities Committee.
Grants for broadband services – H.B. 2 and S.B. 8. The Senate passed its version of this bill last week, which sets up a $20 million competitive grant program for broadband providers to extend broadband services throughout the state. The proposal would also allow broadband providers to use electric cooperative easements and poles, subject to procedures and restrictions. The bill had its second hearing before the House Finance Committee last week.
Eminent domain – H.B. 63. Based on a similar bill that didn’t pass last session, this bill changes eminent domain law in regard to property taken for the use of recreational trails, which include public trails used for hiking, bicycling, horseback riding, ski touring, canoeing and other non-motorized recreational travel. H.B. 63 would allow a landowner to submit a written request asking a municipality or township to veto the use of eminent domain for a recreational trail within its borders. The bill would also allow a landowner to object to a use of eminent domain for any purpose at any time prior to a court order for the taking, rather than limiting that time period to ten days as in current law. The bill had its first hearing before the House Civil Justice Committee last week.
Minimum wage increases. S. B. 51 and H.B. 69. Bills on each side of the General Assembly propose gradually increasing the state minimum wage to $15, but have different paths for reaching that amount. S.B. 51 proposes increasing the wage to $12/hour in 2022, followed by $1/hour increases each year and reaching $15 by 2025, which is when a federal bill proposes to establish the $15 minimum wage. H.B. 69 begins at $10/hour in 2022 with $1/hour increases annually, reaching $15 in 2027. S.B. 51 was referred last week to the Workforce and Higher Education Committee and H.B. 69 was referred to the Commerce and Labor Committee.
Tags: Ohio legislation, beginning farmer, solar energy, wind energy, township zoning, eminent domain, minimum wage, broadband, COVID, Paycheck Protection Program, commercial activity tax
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