January 23, 2023
by Ryan Conklin
Effective Jan. 1, Ohio farmers can finally pursue the state income tax credits authorized by House Bill 95.
The state’s Beginning Farmer Tax Credit is now available to those who’ve recently entered the field and those who help beginning farmers.
Signed into law by Gov. Mike DeWine on April 21, the credits are designed to promote the sale or leasing of agricultural assets to beginning farmers. Rep. Susan Manchester, R-Waynesfield, and Rep. Mary Lightbody, D-Westerville, sponsored and championed the bill through the General Assembly.
Earlier this year, the Ohio Department of Agriculture outlined specific eligibility requirements for beginning farmers and for asset owners. Based on the bill’s requirements, Ohioans looking to complete agricultural sales or leases this year should review ODA’s guidance and consider the applicability to upcoming transactions. Both beginning farmers and farm asset owners are eligible for tax distinct benefits.
To qualify, a beginning farmer is someone who:
is a resident of Ohio
is seeking entry to or has entered farming within the past 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, 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
Beginning farmers should consider qualifying for the program as soon as possible. Doing so may improve competitiveness in purchase transactions or lease arrangements for 2023 and beyond.
Furthermore, the department assembled a list of approved financial management courses that must be completed to establish eligibility. Although the tax credit for the beginning farmer is limited to the cost of the financial management program, the true objective is achieving competitiveness in the land, livestock and equipment markets.
Agricultural asset owners selling or leasing land, livestock, equipment or buildings would all qualify for the 3.99% tax credit. The time frame for claiming the credit may vary based on the timeline of the sale or type of lease contract. For land to qualify for the credit, it must satisfy Ohio’s requirements for current agricultural use value. Equipment dealers are prohibited from participating in the program.
Additionally, beginning farmers and asset owners must complete and submit separate forms to ODA. Those forms will confirm eligibility for the credit and must be carefully completed. Note, the forms and accompanying documentation must be submitted to ODA by Oct. 3 of the current tax year to claim the credit.
Remember, transactions that occurred in the 2022 tax year are not eligible for these tax benefits. To determine the applicability of House Bill 95 to a specific sale or rental arrangement, consult with your legal counsel and tax professional before executing any contracts. As always, a written purchase contract or lease instrument is strongly recommended.
For more information regarding the tax credits and eligibility requirements, visit the Ohio Department of Agriculture website.
Conklin is an attorney and owner of Wright & Moore Law Co. LPA in Ohio. Reach him at [email protected] or 740-990-0755.
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