Minnesota’s beginning farmers scored a major win with the state lawmakers and the governor this legislative session.

Lawmakers passed and Gov. Mark Dayton signed legislation for a beginning farmer program that creates two new income tax credits, both which may be claimed after approval and certification by the Rural Finance Authority. One tax credit is offered to beginning farmers who participate in an approved farm management program. The other tax credit is offered to landowners who rent or sell land to beginning farmers.

To qualify for a beginning farmer management tax credit, a beginning farmer must take a financial management program approved by either RFA or the agricultural commissioner. The credit equals the program costs paid by the farmer, with a maximum of $1,500 for up to three years of program participation.

Under the new program, landowners receive a state income tax credit when they sell or rent land or agricultural assets to a beginning farmer. The credit equals:

• 5% of the sale price of agricultural assets sold to the beginning farmer, up to a maximum of $32,000

• 10% of the gross rental income in the first three years of a cash rental agreement with the beginning farmer, up to a maximum of $7,000 per year, or

• 15% of the cash equivalent in the first three years of a share-rent agreement with the beginning farmer, up to a maximum of $10,000 per year

RFA will allocate credits to applicants on a first-come, first-served basis, with a maximum statewide limit of $5 million beginning in tax year 2018, and $6 million per year in following years. The sunset for the credits is 2023. RFA is required to issue a report to the Legislature on the effectiveness of the program by February 2022.

Matthew Fitzgerald, an organic grain farmer who farms with his family near Glencoe and helped co-found the Central Minnesota Young Farmers Coalition, says the bill offers a win-win solution for the future of farming in Minnesota.

“This is also the first bill to include an incentive for the sale of farmland, making it a historic win,” he adds. “The next generation of farmers is very excited about raising good food and adding to the local economy.”

He currently farms in partnership with his dad, Joe, and Joe Provencher. They farm 1,200 acres of organic corn, soybeans, kidney beans, black beans, wheat and alfalfa. Fitzgerald also recently bought his own farm near Hutchinson, where he is raising alfalfa while transitioning to organic production.

“I grew up on this farm [near Glencoe] and wanted to farm, but it is hard to do,” he says. He worked two jobs in the metro area to save money to buy his own 80-acre spread.

“I’m really humbled and excited about it,” he adds.

Beginning farmers, please step forward
Fitzgerald hopes that beginning farmers and landowners of all types — conventional, organic, rural, urban, livestock, crop, vegetable —  participate in the new program. He would like to see numbers high enough to meet that first year $5 million cap.

According to a recent Minnesota Department of Revenue study, the Minnesota Department of Agriculture estimates that 370 farmers will participate in the program each year, with half of them purchasing assets. An average farm sale price of $640,000 is assumed for beginning farmers, with the asset owner entitled to a credit of 5% of the sales price. Livestock operations are assumed to be included in farm sales.

The study assumed that half of the beginning farmers will rent assets, assuming a quarter-section cash rental gross rent will cost $35,200. Under the program, the rental credit equals 10% of the first three years’ gross rental or 15% of the first three years’ gross share-rental.

The study also estimated that a beginning farmer’s average management credit would be $700, for a total of $259,000 in the first year for 370 participants.

The bill was authored by state Rep. Nels Pierson (R-Rochester) and state Sen. Mike Goggin (R-Red Wing) and had wide bipartisan support. In the House, state Reps. Jason Rarick (R-Pine City), Josh Heintzeman (R-Baxter), Mary Franson (R-Alexandria), Greg Davids (R-Preston), Jeanne Poppe (DFL-Austin), Gene Pelowski (DFL-Winona), Clark Johnson (DFL-North Mankato) and David Bly (DFL-Northfield) co-authored the bill. In the Senate, the bill (SF 1414) was chief-authored by state Sen. Michael Goggin (R-Redwing) and co-authored by state Sens. Andrew Mathews (R-Milaca), Rich Draheim (R-Madison Lake), Kent Eken (DFL-Twin Valley) and Dan Sparks (DFL-Austin).

Strong supporters of the bill included the Central Minnesota Young Farmers Coalition, Minnesota Farm Bureau, Minnesota Farmers Union, Land Stewardship Project and the Minnesota Catholic Conference.