Capitol Update: Week 7

House Ag Committee Approves Beginning Farmer Tax Credit

On Tuesday, February 26, 2019, the Iowa House Agriculture Committee approved House Study Bill 173 by a unanimous 21-aye vote (2-absent).  The bill will now move to the House Ways & Means Committee for its consideration as it contains tax credits provisions.

The measure increases the annual amount of beginning farmer tax credits from $6-million to $12-million, which will restore the ability to issue new tax credits for agricultural asset transfers that has been lost since January 1, 2018, when the prior cap of $12-million expired and reverted back to a $6-million level that existed prior to January 1, 2013.  Because many of the tax credits are multi-year based on multi-year contracts, there is an excess of ongoing already authorized tax credits above the $6-million amount.  HSB 173 further restores significant autonomy of the Agricultural Development Board to approve beginning farmer loans and tax credits without also requiring the Iowa Finance Authority Board to also approve such actions and allows the Agricultural Development Board to once again promulgate administrative rules for its programs on its own accord rather than having the IFA board do so.  The Agricultural Development Division will remain under IFA oversight umbrella and will continue to be housed in that state agency.

As Chairman of the House Ways and Means Committee I look forward to taking up this important piece of legislation in the coming weeks.  It was a priority of my last session as the Ag Chair.  We need to continue to find ways to get our younger generation involved in agriculture.

Business Coupling for Section 179 Passes Ways and Means

Senate File 220 provides section 179 expensing with a maximum deduction of $70,000 for corporations, financial institutions, and partnerships and limited liability companies taxed as corporations. The investment limitation in the bill is set at $280,000.

Currently, for tax year 2018, the maximum expensing allowance deduction and investment limitations on section 179 property for such entities is limited to $25,000 and $200,000, respectively. Last year’s tax reform bill set the limit to $70,000 for individuals. With the passage of Senate File 220—these entities would be allowed the same deductions and subject to the same limits as individuals.

The bill provides that the change is effective upon enactment and applies retroactively to January 1, 2018, for tax years beginning on or after that date. The fiscal impact of Senate File 220 will be a general fund reduction of $620,000 in fiscal year 2019 and a reduction of $430,000 in fiscal year 2020.

Senate File 220 is ready for consideration on the House floor.  If it passes the floor it will head to the Governor’s desk for a signature.

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