Farm Horizons, Oct. 2018

How to help a beginning farmer

By Myron Oftedahl
Farm Business Management Instructor, South Central College

How can I help a beginning farmer, or how can someone help me, as a beginning farmer?

This may seem like an impossible task, considering the amount of capital that is required.

In May 2017, the Minnesota Legislature passed a Beginning Farmer Tax Credit, aimed at assisting beginning farmers. According to the legislation, a beginning farmer is someone who has farmed less than 10 years. This means that they have filed their taxes as a farm return with a Schedule F for less than 10 years.

A beginning farmer must be a resident of Minnesota, an active farmer who is providing the majority of the labor and management of the farm, and can provide positive projected earnings statements. Transactions must be with a non-related party, not grandparents, parents, siblings, children, grandchildren, spouses, or in-laws. As a beginning farmer, one must also have a net worth of less than $800,000.

The legislation allows for two things:

• A tax credit up to $1,500 to cover the cost of tuition for the Farm Management Program. Being enrolled in the Farm Management Program and farming for less than 10 years qualifies one for the tax credit. One may carry the tax credit forward for up to three years. One may receive the tuition credit on its own; it does not need to be connected to an asset transfer.

• The other part of the Beginning Farmer Tax Credit is directed toward the asset owner. If one sells an asset to a beginning farmer, he/she is entitled to a 5 percent tax credit, with a cap of $32,000.

An asset would include machinery, livestock, facilities and buildings, and land. If one doesn’t want to sell an asset, but wants to cash-rent land to a beginning farmer, he/she would be eligible for a 10 percent tax credit, with a cap of $7,000 per year.

If one chooses to do a share-rent arrangement, he/she would qualify for a 15 percent tax credit, with a cap of $10,000 per year. All of the tax credits to the asset owner can be carried forward for 15 years.

How does this work?

The beginning farmer will need to fill out two forms, one for them to receive the credit for their tuition, the other for the asset owner to receive the tax credit.

The program is being administered by the Minnesota Department of Agriculture Rural Finance Authority. There is a Thursday, Nov. 1 deadline for applications, and the cost must have occurred in 2018.

For example, a land owner enters into a cash rental agreement with a beginning farmer. The land owner would like to receive $200 per acre for rent, the beginning farmer would pay $180 for rent and qualify for the other $20 (actually $18), which would come through as a tax credit. If the majority of income is from cash rent, the tax credit would offset much of the Minnesota tax due when filing taxes. The land owner will receive a form from Minnesota Department of Agriculture or Minnesota Department of Revenue that states how much credit they will be eligible to use when filing a return. This form is anticipated to be sent out in December.

The intent of the legislature is to aid a beginning farmer and to assist and encourage young farmers to get established in a farming career. If a retiring farmer or an asset owner has a wish to help someone get started, this tax credit could be the incentive to do so.

The other option, if one doesn’t have any children who are interested in the farming operation, or there are no heirs, one can also explore MN FarmLink, which is a listing of farmers who are interested in helping others get established in a farming career, along with others who are looking for an opportunity to farm.

There are folks interested in a farming career, and some of them do not have the opportunity to do so with a family member.

I strongly encourage you to consider using the Beginning Farmer Tax Credit and/or the MN FarmLink site to give someone that chance. Remember the feeling of pride when looking out over your fields in the morning, and seeing a good crop growing, or cows and calves in the pasture? Maybe you can give a young person the chance to have the same feeling someday.

The beginning farmers who I have been working with are a joy; they are inquisitive, and they want to know how things work and how they are connected.

My generation, myself included, often struggles with technology. How many of you have asked your kids or grandkids how to use your smartphone? This generation grew up with it, so it is somewhat second-nature to them. They don’t have a fear of technology. These kids have been eager to learn the multitude of things that they need to know, or at least have some basic understanding to operate a farming operation now.

For more information concerning the tax credit, go to http://www.mda.state.mn.us/bftc, or call me or another Farm Business Management instructor.

I hope that you can look at this as an opportunity to help a younger person get started farming. Let them experience the line in the FFA Creed that states “ . . . for I know the joys and discomforts of an agricultural life.”

Or the lines in “And so God created a Farmer,” written by Paul Harvey. He needed someone who could get up before dawn, work all day, and then stay past midnight at a school board meeting. He needed someone who could bale a family together with the soft strong bonds of sharing, who would laugh and then sigh, and then reply, with smiling eyes, when his son/daughter says that they want to spend his/her life doing what Dad does. So, God made a farmer.

Will you help God make a farmer?

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