Regular Session 2023-2024 House Bill 2414 P.N. 3327

PRINTER'S NO. 3327

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

2414

Session of

2024

INTRODUCED BY FRIEL, FREEMAN, HILL-EVANS, BRENNAN, SANCHEZ,

GIRAL, KHAN, HOWARD, D. WILLIAMS, ZIMMERMAN, DALEY AND

CEPEDA-FREYTIZ, JUNE 13, 2024

REFERRED TO COMMITTEE ON FINANCE, JUNE 13, 2024

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," in tax credits relating to beginning farmers,

further providing for scope of article, for definitions, for

beginning farmer management tax credit and for approval of

tax credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Section 1801-H of the act of March 4, 1971

(P.L.6, No.2), known as the Tax Reform Code of 1971, is amended

to read:

Section 1801-H. Scope of article.

This article relates to the tax credits to owners of

agricultural assets who sell [or rent] agricultural assets to

beginning farmers.

Section 2. The definitions of "department" and "lease" in

section 1802-H of the act are amended to read:

Section 1802-H. Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

* * *

"Department." The Department of [Community and Economic

Development] Agriculture of the Commonwealth.

* * *

["Lease." A written agreement between parties for the lease

of real property on which farming occurs.]

* * *

Section 3. Sections 1803-H and 1804-H(a) of the act are

amended to read:

Section 1803-H. Beginning farmer management tax credit.

(a) General rule.--An owner of agricultural assets and a

beginning farmer may each take a credit against the tax due

under Article III for the sale [or rental] of agricultural

assets to [a] the beginning farmer in the amount approved by the

department. An owner of agricultural assets [is] and a beginning

farmer are eligible for allocation of a tax credit equal to[:

(1) five percent of the lesser of the sale price or the

fair market value of the agricultural asset, up to a maximum

of $32,000; or

(2) ten percent of the gross rental income in each of

the first, second and third years of a rental agreement, up

to a maximum of $7,000 per year.] 5% of the lesser of the

sale price or the fair market value of the agricultural

asset, up to a maximum of $50,000 per farm or agricultural

asset.

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(b) Application.--

(1) The tax credit may be claimed only after approval

and certification by the department and is limited to the

amount stated on the certificate issued under section 1804-H.

(2) An owner of agricultural assets and a beginning

farmer must apply to the department for approval of a tax

credit, in a form and manner prescribed by the department.

The application shall:

(i) identify the beginning farmer who has been

certified by the department under paragraph (3) and to

whom the agricultural assets are sold [or rented]; and

(ii) specify whether the beginning farmer is a

brother, sister, ancestor or lineal descendant of the

applicant.

(3) A person may apply to the department for

certification that the person is a beginning farmer for

purposes of this article. The application shall be in a form

and manner prescribed by the department and shall require

that the applicant provide:

(i) Projected earnings statements to demonstrate the

profit potential for the farming conducted by the

applicant.

[(ii) Verification that the farming conducted by the

applicant will be a significant source of income for the

applicant.]

(iii) Verification that the applicant will, if

certified as a beginning farmer by the department, notify

the department if the farmer no longer meets the

certification and eligibility requirements within the

three-year certification period, in which case

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eligibility for tax credits ends.

(iv) Verification that [the applicant is not engaged

in farming by means of a joint business venture.] the

applicant is an individual, or if engaged in farming by

means of a joint business venture, that each individual

who is a member of the joint business venture meets the

definition of a beginning farmer.

(iv.1) Verification and documentation of Federal

gross income from agricultural production or experience

in the agriculture industry or related field within the

taxable year.

(v) Verification and documentation as necessary to

meet other eligibility requirements as may be established

by the department.

(1) An owner of agricultural assets or a beginning

farmer may terminate a rental agreement for reasonable cause

upon approval of the department.

(2) If a rental agreement is terminated without the

fault of the owner of agricultural assets, the tax credits

shall not be retroactively disallowed.

(3) In determining reasonable cause, the department

shall consider which party was at fault in the termination of

the agreement.

(4) If the department determines the owner of

agricultural assets did not have reasonable cause, the owner

of agricultural assets must repay all tax credits received as

a result of the rental agreement to the Commonwealth. The

repayment is additional income tax for the taxable year in

which the department makes its decision.] (Reserved).

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(d) [Duration] Limitation of tax credit.--The credit is

limited to the liability for tax as computed under Article III

[for the taxable year. The tax credit may not be sold, passed

through, carried forward or refunded]. No credits granted under

this section shall be applied against any tax withheld by an

employer from an employee under Article III.

(e) Use, carryover, carryback, refund and assignment of

credit.--

(1) The taxpayer must first apply the tax credit against

the taxpayer's tax liability for the year in which the credit

is first approved. If the taxpayer cannot use the entire

amount of the tax credit for the taxable year in which the

tax credit is first approved, the excess may be carried over

to succeeding taxable years and used as a credit against the

tax liability of the taxpayer for those taxable years. Each

time the tax credit is carried over to a succeeding taxable

year, it shall be reduced by the amount that was used as a

credit during the immediately preceding taxable year. The tax

credit may be carried over and applied to succeeding taxable

years for no more than three taxable years following the year

in which the credit was first approved.

(2) If the taxpayer cannot use the entire amount of the

tax credit after the application of paragraph (1), the

taxpayer, upon application to and approval by the Department

of Revenue, may request a refund. The refund permitted under

this paragraph may not exceed 75%, or $15,000, of the

remaining balance of the tax credit.

(3) A taxpayer is not entitled to carryback, sell or

assign all or any portion of an unused tax credit granted to

the taxpayer under this article.

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(f) Beginning farmer tax credit program public awareness

campaign.--The department shall establish a public awareness

campaign to provide information to the general public and owners

of agricultural assets concerning the availability and

applicability of the tax credit.

Section 1804-H. Approval of tax credit.

(a) General rule.--The tax credit may be claimed only after

approval and certification by the department. [The department

shall review the application of a tax credit in consultation

with the Department of Agriculture.]

* * *

Section 4. This act shall take effect in 60 days.

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