PRINTER'S NO. 2285
No. 1552 Session of 2002
INTRODUCED BY WAUGH, WENGER, MADIGAN, O'PAKE, THOMPSON, WOZNIAK,
KITCHEN, PUNT, M. WHITE, RHOADES, LAVALLE, HUGHES, KUKOVICH,
CONTI, DENT, MUSTO, ERICKSON, COSTA, TOMLINSON, MOWERY,
SCHWARTZ, ROBBINS, ORIE AND LEMMOND, OCTOBER 7, 2002
REFERRED TO AGRICULTURE AND RURAL AFFAIRS, OCTOBER 7, 2002
AN ACT
1 Providing for farm loans; imposing powers and duties on the
2 Department of Agriculture; and establishing the Next
3 Generation Farmer Loan Program.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Short title.
7 This act shall be known and may be cited as the Next
8 Generation Farmer Loan Act.
9 Section 2. Declaration of policy.
10 The General Assembly finds and declares as follows:
11 (1) It is necessary to provide an effective means for
12 Federal, Commonwealth and business linkages to assist
13 beginning farmers and first-time farmers in undertaking
14 projects to develop farming for future generations in this
15 Commonwealth.
16 (2) Federally tax-exempt mortgage financing can be used
17 to reduce a borrower's interest rate while permitting a
1 lender to extend the benefits of tax-exempt financing to
2 agriculture.
3 Section 3. Definitions.
4 The following words and phrases when used in this act shall
5 have the meanings given to them in this section unless the
6 context clearly indicates otherwise:
7 "Agricultural improvement." A building, structure or
8 fixture, which is:
9 (1) suitable for use in farming; and
10 (2) located on agricultural land.
11 "Agricultural land." Land suitable for use in farming and
12 which is or will be operated as a farm.
13 "Applicant." A borrower that applies for a loan under
14 section 6.
15 "Beginning farmer." An individual or a partnership that
16 engages or desires to engage in farming.
17 "Borrower." Any of the following that seeks to obtain a loan
18 under section 6:
19 (1) A beginning farmer.
20 (2) A first-time farmer.
21 "Department." The Department of Agriculture of the
22 Commonwealth.
23 "Depreciable agricultural property." Personal property:
24 (1) which is suitable for use in farming; and
25 (2) for which a Federal income tax deduction for
26 depreciation is allowable.
27 The term does not include feeder livestock, seed, feed,
28 fertilizer, inventory or supplies.
29 "Fair market value." The price which a buyer that is willing
30 but not obligated to buy would pay to a seller that is willing
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1 but not obligated to sell.
2 "First-time farmer." As defined in section 147(c)(2)(C) of
3 the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
4 § 147(c)(2)(C)) applied to the indebtedness with respect to the
5 farmland.
6 "Lender." A person that seeks to make a loan under section
7 6.
8 "Project." The expenditure of money for any of the
9 following:
10 (1) The purchase of agricultural land.
11 (2) The construction of an agricultural improvement.
12 (3) The purchase of agricultural equipment. This
13 paragraph does not include the original sale of depreciable
14 agricultural property.
15 "Related person." As defined in section 144(a)(3) of the
16 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
17 144(a)(3)).
18 "Substantial farmland." As defined in section 147(c)(2)(E)
19 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
20 U.S.C. § 147(c)(2)(E)).
21 "Total assets." Includes cash crops or feed on hand;
22 livestock held for sale; breeding stock; marketable loans and
23 securities not readily marketable; accounts receivable; notes
24 receivable; cash invested in growing crops; net cash value of
25 life insurance; machinery and equipment; cars and trucks; farm
26 and other real estates, including life estates and personal
27 residence; and value of a beneficial interest in a trust,
28 government payments or grants. The term does not include items
29 used for personal, family or household purposes, but in no event
30 shall such property be excluded to the extent a deduction for
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1 depreciation is allowable for Federal income tax purposes. All
2 assets shall be valued at fair market value.
3 "Total liabilities." Includes accounts payable, notes or
4 other indebtedness owed to any source, taxes, rent, amount owed
5 on a real estate contract or real estate mortgages, judgments
6 and accrued interest payable.
7 Section 4. Department.
8 The department has the following powers and duties:
9 (1) Utilize the program under section 5(c).
10 (2) Administer loans under sections 6 and 7.
11 (3) Cooperate with Federal, Commonwealth and local
12 agencies to implement this act.
13 (4) Promulgate regulations to implement this act.
14 Section 5. Allocation.
15 (a) Establishment.--The Next Generation Farmer Loan Program
16 is hereby established.
17 (b) Source.--The sources of moneys for the program are as
18 follows:
19 (1) Allocations from the Commonwealth's tax exempt bond
20 allocation as authorized under Federal law.
21 (2) Annual allocations established by the department and
22 the Department of Community and Economic Development.
23 (c) Status of appropriation.--Allocations in the program
24 under subsection (b)(2) which have not been encumbered by
25 December 1 shall lapse to the Department of Community and
26 Economic Development.
27 Section 6. Loans.
28 (a) Eligibility.--
29 (1) As a condition for loan eligibility an individual
30 must be all of the following:
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1 (i) Domiciled in this Commonwealth.
2 (ii) At least 18 years of age.
3 (iii) A beginning farmer or a first-time farmer.
4 (iv) The sole owner of the project.
5 (v) The principal user of the project.
6 (2) Any applicant must meet the credit standards of the
7 lender.
8 (b) Conditions.--
9 (1) A loan must be used only to finance a project.
10 (2) If the project involves a purchase from a related
11 person, the following apply:
12 (i) The purchase must be at fair market value.
13 (ii) The seller must have no continuing financial
14 interest in the property which is the subject of the
15 project. To comply with this subparagraph, the seller
16 must:
17 (A) have no legal or equitable interest in the
18 property; and
19 (B) not be the principal user of the project.
20 (c) Principal and interest.--A loan may not exceed $250,000.
21 No more than $62,500 may be used to purchase agricultural
22 equipment.
23 Section 7. Procedure.
24 (a) Application.--
25 (1) An application must be submitted in a form
26 prescribed by the department. The application shall include
27 all of the following for an individual applicant and for each
28 partner of an applicant which is a partnership:
29 (i) Name and address.
30 (ii) Date of birth.
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1 (iii) Proof of status as a beginning farmer or
2 first-time farmer.
3 (iv) Representation as to ownership and principal
4 use.
5 (v) Financial data to establish net worth.
6 (vi) Description of project.
7 (vii) Amount of loan requested.
8 (viii) Terms of the loan.
9 (ix) Conditions of the loan.
10 (x) Lending criteria.
11 (2) The department may charge a filing fee.
12 (b) Determination.--
13 (1) Within 21 days of receipt of a completed
14 application, the department shall make a determination on
15 whether to approve an application. A determination under this
16 paragraph shall be based on:
17 (i) Availability of allocations in the program.
18 (ii) Compliance with section 6(a).
19 (iii) Fulfillment of section 2.
20 (iv) Eligibility of the lender to qualify for
21 Federal tax exemption.
22 (2) Failure to act on an application within the time
23 period specified in paragraph (1) shall be deemed an approval
24 of the application.
25 Section 20. Effective date.
26 This act shall take effect immediately.
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