PRIOR PRINTER'S NO. 2285 PRINTER'S NO. 2361
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, LEMMOND AND KASUNIC, OCTOBER 7, 2002
SENATOR WAUGH, AGRICULTURE AND RURAL AFFAIRS, AS AMENDED,
NOVEMBER 13, 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 AMENDING THE ACT OF JUNE 29, 1996 (P.L.434, NO.67), ENTITLED, AS <--
5 AMENDED, "AN ACT TO ENHANCE JOB CREATION AND ECONOMIC
6 DEVELOPMENT BY PROVIDING FOR AN ANNUAL FINANCING STRATEGY,
7 FOR OPPORTUNITY GRANTS, FOR JOB CREATION TAX CREDITS, FOR
8 SMALL BUSINESS ASSISTANCE, FOR THE SMALL BUSINESS ADVOCACY
9 COUNCIL, FOR A FAMILY SAVINGS PROGRAM, FOR INDUSTRIAL
10 DEVELOPMENT ASSISTANCE, FOR COMMUNITY DEVELOPMENT BANK GRANTS
11 AND LOANS AND FOR TAX-EXEMPT BOND ALLOCATION; CONFERRING
12 POWERS AND DUTIES ON VARIOUS ADMINISTRATIVE AGENCIES AND
13 AUTHORITIES; FURTHER PROVIDING FOR VARIOUS FUNDS; AND MAKING
14 REPEALS," ADDING A DEFINITION; AND FURTHER PROVIDING FOR
15 SELECTION OF PROJECT AND ALLOCATION.
16 The General Assembly of the Commonwealth of Pennsylvania
17 hereby enacts as follows:
18 Section 1. Short title. <--
19 This act shall be known and may be cited as the Next
20 Generation Farmer Loan Act.
21 Section 2. Declaration of policy.
22 The General Assembly finds and declares as follows:
23 (1) It is necessary to provide an effective means for
1 Federal, Commonwealth and business linkages to assist
2 beginning farmers and first-time farmers in undertaking
3 projects to develop farming for future generations in this
4 Commonwealth.
5 (2) Federally tax-exempt mortgage financing can be used
6 to reduce a borrower's interest rate while permitting a
7 lender to extend the benefits of tax-exempt financing to
8 agriculture.
9 Section 3. Definitions.
10 The following words and phrases when used in this act shall
11 have the meanings given to them in this section unless the
12 context clearly indicates otherwise:
13 "Agricultural improvement." A building, structure or
14 fixture, which is:
15 (1) suitable for use in farming; and
16 (2) located on agricultural land.
17 "Agricultural land." Land suitable for use in farming and
18 which is or will be operated as a farm.
19 "Applicant." A borrower that applies for a loan under
20 section 6.
21 "Beginning farmer." An individual or a partnership that
22 engages or desires to engage in farming.
23 "Borrower." Any of the following that seeks to obtain a loan
24 under section 6:
25 (1) A beginning farmer.
26 (2) A first-time farmer.
27 "Department." The Department of Agriculture of the
28 Commonwealth.
29 "Depreciable agricultural property." Personal property:
30 (1) which is suitable for use in farming; and
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1 (2) for which a Federal income tax deduction for
2 depreciation is allowable.
3 The term does not include feeder livestock, seed, feed,
4 fertilizer, inventory or supplies.
5 "Fair market value." The price which a buyer that is willing
6 but not obligated to buy would pay to a seller that is willing
7 but not obligated to sell.
8 "First-time farmer." As defined in section 147(c)(2)(C) of
9 the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
10 § 147(c)(2)(C)) applied to the indebtedness with respect to the
11 farmland.
12 "Lender." A person that seeks to make a loan under section
13 6.
14 "Project." The expenditure of money for any of the
15 following:
16 (1) The purchase of agricultural land.
17 (2) The construction of an agricultural improvement.
18 (3) The purchase of agricultural equipment. This
19 paragraph does not include the original sale of depreciable
20 agricultural property.
21 "Related person." As defined in section 144(a)(3) of the
22 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
23 144(a)(3)).
24 "Substantial farmland." As defined in section 147(c)(2)(E)
25 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
26 U.S.C. § 147(c)(2)(E)).
27 "Total assets." Includes cash crops or feed on hand;
28 livestock held for sale; breeding stock; marketable loans and
29 securities not readily marketable; accounts receivable; notes
30 receivable; cash invested in growing crops; net cash value of
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1 life insurance; machinery and equipment; cars and trucks; farm
2 and other real estates, including life estates and personal
3 residence; and value of a beneficial interest in a trust,
4 government payments or grants. The term does not include items
5 used for personal, family or household purposes, but in no event
6 shall such property be excluded to the extent a deduction for
7 depreciation is allowable for Federal income tax purposes. All
8 assets shall be valued at fair market value.
9 "Total liabilities." Includes accounts payable, notes or
10 other indebtedness owed to any source, taxes, rent, amount owed
11 on a real estate contract or real estate mortgages, judgments
12 and accrued interest payable.
13 Section 4. Department.
14 The department has the following powers and duties:
15 (1) Utilize the program under section 5(c).
16 (2) Administer loans under sections 6 and 7.
17 (3) Cooperate with Federal, Commonwealth and local
18 agencies to implement this act.
19 (4) Promulgate regulations to implement this act.
20 Section 5. Allocation.
21 (a) Establishment.--The Next Generation Farmer Loan Program
22 is hereby established.
23 (b) Source.--The sources of moneys for the program are as
24 follows:
25 (1) Allocations from the Commonwealth's tax exempt bond
26 allocation as authorized under Federal law.
27 (2) Annual allocations established by the department and
28 the Department of Community and Economic Development.
29 (c) Status of appropriation.--Allocations in the program
30 under subsection (b)(2) which have not been encumbered by
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1 December 1 shall lapse to the Department of Community and
2 Economic Development.
3 Section 6. Loans.
4 (a) Eligibility.--
5 (1) As a condition for loan eligibility an individual
6 must be all of the following:
7 (i) Domiciled in this Commonwealth.
8 (ii) At least 18 years of age.
9 (iii) A beginning farmer or a first-time farmer.
10 (iv) The sole owner of the project.
11 (v) The principal user of the project.
12 (2) Any applicant must meet the credit standards of the
13 lender.
14 (b) Conditions.--
15 (1) A loan must be used only to finance a project.
16 (2) If the project involves a purchase from a related
17 person, the following apply:
18 (i) The purchase must be at fair market value.
19 (ii) The seller must have no continuing financial
20 interest in the property which is the subject of the
21 project. To comply with this subparagraph, the seller
22 must:
23 (A) have no legal or equitable interest in the
24 property; and
25 (B) not be the principal user of the project.
26 (c) Principal and interest.--A loan may not exceed $250,000.
27 No more than $62,500 may be used to purchase agricultural
28 equipment.
29 Section 7. Procedure.
30 (a) Application.--
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1 (1) An application must be submitted in a form
2 prescribed by the department. The application shall include
3 all of the following for an individual applicant and for each
4 partner of an applicant which is a partnership:
5 (i) Name and address.
6 (ii) Date of birth.
7 (iii) Proof of status as a beginning farmer or
8 first-time farmer.
9 (iv) Representation as to ownership and principal
10 use.
11 (v) Financial data to establish net worth.
12 (vi) Description of project.
13 (vii) Amount of loan requested.
14 (viii) Terms of the loan.
15 (ix) Conditions of the loan.
16 (x) Lending criteria.
17 (2) The department may charge a filing fee.
18 (b) Determination.--
19 (1) Within 21 days of receipt of a completed
20 application, the department shall make a determination on
21 whether to approve an application. A determination under this
22 paragraph shall be based on:
23 (i) Availability of allocations in the program.
24 (ii) Compliance with section 6(a).
25 (iii) Fulfillment of section 2.
26 (iv) Eligibility of the lender to qualify for
27 Federal tax exemption.
28 (2) Failure to act on an application within the time
29 period specified in paragraph (1) shall be deemed an approval
30 of the application.
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1 Section 20. Effective date.
2 This act shall take effect immediately.
3 SECTION 1. SECTION 2702 OF THE ACT OF JUNE 29, 1996 <--
4 (P.L.434, NO.67), KNOWN AS THE JOB ENHANCEMENT ACT, IS AMENDED
5 BY ADDING A DEFINITION TO READ:
6 SECTION 2702. DEFINITIONS.
7 THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS CHAPTER
8 SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
9 CONTEXT CLEARLY INDICATES OTHERWISE:
10 * * *
11 "FIRST-TIME FARMER." AS DEFINED IN SECTION 147(C)(2)(C) OF
12 THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C.
13 § 147(C)(2)(C)).
14 * * *
15 SECTION 2. SECTIONS 2703 AND 2704 OF THE ACT, ADDED NOVEMBER
16 17, 1998 (P.L.788, NO.100), ARE AMENDED TO READ:
17 SECTION 2703. SELECTION OF PROJECTS.
18 (A) CRITERIA.--IN SELECTING PROJECTS FOR ALLOCATION OF THE
19 TAX-EXEMPT BOND AUTHORITY OF THE COMMONWEALTH, THE DEPARTMENT
20 SHALL ENDEAVOR TO BEST SERVE THE PURPOSES SET FORTH IN SECTION
21 2701 IN ACCORDANCE WITH THE REQUIREMENTS OF THE INTERNAL REVENUE
22 CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 1 ET SEQ.). IN SO
23 DOING, THE SECRETARY MAY, AMONG OTHER THINGS, CONSIDER ALL OF
24 THE FOLLOWING:
25 (1) THE NUMBER OF NET NEW JOBS TO BE CREATED AND THE
26 NUMBER OF JOBS TO BE PRESERVED.
27 (2) THE ECONOMIC DISTRESS OF THE COUNTY, MUNICIPALITY OR
28 REGION AS DETERMINED BY ITS EMPLOYMENT.
29 (3) THE GEOGRAPHICAL DIVERSITY WITHIN THIS COMMONWEALTH.
30 (4) THE AMOUNT OF PRIVATE FUNDS TO BE LEVERAGED BY THE
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1 TAX-EXEMPT BOND FINANCING.
2 (5) COORDINATION WITH COMMUNITY AND ECONOMIC DEVELOPMENT
3 PLANS OF THE COMMONWEALTH AND ITS COUNTIES, MUNICIPALITIES
4 AND REGIONS.
5 (6) WHETHER THE COMMUNITY HAS BEEN DESIGNATED A FEDERAL
6 DISASTER RELIEF AREA OR THE COMMUNITY'S BUSINESS DISTRICT HAS
7 BEEN SIGNIFICANTLY DAMAGED AS A RESULT OF FIRE OR NATURAL
8 DISASTER.
9 (B) TAX-EXEMPT BOND AUTHORITY SET-ASIDE.--EITHER AT THE
10 BEGINNING OF OR AT ANY TIME DURING THE COURSE OF EACH YEAR, THE
11 DEPARTMENT MAY SET ASIDE SUCH TAX-EXEMPT BOND AUTHORITY AS THE
12 DEPARTMENT, IN CONSULTATION WITH THE SECRETARY OF THE BUDGET,
13 DETERMINES FOR USE DURING THE YEAR FOR THE VARIOUS CATEGORIES OF
14 TAX-EXEMPT BONDS SUCH AS MANUFACTURING FACILITIES, ENTERPRISE
15 ZONE FACILITIES, EXEMPT FACILITIES, MORTGAGE REVENUE BONDS,
16 STUDENT LOAN BONDS, FIRST-TIME FARMERS AND REDEVELOPMENT BONDS.
17 SECTION 2704. ALLOCATION.
18 (A) APPLICATION BY AGENCY.--AN AGENCY MAY APPLY TO THE
19 DEPARTMENT FOR AN ALLOCATION FOR A PROJECT TO BE UNDERTAKEN BY
20 THE AGENCY CONSISTENT WITH THE PURPOSES SET FORTH IN SECTION
21 2701. THE DEPARTMENT, IN CONSULTATION WITH THE AGENCY AND THE
22 SECRETARY OF THE BUDGET, SHALL DETERMINE WHAT PORTION OF AN
23 ALLOCATION REQUEST THE AGENCY WILL RECEIVE AND MAY ESTABLISH
24 DEADLINES FOR THE USE OF THE ALLOCATION. A DECISION ON THE
25 APPLICATION SHALL BE PROVIDED BY THE DEPARTMENT WITHIN 30 DAYS
26 FROM THE DATE THAT THE APPLICATION FOR AN ALLOCATION IS MADE TO
27 THE DEPARTMENT. NOTHING IN THIS CHAPTER SHALL PREVENT AN AGENCY
28 FROM APPLYING FOR ADDITIONAL ALLOCATIONS FOR PROJECTS THROUGHOUT
29 THE YEAR. NOTHING IN THIS CHAPTER SHALL AFFECT THE RIGHTS OF
30 CONSTITUTIONAL HOME RULE CITIES TO RECEIVE ALLOCATIONS UNDER
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1 SECTION 146(E)(3) OF THE INTERNAL REVENUE CODE OF 1986 (PUBLIC
2 LAW 99-514, 26 U.S.C. § 146(E)(3)).
3 (B) APPLICATION BY QUALIFIED LOCAL ISSUERS.--A QUALIFIED
4 LOCAL ISSUER MAY APPLY TO THE DEPARTMENT FOR AN ALLOCATION FOR A
5 PROJECT CONSISTENT WITH PURPOSES SET FORTH IN SECTION 2701 WITH
6 RESPECT TO WHICH THE QUALIFIED LOCAL ISSUERS ARE AUTHORIZED BY
7 THE LAWS OF THE COMMONWEALTH TO ISSUE A TAX-EXEMPT BOND. [A]
8 EXCEPT AS SET FORTH IN SUBSECTION (D.1), A QUALIFIED LOCAL
9 ISSUER SHALL APPLY DIRECTLY TO THE DEPARTMENT, AND THE
10 DEPARTMENT SHALL DETERMINE WHAT PORTION OF AN ALLOCATION REQUEST
11 A [PARTICULAR AUTHORITY ORGANIZED BY A COUNTY OR OTHER POLITICAL
12 SUBDIVISION] QUALIFIED LOCAL ISSUER WILL RECEIVE.
13 (C) RECAPTURE OF UNUSED ALLOCATION.--A PORTION OF AN
14 ALLOCATION PROVIDED UNDER SUBSECTION (A) [OR], (B) OR (D.1)
15 WHICH IS NOT USED BEFORE THE EARLIER OF THE END OF THE CALENDAR
16 YEAR OR THE DEADLINE SET BY THE DEPARTMENT UNDER SUBSECTION (A),
17 INCLUDING AN EXTENSION BY THE DEPARTMENT, SHALL BE RECAPTURED
18 FOR REALLOCATION BY THE DEPARTMENT IN CONSULTATION WITH THE
19 SECRETARY OF THE BUDGET.
20 (D) ALLOCATIONS TO PENNSYLVANIA HOUSING FINANCE AGENCY.--AS
21 PROVIDED BY SECTION 501-A.1 OF THE ACT OF DECEMBER 3, 1959
22 (P.L.1688, NO.621), KNOWN AS THE HOUSING FINANCE AGENCY LAW, AN
23 ALLOCATION FOR A MORTGAGE REVENUE BOND SHALL ONLY BE MADE BY THE
24 DEPARTMENT TO THE PENNSYLVANIA HOUSING FINANCE AGENCY, WHICH MAY
25 REALLOCATE A MORTGAGE REVENUE BOND UNDER THE HOUSING FINANCE
26 AGENCY LAW. THE DEPARTMENT MAY MAKE AN ALLOCATION FOR A
27 QUALIFIED MULTIFAMILY RESIDENTIAL FACILITY TO THE PENNSYLVANIA
28 HOUSING FINANCE AGENCY, THE PENNSYLVANIA ECONOMIC DEVELOPMENT
29 FINANCING AUTHORITY OR A QUALIFIED LOCAL ISSUER. AN ALLOCATION
30 FOR A QUALIFIED MULTIFAMILY RESIDENTIAL FACILITY MADE TO THE
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1 PENNSYLVANIA HOUSING FINANCE AGENCY MAY BE REALLOCATED IN WHOLE
2 OR IN PART BY THE PENNSYLVANIA HOUSING FINANCE AGENCY TO A
3 QUALIFIED LOCAL ISSUER.
4 (D.1) FIRST-TIME FARMERS.--AN ALLOCATION FOR FIRST-TIME
5 FARMER PROJECTS SHALL BE MADE BY THE DEPARTMENT TO THE
6 DEPARTMENT OF AGRICULTURE, WHICH MAY REALLOCATE TO QUALIFIED
7 LOCAL ISSUERS. A QUALIFIED LOCAL ISSUER MUST APPLY DIRECTLY TO
8 THE DEPARTMENT OF AGRICULTURE, AND THE DEPARTMENT OF AGRICULTURE
9 SHALL DETERMINE WHAT PORTION OF AN ALLOCATION REQUEST A
10 QUALIFIED LOCAL ISSUER SHALL RECEIVE. THE DEPARTMENT OF
11 AGRICULTURE HAS THE AUTHORITY TO ESTABLISH BY REGULATION THE
12 CRITERIA UNDER WHICH A QUALIFIED LOCAL ISSUER MAY RECEIVE
13 ALLOCATION FOR A FIRST-TIME FARMER PROJECT. THE CRITERIA MUST BE
14 CONSISTENT WITH FEDERAL LAW. BY JUNE 30 AND DECEMBER 31 OF EACH
15 YEAR, THE DEPARTMENT OF AGRICULTURE SHALL PROVIDE INFORMATION TO
16 THE DEPARTMENT ON ALLOCATIONS PROVIDED TO QUALIFIED LOCAL
17 ISSUERS FOR FIRST-TIME FARMER PROJECTS, CONSISTENT WITH THE
18 INFORMATION SET FORTH IN SECTION 2706(A)(2).
19 (E) CARRYFORWARD OF UNUSED AUTHORITY.--THE DEPARTMENT SHALL
20 PROVIDE FOR THE CARRYFORWARD OF ANY UNUSED TAX-EXEMPT BOND
21 AUTHORITY AT THE CLOSE OF A YEAR IN A MANNER THE DEPARTMENT
22 DETERMINES WILL BEST PRESERVE THE ABILITY TO USE THE ALLOCATION
23 TO CARRY OUT THE PURPOSES OF THIS CHAPTER. IN PROVIDING FOR THE
24 CARRYFORWARD, THERE SHALL BE A PRESUMPTION THAT ABILITY TO CARRY
25 OUT THE PURPOSES OF THIS CHAPTER WILL BE BEST MAINTAINED IF
26 CARRYFORWARDS OF UNUSED TAX-EXEMPT BOND AUTHORITY ARE RESERVED
27 FOR AGENCIES.
28 SECTION 3. THIS ACT SHALL TAKE EFFECT IN 60 DAYS.
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