Michigan would approve tax credits for deals with beginning farmers

Michigan's agriculture department would approve tax credits for eligible owners selling or renting farm property to certified beginning farmers. This bill would take effect only if HB 6438 or the specified Senate companion becomes law. Owners must earn at least half their income from farming, owe no overdue state taxes, and meet Michigan individual income tax requirements. Owners making most of their income from equipment dealing, livestock dealing, or a similar business would not qualify. Section 7 also requires the owner applying for a credit to be a beginning farmer.

People seeking beginning farmer status would apply to Michigan's agriculture department for certification. Applicants must live in Michigan, plan to farm in Michigan, and be entering farming or have entered within the last 10 years. They cannot have received farm income for more than the 10 most recent tax years. Applicants must provide most daily farm labor and management, show farming knowledge or experience, and show that farming could earn a profit and provide significant income. Neither applicants nor their spouses may be related to the owner or the owner's partners, members, shareholders, or trustees. Applicants cannot farm through a joint business venture. Certification lasts three years and can be renewed if requirements are still met. Farmers must report losing eligibility within 60 days, and credit eligibility then ends.

Eligible owners' credits would have separate limits for sales, cash rentals, and rentals paid through a share of farm production. Sale credits could reach 5% of the lower of the sale price or market value, capped at $32,000. Cash rental credits could reach 10% of gross rent, capped at $7,000 yearly. Production-share credits could reach 15% of gross rent's cash value, capped at $10,000 yearly. Cash rents must match local rates. Production-share rentals must use a share set in advance and share production costs or loss risks. Sale credits apply in the sale year. Rental credits use income received or earned from the agreement's first three years, following the owner's federal tax accounting method.

The agriculture and treasury departments would limit the total value of approved credits each year. The limit covers all credits approved under this program. Up to $1 million in unused credit capacity could carry forward for one year. The limit applies by calendar year.