A new program administered by the state Cabinet of Economic Development (CED) aims to give farmers an incentive to sell their agricultural land and assets to beginning farmers in return for an income tax credit. Kentucky farmers may be eligible for a credit up to 5 percent of the purchase price of qualifying agricultural assets, up to $25,000 per year and capped at $100,000 total.
The Kentucky Selling Farmer Tax Credit is a state program authorized in 2020 by the General Assembly (KRS 154.60-040). Several strong agricultural states, such as Iowa and Nebraska, have similar programs.
Tim Hughes of the Kentucky Department of Agriculture says KDA has been a staunch supporter of the program from its beginning.
"The intent is to give incentives to the current landowner to sell to a beginning farmer rather than lose the land to development," Hughes said. "That provides an incentive for a farm to remain in agriculture production and continue to provide for the next generation."
Monique Quarterman is executive director of KY Innovation, the office within CED that administers the tax credit program.
"Farming and agriculture are fundamental to Kentucky's economy, but also essential to the fabric of our state's culture," Quarterman said. "This tax credit is one way Kentucky helps maintain more of the rich, productive farmland that has fed our people and supported families for generations. That is only going to become more critically important in years to come."
Unfortunately, interest in the new program has been underwhelming so far. So CED reached out for help from Hughes to spread the word that such a program exists.
"I sent them a list of farm organizations and other people to work with on promoting it within our state's agriculture community," Hughes said. He added CED could also get the word out to real estate associations, major farm lenders, and attorneys that specialize in closings for buying and selling farmland.
"It's been my experience with a program like this is somebody hears about it, but by the time they get around to buying or selling a farm, they forget about it," Hughes said.
The program stipulates that the beginning farmer cannot have previously owned any agricultural land for at least 10 years. In addition, beginning farmers must commit to managing and operating a for-profit farming business for a minimum of five years after purchasing eligible agricultural land.
Selling farmers cannot have more than 50 full-time employees and must be the legal owner of agricultural land and assets sold to a beginning farmer. Sales involving immediate family members do not qualify for the program.
Prior to completing a sale of agricultural assets, applicants should review the program's guidelines for more detailed information and eligibility requirements. Go to https://cedky.com/cdn/1740_ksftcguidelines.pdf?7.
After completing a sale, both the beginning farmer and selling farmer must submit applications before tax credit eligibility can be determined. An application fee of $500 must be submitted by the selling farmer.
For questions not covered in the program guidelines, contact CED at (800) 626-2930 or email info@kyinnovation.com.
Categories: Kentucky, Business