Tax credit to sell to beginning farmers

Summary#

HB 6438 would amend Michigan’s Income Tax Act of 1967 by adding a tax credit for owners who sell agricultural assets to beginning farmers or rent those assets to them under qualifying agreements. Its stated goal is to provide that credit, starting with tax years that begin on or after January 1, 2027; the bill would take effect only if HB 6437 or the named Senate bill is enacted.

  • An eligible owner may claim a credit against Michigan income tax, but only up to the amount on a tax credit certificate issued by the Department of Agriculture and Rural Development.
  • For a rental credit, the owner must attach proof that the qualifying rental agreement was active during the claimed period. It is not active if it ends or the beginning farmer stops farming.
  • A member of a flow-through entity (a business whose income is reported by its members) may claim a share of the credit based on business income, or another method approved by the department.
  • The credit cannot exceed the taxpayer’s tax liability for that year as a refund. Any unused amount may be carried forward for up to five years, or until used.
  • The bill relies on definitions and a tax-credit certificate process in the separate Beginning Farmer Tax Credit Program Act. That act is not included in the supplied materials.

What it means for you#

  • Owners of agricultural assets: If you qualify and receive a certificate, you may claim the credit for a sale or qualifying rental. You must attach the certificate to your tax return; rental claims also require proof the agreement was active.
  • Members of flow-through entities: You may be able to claim your share of a credit issued to the entity, subject to the bill’s allocation rule or another method approved by the department.
  • Beginning farmers: The bill gives the credit to asset owners, not directly to beginning farmers. It could make selling or renting assets to them more attractive, but the bill does not require owners to pass on any benefit.
  • Other taxpayers: The bill does not change tax rates or create a direct credit for people who do not own qualifying agricultural assets.

Money#

No publicly available information.

  • The bill would reduce tax owed for eligible claimants, but the supplied material gives no estimate of the resulting reduction in state revenue.
  • The credit is nonrefundable. An unused amount may reduce tax owed in later years for up to five years.
  • The bill does not state how much the agriculture department’s certificate process or any added work would cost.

What is unclear#

  • The Beginning Farmer Tax Credit Program Act is not supplied, so the terms “agricultural assets,” “beginning farmer,” and the qualifying agreements cannot be checked against their definitions.
  • The bill does not set the credit amount or explain the certificate program’s eligibility rules, limits, or decision process; those details appear to depend on the separate program law.
  • The text does not explain how the credit interacts with other tax credits or programs.
  • The bill’s start depends on HB 6437 or the named Senate bill becoming law. Passage is uncertain because HB 6438 is introduced and is not yet law.
  • The supplied materials do not include the current versions of the amended tax law or the program law, so existing rules and how this proposal would fit with them could not be verified.

Case for#

  • The bill appears intended to encourage owners to sell or rent agricultural assets to beginning farmers by reducing the owners’ income tax.
  • A tax credit tied to a certificate could limit claims to transactions recognized under the separate program.
  • Carrying unused credit forward may let an eligible owner use it in a later year when they owe tax.
  • A credit for owners could indirectly make assets more available to beginning farmers, though the bill does not require that result.

Case against#

  • The certificate rules and key eligibility definitions are outside this bill, so readers cannot tell from this text who would qualify or how many credits could be issued.
  • The bill gives no estimate of the tax revenue that might be forgone or the cost of administering the certificate process.
  • Because the credit belongs to the owner, it does not guarantee that beginning farmers receive lower prices or rents.
  • The credit cannot be refunded, and unused amounts expire after five years; an eligible owner who owes too little tax may not use the full amount.