A bill for an act relating to the farm tenancy net income exclusion available against the individual income tax, and including effective date and retroactive applicability provisions.

2025-2026 Regular Session Introduced by Annette Sweeney

Bill SF 19 allows retired farmers to exclude net income from farm tenancy agreements from individual income tax, providing potential tax relief and financial stability.

Subcommittee: Dawson, Dotzler, and Rowley.

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Summary of Bill SF 19

Bill Number: SF 19
Title: A bill for an act relating to the farm tenancy net income exclusion available against the individual income tax, and including effective date and retroactive applicability provisions.
Status: Subcommittee: Dawson, Dotzler, and Rowley
Introduced: January 14, 2025
Classification: Bill
Subject Areas: Corporations, Farming, Federal Taxes, Income, Income Taxes, Landlord and Tenant, Leases, Pass-Through Entities, Real Property

Purpose and Intent

The primary purpose of Bill SF 19 is to amend the existing tax code regarding the exclusion of net income from farm tenancy agreements for individual income tax purposes. This bill aims to provide clarity and expand eligibility for individuals receiving income through various business entities, thereby potentially benefiting retired farmers and their financial situations.

Key Provisions

Amendment to Tax Code:

The bill proposes to amend Section 422.7, subsection 14, paragraph e of the Iowa Code.
It allows net income from farm tenancy agreements to be excluded from individual income tax for individuals receiving income through:
- Disregarded entities
- Partnerships
- S Corporations
- Trusts
- Estates

Eligibility Criteria:

Eligible individuals can claim the exclusion for net income derived from farm tenancy agreements, even if the income is received through distributions from the aforementioned entities.
The bill clarifies that net income accruing to a grantor trust or a disregarded entity is considered distributed to its sole owner if the owner has the right to withdraw or compel distribution of that income.

Effective Date:

The bill is deemed of immediate importance and takes effect upon enactment.

Retroactive Applicability:

The provisions of this bill apply retroactively to January 1, 2024, for tax years beginning on or after that date.

Impact

Who Would Be Affected:

This legislation primarily affects retired farmers who have been involved in farming for at least 10 years and are receiving income through farm tenancy agreements.
It also impacts entities such as partnerships and S corporations that manage farm tenancy agreements.

Financial Implications:

By allowing a broader exclusion of net income from taxation, the bill could provide significant tax relief for eligible individuals, potentially improving their financial stability.

Legislative Timeline

January 14, 2025: Bill introduced and referred to the Ways and Means Committee.

January 22, 2025: Bill reviewed by the subcommittee consisting of Dawson, Dotzler, and Rowley.

This summary provides an overview of Bill SF 19, outlining its purpose, key provisions, and potential impact on affected individuals and entities.