Beginning Farmer Tax Incentive Act

Tax break for farmland sellers and lessors

If enacted, owners who sell qualifying farmland to a certified beginning farmer would be able to exclude 40% of the capital gain from gross income when the land was held more than one year. The yearly excluded amount per taxpayer could not exceed the excess of $1,500,000 over the amount excluded for that taxpayer in the four prior years. If enacted, owners who lease qualifying farmland to a certified beginning farmer for 10 years or less would be able to exclude up to $25,000 of lease income per year. Qualifying farmland must meet an 8-year lookback with at least five aggregated years of ownership and material participation by the owner or family. "Beginning farmer" would be a U.S. citizen certified by the Secretary of Agriculture, with several paths to qualify (1–10 years of Schedule F experience before age 18 exceptions, Farm Service Agency beginner-farmer loan approval, principal operator of new production agriculture, or being related within the fourth degree). The bill would apply aggregation rules like section 194(b)(2). If the land stops being used as farmland within five years after sale, the seller's tax would be increased by a recapture percentage of the earlier tax benefit (100%, 80%, 60%, 40%, 20% for years 1–5). These rules would apply to taxable years beginning after enactment, and Treasury would report yearly on exclusions and taxpayer counts.