Beginning Farmer Program has financial benefits for established farmers as well
April 26, 2011
One in three people in Nebraska have a job related to agriculture. Fifteen billion dollars are contributed to the state’s economy from annual farm sales and $1 of agricultural exports generates $1.36 in economic activity, making Nebraska’s $4.8 billion in agricultural exports supply $6.5 billion in additional economic activity. Those statics are a few examples of why agriculture is important in Nebraska. Because it is such an important industry many companies and organizations involved in the industry have established incentives to help farmers and ranchers get started so they may contribute to the effort of feeding the world.
Most of the incentive programs go by the title: Beginning Farmer Program. However, with several different organizations housing a beginning farmer program they can easily become confusing. Some programs deal with low rate interest loans for first time farmers, while others provide grants to help farmers get started; however, they all have different requirements for the applicant in order to be a qualified beginning farmer, further adding to the confusion.
Although all of these programs are aimed at helping farmers get started, one program in particular also focuses on rewarding landowners for renting to beginning farmers in Nebraska while helping the beginning farmer establish a successful operation. This program is the Beginning Farmer Program from the Nebraska Department of Agriculture (NDA).
The Nebraska Department of Agriculture’s Beginning Farmer Program was established to be a mutually beneficial partnership between a landowner and a farmer looking to get started in the industry. Individuals, who own land in Nebraska and are willing to rent to a qualified beginning farmer, may receive a tax credit based upon the type of lease they establish for the rented asset. For instance, if a cash rent lease is established, the tax credit will be 10% of the cash rent paid annually for the land. If the lease is a crop share, the landowner would receive 15% of the value of his share as a tax credit. If the tax credit is more than the amount of state income taxes owed, the remaining money is sent to the landowner as a check. The tax credit is open to out-of-state residents if they own land in Nebraska and rent their cornhusker soil to a beginning farmer who is a resident of Nebraska.
Recent changes in the program now allow for a close relative of the beginning farmer to enroll in the program as a landowner; however, to receive the tax credit the related landowner and beginning farmer will have to write a succession plan detailing what will happen to the rented ground in the future. Because many people are unfamiliar with succession planning, related applicants must also attend a succession planning workshop.
So what benefit does the beginning farmer receive if the tax credit goes to the landowner? First, once the beginning farmer has been approved – meaning he or she meets the requirements of the program – he is automatically approved to receive a tax exemption for any personal property used in production agriculture, valued up to $100,000. Second, the beginning farmer will have a three-year rental agreement established with the landowner, rather than a year-to-year lease. Having a three-year contract will help the beginning farmer become established faster, versus having to worry if the lease will be renewed for the following year. Finally, a qualified beginning farmer will have something to offer potential new landlords should they rent to him and hopefully foster a strong relationship with current landowners for future rental agreements.
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If you’re looking to get started in the farming or ranching industry, or are ready to lease your ground to someone who will farm your fields or graze your pastures, visit http://www.agr.ne.gov for more information.