HB 242 — An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in tax credits relating to beginning farmers, further providing for scope of article, for definitions, for beginning farmer management tax credit and for approval of tax credit.

PRINTER'S NO.   161

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 242
                                                Session of
                                                  2025

     INTRODUCED BY FRIEL, KHAN, McNEILL, GIRAL, BARGER, HOWARD,
        HADDOCK, PASHINSKI, SANCHEZ, HILL-EVANS, PIELLI, FREEMAN AND
        ZIMMERMAN, JANUARY 17, 2025

     REFERRED TO COMMITTEE ON FINANCE, JANUARY 17, 2025


                                     AN ACT
 1   Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
 2      act relating to tax reform and State taxation by codifying
 3      and enumerating certain subjects of taxation and imposing
 4      taxes thereon; providing procedures for the payment,
 5      collection, administration and enforcement thereof; providing
 6      for tax credits in certain cases; conferring powers and
 7      imposing duties upon the Department of Revenue, certain
 8      employers, fiduciaries, individuals, persons, corporations
 9      and other entities; prescribing crimes, offenses and
10      penalties," in tax credits relating to beginning farmers,
11      further providing for scope of article, for definitions, for
12      beginning farmer management tax credit and for approval of
13      tax credit.
14      The General Assembly of the Commonwealth of Pennsylvania
15   hereby enacts as follows:
16      Section 1.     Section 1801-H of the act of March 4, 1971
17   (P.L.6, No.2), known as the Tax Reform Code of 1971, is amended
18   to read:
19   Section 1801-H.    Scope of article.
20      This article relates to the tax credits to owners of
21   agricultural assets who sell [or rent] agricultural assets to
22   beginning farmers.
23      Section 2.     The definitions of "department" and "lease" in
 1   section 1802-H of the act are amended to read:
 2   Section 1802-H.    Definitions.
 3      The following words and phrases when used in this article
 4   shall have the meanings given to them in this section unless the
 5   context clearly indicates otherwise:
 6      * * *
 7      "Department."     The Department of [Community and Economic
 8   Development] Agriculture of the Commonwealth.
 9      * * *
10      ["Lease."    A written agreement between parties for the lease
11   of real property on which farming occurs.]
12      * * *
13      Section 3.     Sections 1803-H and 1804-H(a) of the act are
14   amended to read:
15   Section 1803-H.    Beginning farmer management tax credit.
16      (a)   General rule.--An owner of agricultural assets and a
17   beginning farmer may each take a credit against the tax due
18   under Article III for the sale [or rental] of agricultural
19   assets to [a] the beginning farmer in the amount approved by the
20   department. An owner of agricultural assets [is] and a beginning
21   farmer are eligible for allocation of a tax credit equal to[:
22            (1)   five percent of the lesser of the sale price or the
23      fair market value of the agricultural asset, up to a maximum
24      of $32,000; or
25            (2)   ten percent of the gross rental income in each of
26      the first, second and third years of a rental agreement, up
27      to a maximum of $7,000 per year.] 5% of the lesser of the
28      sale price or the fair market value of the agricultural
29      asset, up to a maximum of $50,000 per farm or agricultural
30      asset.

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 1    (b)   Application.--
 2          (1)   The tax credit may be claimed only after approval
 3    and certification by the department and is limited to the
 4    amount stated on the certificate issued under section 1804-H.
 5          (2)   An owner of agricultural assets and a beginning
 6    farmer must apply to the department for approval of a tax
 7    credit, in a form and manner prescribed by the department.
 8    The application shall:
 9                (i)    identify the beginning farmer who has been
10          certified by the department under paragraph (3) and to
11          whom the agricultural assets are sold [or rented]; and
12                (ii)    specify whether the beginning farmer is a
13          brother, sister, ancestor or lineal descendant of the
14          applicant.
15          (3)   A person may apply to the department for
16    certification that the person is a beginning farmer for
17    purposes of this article. The application shall be in a form
18    and manner prescribed by the department and shall require
19    that the applicant provide:
20                (i)    Projected earnings statements to demonstrate the
21          profit potential for the farming conducted by the
22          applicant.
23                [(ii)    Verification that the farming conducted by the
24          applicant will be a significant source of income for the
25          applicant.]
26                (iii)    Verification that the applicant will, if
27          certified as a beginning farmer by the department, notify
28          the department if the farmer no longer meets the
29          certification and eligibility requirements within the
30          three-year certification period, in which case

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 1          eligibility for tax credits ends.
 2                (iv)   Verification that [the applicant is not engaged
 3          in farming by means of a joint business venture.] the
 4          applicant is an individual, or if engaged in farming by
 5          means of a joint business venture, that each individual
 6          who is a member of the joint business venture meets the
 7          definition of a beginning farmer.
 8                (iv.1)   Verification and documentation of Federal
 9          gross income from agricultural production or experience
10          in the agriculture industry or related field within the
11          taxable year.
12                (v)    Verification and documentation as necessary to
13          meet other eligibility requirements as may be established
14          by the department.
15    (c)   [Termination of rental agreement.--
16          (1)   An owner of agricultural assets or a beginning
17    farmer may terminate a rental agreement for reasonable cause
18    upon approval of the department.
19          (2)   If a rental agreement is terminated without the
20    fault of the owner of agricultural assets, the tax credits
21    shall not be retroactively disallowed.
22          (3)   In determining reasonable cause, the department
23    shall consider which party was at fault in the termination of
24    the agreement.
25          (4)   If the department determines the owner of
26    agricultural assets did not have reasonable cause, the owner
27    of agricultural assets must repay all tax credits received as
28    a result of the rental agreement to the Commonwealth. The
29    repayment is additional income tax for the taxable year in
30    which the department makes its decision.] (Reserved).

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 1      (d)   [Duration] Limitation of tax credit.--The credit is
 2   limited to the liability for tax as computed under Article III
 3   [for the taxable year. The tax credit may not be sold, passed
 4   through, carried forward or refunded]. No credits granted under
 5   this section shall be applied against any tax withheld by an
 6   employer from an employee under Article III.
 7      (e)   Use, carryover, carryback, refund and assignment of
 8   credit.--
 9            (1)   The owner of an agricultural asset or beginning
10      farmer must first apply the tax credit against the tax
11      liability for the year in which the credit is first approved.
12      If the owner of an agricultural asset or beginning farmer
13      cannot use the entire amount of the tax credit for the
14      taxable year in which the tax credit is first approved, the
15      excess may be carried over to succeeding taxable years and
16      used as a credit against the tax liability of the owner of an
17      agricultural asset or beginning farmer for those taxable
18      years. Each time the tax credit is carried over to a
19      succeeding taxable year, it shall be reduced by the amount
20      that was used as a credit during the immediately preceding
21      taxable year. The tax credit may be carried over and applied
22      to succeeding taxable years for no more than three taxable
23      years following the year in which the credit was first
24      approved.
25            (2)   If the owner of an agricultural asset or beginning
26      farmer cannot use the entire amount of the tax credit after
27      the application of paragraph (1), the owner of an
28      agricultural asset or beginning farmer, upon application to
29      and approval by the Department of Revenue, may request a
30      refund. The refund permitted under this paragraph may not

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 1      exceed 75% of the remaining balance of the tax credit or
 2      $15,000, whichever is less.
 3            (3)   An owner of an agricultural asset or beginning
 4      farmer is not entitled to carry back, sell or assign all or
 5      any portion of an unused tax credit granted to the owner of
 6      an agricultural asset or beginning farmer under this article.
 7      (f)   Beginning farmer tax credit program public awareness
 8   campaign.--The department shall establish a public awareness
 9   campaign to provide information to the general public and owners
10   of agricultural assets concerning the availability and
11   applicability of the tax credit.
12   Section 1804-H.    Approval of tax credit.
13      (a)   General rule.--The tax credit may be claimed only after
14   approval and certification by the department. [The department
15   shall review the application of a tax credit in consultation
16   with the Department of Agriculture.]
17      * * *
18      Section 4.     This act shall take effect in 60 days.




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