Colorado Gov. John Hickenlooper has signed legislation creating a corporate and personal income tax deduction for taxpayers that lease an agricultural asset, which is defined as “land, crops, livestock, livestock facilities, farm equipment, grain storage, or irrigation equipment,” to a beginning farmer or rancher satisfying certain qualifications. The deduction is equal to 20% of the lease payment received from the beginning farmer or rancher for a lease of agricultural assets with a term of at least three years and is available for tax years beginning after 2017 and before 2020. Under the legislation, more than one deduction certificate may be issued to a qualified taxpayer, except that the deductions are capped at $25,000 per taxpayer, per year.
In order for the lessor to receive a deduction, the beginning farmer or rancher lessee must:
— live in Colorado;
— have a net worth of less than $2 million;
— be responsible for the majority of the labor on and management of the leased agricultural asset the majority of the time;
— have plans to farm or ranch full-time;
— have less than 10 years of experience in farming or ranching;
— have some prior farming or ranching experience or education; and
— participate in a financial management educational program approved by the Colorado Agricultural Development Authority.
Taxpayers must submit a deduction certificate from the Colorado Agricultural Development Authority when filing their state income tax return. The Colorado Agricultural Development Authority is permitted to issue a maximum of 100 deduction certificates each tax year and must notify the Department of Revenue of all deductions awarded.
H.B. 1194, Laws 2016, effective August 10, 2016