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PRIOR PRINTER'S NOS. 161, 1485 PRINTER'S NO. 1720
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,
ZIMMERMAN, GREEN AND WEBSTER, JANUARY 17, 2025
AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES,
MAY 14, 2025
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," 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.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 1801-H of the act of March 4, 1971
(P.L.6, No.2), known as the Tax Reform Code of 1971, is amended
to read:
Section 1801-H. Scope of article.
This article relates to the tax credits to owners of
agricultural assets who sell [or rent] agricultural assets to
beginning farmers.
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Section 2. The definitions of "department" and "lease" in
section 1802-H of the act are amended to read:
Section 1802-H. Definitions.
The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
* * *
"Department." The Department of [Community and Economic
Development] Agriculture of the Commonwealth.
* * *
["Lease." A written agreement between parties for the lease
of real property on which farming occurs.]
* * *
Section 3. Sections 1803-H and 1804-H(a) of the act are
amended to read:
Section 1803-H. Beginning farmer management tax credit.
(a) General rule.--An owner of agricultural assets and a
beginning farmer may each take a credit against the tax due
under Article III for the sale [or rental] of agricultural
assets to [a] the beginning farmer in the amount approved by the
department. An owner of agricultural assets [is] and a beginning
farmer are eligible for allocation as determined by the
department of a tax credit equal to[:
(1) five percent of the lesser of the sale price or the
fair market value of the agricultural asset, up to a maximum
of $32,000; or
(2) ten percent of the gross rental income in each of
the first, second and third years of a rental agreement, up
to a maximum of $7,000 per year.] 5% of the lesser of the
sale price or the fair market value of the agricultural
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asset, up to a maximum of $50,000 per farm or agricultural
asset.
(b) Application.--
(1) The tax credit may be claimed only after approval
and certification by the department and is limited to the
amount stated on the certificate issued under section 1804-H.
(2) An owner of agricultural assets and a beginning
farmer must apply to the department for approval of a tax
credit, in a form and manner prescribed by the department.
The application shall:
(i) identify the beginning farmer who has been
certified by the department under paragraph (3) and to
whom the agricultural assets are sold [or rented]; and
(ii) specify whether the beginning farmer is a
brother, sister, ancestor or lineal descendant of the
applicant.
(3) A person may apply to the department for
certification that the person is a beginning farmer for
purposes of this article. The application shall be in a form
and manner prescribed by the department and shall require
that the applicant provide:
(i) Projected earnings statements to demonstrate the
profit potential for the farming conducted by the
applicant.
[(ii) Verification that the farming conducted by the
applicant will be a significant source of income for the
applicant.]
(iii) Verification that the applicant will, if
certified as a beginning farmer by the department, notify
the department if the farmer no longer meets the
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certification and eligibility requirements within the
three-year certification period, in which case
eligibility for tax credits ends.
(iv) Verification that [the applicant is not engaged
in farming by means of a joint business venture.] the
applicant is an individual, or if engaged in farming by
means of a joint business venture, that each individual
who is a member of the joint business venture meets the
definition of a beginning farmer.
(iv.1) Verification and documentation of Federal
gross income from agricultural production or experience
in the agriculture industry or related field within the
taxable year.
(v) Verification and documentation as necessary to
meet other eligibility requirements as may be established
by the department.
(c) [Termination of rental agreement.--
(1) An owner of agricultural assets or a beginning
farmer may terminate a rental agreement for reasonable cause
upon approval of the department.
(2) If a rental agreement is terminated without the
fault of the owner of agricultural assets, the tax credits
shall not be retroactively disallowed.
(3) In determining reasonable cause, the department
shall consider which party was at fault in the termination of
the agreement.
(4) If the department determines the owner of
agricultural assets did not have reasonable cause, the owner
of agricultural assets must repay all tax credits received as
a result of the rental agreement to the Commonwealth. The
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repayment is additional income tax for the taxable year in
which the department makes its decision.] (Reserved).
(d) [Duration] Limitation of tax credit.--The credit is
limited to the liability for tax as computed under Article III
[for the taxable year. The tax credit may not be sold, passed
through, carried forward or refunded]. THE TAX CREDIT MAY NOT BE
REFUNDED. No credits granted under this section shall be applied
against any tax withheld by an employer from an employee under
Article III.
(e) Use, carryover, carryback , refund and assignment of
credit.--
(1) The owner of an agricultural asset or beginning
farmer must first apply the tax credit against the tax
liability for the year in which the credit is first approved.
If the owner of an agricultural asset or beginning farmer
cannot use the entire amount of the tax credit for the
taxable year in which the tax credit is first approved, the
excess may be carried over to succeeding taxable years and
used as a credit against the tax liability of the owner of an
agricultural asset or beginning farmer for those taxable
years. Each time the tax credit is carried over to a
succeeding taxable year, it shall be reduced by the amount
that was used as a credit during the immediately preceding
taxable year. The tax credit may be carried over and applied
to succeeding taxable years for no more than three taxable
years following the year in which the credit was first
approved.
(2) If the owner of an agricultural asset or beginning
farmer cannot use the entire amount of the tax credit after
the application of paragraph (1), the owner of an
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agricultural asset or beginning farmer , upon application to
and approval by the Department of Revenue, may request a
refund. The refund permitted under this paragraph may not
exceed 75% of the remaining balance of the tax credit or
$15,000, whichever is less.
(3) (2) An owner of an agricultural asset or beginning
farmer is not entitled to carry back, sell or assign all or
any portion of an unused tax credit granted to the owner of
an agricultural asset or beginning farmer under this article.
(f) Beginning farmer tax credit program public awareness
campaign.--The department shall establish a public awareness
campaign to provide information to the general public and owners
of agricultural assets concerning the availability and
applicability of the tax credit.
Section 1804-H. Approval of tax credit.
(a) General rule.--The tax credit may be claimed only after
approval and certification by the department. [The department
shall review the application of a tax credit in consultation
with the Department of Agriculture.]
* * *
Section 4. This act shall take effect in 60 days.
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