Attorneys at Law

Blog

2019 Farm Bill Creates Greater Opportunity for Succession Planning

May 24, 2019 | Agricultural, Business, Farming, Legal

This article was previously published in Lancaster Farming.

Agriculture is a central force of Pennsylvania industry and a way of life.  As practices have modernized and technology has influenced the mechanics of how to farm, the Pennsylvania farmer has become a master of innovation.  One of the greatest changes facing this generation of seasoned farmers is succession planning.  Rising land prices, the cost of operations and improvements, and the cost of living make it difficult to develop a succession plan for passing the farm to the next generation; whether that’s family or a new start-up farmer.  Per the Pennsylvania Senate GOP, there are four farmers over the age 65 for every one farmer under age 35 and it is often difficult for young farmers to get a foothold in the industry.

The 2019 Pennsylvania Farm Bill proposes to invest more than $24 million in the agricultural industry, and a large part of that provides new resources for succession planning.   One of the biggest resources for farmers is the newly proposed Pennsylvania Agricultural Business Development Center.  The Bill proposes to fund the center with $2 million “to serve as a resource to help every farmer create a business plan, transition plan, or succession plan to ensure the best chance of success” (Pennsylvania Department of Agriculture).  This center would provide farmers with the opportunity to access public and private resources to better plan for the future of their farm operation.

Another proposed change is a new exemption to realty transfer tax.  Currently in Pennsylvania, there is a 2% transfer tax on real estate at settlement, and typically 1% is paid by buyer and seller each.  There are some existing exemptions for certain transfers, including amongst family, but currently these have their limitations.  However, this new exemption would allow a preserved farm to be transferred to a qualified beginning farmer free from this tax.  While we do not yet have all the details of how this exemption will be worded, it certainly provides the opportunity for a new farmer to purchase farmland with less cost at settlement, and thus, less out of pocket expense.  Hopefully this exemption would incentivize tentative farm purchasers to take that step into preserved farm ownership.

Also proposed this year is an income tax credit for beginning farmers.  Senator Elder Vogel, the Chairman of the Senate Agriculture & Rural Affairs Committee, has proposed that landowners selling or leasing to beginning farmers would get a credit based on the value of the sale price or gross rental income.  The proposed credit would aid beginning farmers who are Pennsylvania residents and have started farming within the past ten years.  As this credit would be for non-family transfers, the program is aimed at preserving farmland by incentivizing retiring farmers to sell to up-and-coming farmers rather than to land developers.

Many other resources and programs have been included in the Pennsylvania Farm Bill and various other bills being presented by Senators this year.  These proposals show an investment and focus on the agricultural community, which is necessary for farmers of every generation.  Hopefully these changes will spur the development of succession plans for farm families across the state, provide growing room for the next generation of Pennsylvania farmers, and preserve the rich farmland we have in Pennsylvania.

Was this Insightful?

Check out more of our informational articles for legal knowledge.

Disclaimer: The materials on this website are provided for informational purposes only and are not legal advice.  Planning approaches vary widely from individual to individual. If you are interested in planning, you should consult with an attorney to develop a plan that meets your unique needs. Nothing on this website is intended to create an attorney-client relationship.  Though we work to keep the site as accurate and up to date as possible, the presented information may not reflect recent legal developments. Prior results described on this site do not guarantee similar results in the future.

2019 Farm Bill Creates Greater Opportunity for Succession Planning

May 24, 2019 | Agricultural, Business, Farming, Legal

This article was previously published in Lancaster Farming.

Agriculture is a central force of Pennsylvania industry and a way of life.  As practices have modernized and technology has influenced the mechanics of how to farm, the Pennsylvania farmer has become a master of innovation.  One of the greatest changes facing this generation of seasoned farmers is succession planning.  Rising land prices, the cost of operations and improvements, and the cost of living make it difficult to develop a succession plan for passing the farm to the next generation; whether that’s family or a new start-up farmer.  Per the Pennsylvania Senate GOP, there are four farmers over the age 65 for every one farmer under age 35 and it is often difficult for young farmers to get a foothold in the industry.

The 2019 Pennsylvania Farm Bill proposes to invest more than $24 million in the agricultural industry, and a large part of that provides new resources for succession planning.   One of the biggest resources for farmers is the newly proposed Pennsylvania Agricultural Business Development Center.  The Bill proposes to fund the center with $2 million “to serve as a resource to help every farmer create a business plan, transition plan, or succession plan to ensure the best chance of success” (Pennsylvania Department of Agriculture).  This center would provide farmers with the opportunity to access public and private resources to better plan for the future of their farm operation.

Another proposed change is a new exemption to realty transfer tax.  Currently in Pennsylvania, there is a 2% transfer tax on real estate at settlement, and typically 1% is paid by buyer and seller each.  There are some existing exemptions for certain transfers, including amongst family, but currently these have their limitations.  However, this new exemption would allow a preserved farm to be transferred to a qualified beginning farmer free from this tax.  While we do not yet have all the details of how this exemption will be worded, it certainly provides the opportunity for a new farmer to purchase farmland with less cost at settlement, and thus, less out of pocket expense.  Hopefully this exemption would incentivize tentative farm purchasers to take that step into preserved farm ownership.

Also proposed this year is an income tax credit for beginning farmers.  Senator Elder Vogel, the Chairman of the Senate Agriculture & Rural Affairs Committee, has proposed that landowners selling or leasing to beginning farmers would get a credit based on the value of the sale price or gross rental income.  The proposed credit would aid beginning farmers who are Pennsylvania residents and have started farming within the past ten years.  As this credit would be for non-family transfers, the program is aimed at preserving farmland by incentivizing retiring farmers to sell to up-and-coming farmers rather than to land developers.

Many other resources and programs have been included in the Pennsylvania Farm Bill and various other bills being presented by Senators this year.  These proposals show an investment and focus on the agricultural community, which is necessary for farmers of every generation.  Hopefully these changes will spur the development of succession plans for farm families across the state, provide growing room for the next generation of Pennsylvania farmers, and preserve the rich farmland we have in Pennsylvania.

Was this Insightful?

Check out more of our informational articles for legal knowledge.

Disclaimer: The materials on this website are provided for informational purposes only and are not legal advice.  Planning approaches vary widely from individual to individual. If you are interested in planning, you should consult with an attorney to develop a plan that meets your unique needs. Nothing on this website is intended to create an attorney-client relationship.  Though we work to keep the site as accurate and up to date as possible, the presented information may not reflect recent legal developments. Prior results described on this site do not guarantee similar results in the future.