Ohio’s Beginning Farmer Tax Credit now available

By Matt Reese

Of numerous challenges for the future of Ohio’s farms, one continues to be the barriers of entry for young farmers with extremely high startup costs, need for an extensive knowledge base and limited on-farm opportunities. 

“It’s been difficult for younger people to get into the industry, especially if they have not come from a farm,” said Evan Callicoat, director of state policy for Ohio Farm Bureau. “We all know that farming is a very capital-intensive industry and that often comes with a very large price tag, so it can often be hard to get passed that barrier of entry.”

After years of debate in the legislature, Ohio now has a Beginning Farmer Tax Credit available to help address this challenge. In April of 2022, House Bill 95 was signed into law by Governor Mike DeWine. The law establishes an income tax credit for beginning farmers who participate in a financial management program. It also constructs an income tax credit for established farmers who sell or rent agricultural assets to beginning farmers. Primary sponsors for the bill were Rep. Susan Manchester (R-Waynesfield) and Rep. Mary Lightbody (D-Westerville). The program is overseen by the Office of Farmland Preservation within the Ohio Department of Agriculture.

“We finally got it passed last year. This has been something that has been around for a few years now that we’ve been trying to get passed. It all kind of started because many of our younger members were trying to work their way into agriculture and more experienced members were trying to step away from the industry and build a transition plan,” Callicoat said. “As we’ve all heard, the age of the average farmer just continues to rise, so we need to figure out a way to attract younger people into the industry. Through recommendations from our members, we worked through our policy development process and we really got this going. We were glad that HB 95 got passed last year creating the Beginning Farmer Tax Credit Program. We hope that in the next few years we’ll see a lot of participation in the program and then after that look forward to ways we can make it better and help more young people get involved in our industry.” 

The program offers opportunities for young farmers, and incentives for established farmers to transition the farm to the next generation. 

“To be qualified as beginning farmer, there’s a list of requirements and you also have to take a financial management program. We’re trying to make sure that these younger members are set up for financial success in the industry. Then they are able to apply for the for a tax credit on the cost of that financial management program — there are several approved courses right now that people can take to get to get that requirement,” Callicoat said. ‘To qualify as someone who’s a beginning farmer, first they have to be a resident of Ohio. We want to make sure that we’re offering this to Ohio residents keeping Ohio agriculture in Ohio and they have to either be seeking entry or have entered farming within the last 10 years and currently farm or intend to farm in Ohio. They need to provide a majority of the daily physical labor management of the farm. We don’t want people that aren’t going to be on the farm taking advantage of this program. We want new, beginning farmers to be involved in agriculture and have adequate farm experience or knowledge. They have to submit earnings statements and demonstrate some profit potential.” 

For the purposes of the program, the ODA defines a beginning farmer as having the following qualifications:

• Is a resident of Ohio.
• Is seeking entry to or has entered farming within the last 10 years.
• Farms or intends to farm on land in Ohio.
• Is not a partner, member, shareholder, or trustee of the assets the individual is seeking to purchase or rent.
• Has a total net worth of less than $800,000, including spouse and dependent assets, as adjusted for inflation each year.
• Provides the majority of daily physical labor and management of the farm.
• Has adequate farming experience or knowledge in the type of farming for which they are seeking assistance.
• Submits projected earnings statements and demonstrates profit potential.
• Demonstrates farming will be a significant source of income for the individual.
• Participates in a financial management program approved by ODA.

Along with beginning farmers, asset owners, or people or businesses that sell or rent farmland, livestock, buildings, or equipment to beginning famers may apply for the program as well. In order for land to qualify as an asset, it must either total at least 10 acres or produce an average annual income of at least $2,500 for farming.

“In terms of the established farmer, as long as they’re the ones with the assets, that’s about the only requirement they really have. They must have some assets that they’re able to take advantage of though the program,” Callicoat said. “For the established farmer tax credit portion, they can’t take advantage of the tax credit if the person that they’re entering into that agreement with is not a beginning farmer. If they find someone that is certified, they can get a 3.99% tax credit on the sale price of the land or, if it’s a rental, it would be a tax credit on the gross rental income over the first three years of that agreement.”

According to the ODA, the established farmer tax credit equals 3.99% of one of the following: 

• In the case of a sale, the sale price. The credit must be claimed in the year of the sale.
• In the case of a rental, the gross rental income that the individual or business received during the first three years of the rental agreement. To qualify for the credit, an asset must be rented at prevailing community rates. In the case of a rental, the credit is claimed over the first three years of the rental or share-rent agreement.
• In the case of a rental through a share-rent agreement, the gross rental income received during the first three years of the share-rent agreement. A share-rent agreement is an arrangement by which, in exchange for the rented assets, the beginning farmer provides the owner of the assets with a specified portion of the farm products produced from the assets. In the case of a rental, the credit is claimed over the first three years of the rental or share-rent agreement.

“I think a program like this is an attractive piece to try to get young people involved whether they have been on a family farm or they haven’t yet gotten involved in Ohio agriculture,” Callicoat said. “For more, reach out to the Farmland Preservation Office. They are so knowledgeable and we are so glad that it was put into that office. We’ve worked with Sarah Huffman, who’s the executive director there, a lot through this process while the bill was being discussed in the legislature, but also after the fact, helping them try to set up this program. They are so knowledgeable about the ins and outs of the administration and everything like that. We are happy to be advertising that this program does exist. We’ve been talking about it for so many years and now that it’s finally here we want to make sure our members take advantage of it. We’ve definitely been pushing it out on our social media channels and our communications channels and everything like that. People can go to ODA and start applying for this now. I just think it’s a really important thing to get the word out now that we actually have this program to finally take advantage of.”

Additional information is available at agri.ohio.gov/programs/farmland-preservation-office/Beginning-Farmer-Tax-Credit-Program, or by emailing BeginningFarmer@agri.ohio.gov or calling 614-728-6238.