BILL NUMBER:S4275

TITLE OF BILL:

An act to amend the tax law, in relation to the personal income real
property tax credit for manufacturers

PURPOSE:

To clarify that land in production of goods in agriculture is not
precluded from the credit if such land is leased from a related party.

SUMMARY OF PROVISIONS:

Section 1 amends the tax law, to clarify that land in production of
goods in agriculture is not precluded from the credit if such land is
leased from a related party.

Section 2 establishes the effective date.

JUSTIFICATION:

The real property manufacturer's tax credit allows qualified
manufacturers to claim a property tax credit equal to 20% of real
property tax paid during the year. Qualified manufacturers include tax
payers principally engaged in farming, agriculture, horticulture,
              

floriculture, viticulture, or commercial fishing, among other
activities. These activities, specifically, describe farming practices
within New York State. It was the intention of the original enactment
of the credit that farms be eligible for the benefit.

Many farms that were intended to be eligible for the real property
manufacturer's tax credit are precluded from eligibility based on a
technicality. Under current law, leased land is precluded from
eligibility unless the lease occurs between two corporations. The
instant bill would clarify that other business structures-such as sole
proprietorships, partnerships, or limited liability companies-that
rent land from a related party for agricultural production are also
eligible for the credit.

This clarification comes at a critical time. There recently have been
great efforts across the State to engage the farming community in
planning for intergenerational transfer. An overwhelming majority of
farms in New York State are family farms, and planning for
intergenerational transfer is essential to maintaining the assets of
these unique family businesses as they are passed from one generation
to the next.

Intergenerational transfer models often include business structures
that result in land leased between related parties, a construct that
would technically preclude such farms from qualifying for the credit.
Typically, farm families will incorporate into two separate
entities-primarily sole proprietorships, partnerships, or limited
liabilities companies-to aid with intergenerational transfer
activities. For example, a younger generation may incorporate as an
operating LLC and lease land from the preceding generation's ownership


LLC. Over time, the younger generation will buy into the ownership
LLC, effecting a gradual transfer.

This bill, therefore, clarifies that New York's family farms will be
eligible for the real property manufacturer's tax credit, regardless
of a transfer structure, as intended.

LEGISLATIVE HISTORY:

This is a new bill.

FISCAL IMPLICATIONS:

To be determined.

EFFECTIVE DATE:

This act shall take effect immediately.