HF5144

Purpose and intent

• The bill would modify the nonprofit corporation exemption under Minnesota’s corporate farming law (Minnesota Statutes 2024 section 500.24, subdivision 2). It sets new definitions and rules for who can own and operate agricultural land through different kinds of farming entities, with the goal of keeping land in farming-related uses while allowing structured ownership. It also introduces new limits and divestiture requirements to prevent broad, non-farming control of farmland.

Key concepts and who it affects

• The bill creates and tightens rules for several farming-entity types, including:
  • authorized farm corporations
  • authorized livestock farm corporations
  • authorized farm partnerships
  • family farm partnerships
  • family farm corporations
  • family farm limited liability companies (LLCs)
  • authorized farm limited liability companies (LLEs)
  • family farm trusts and related structures
• It also defines land ownership and operating requirements to keep ownership closely tied to farming activity and families or approved entities.

Main provisions and what the bill does

• Definitions and scope

  • Farming: production of agricultural products, livestock, milk, or fruit/other horticultural products; excludes processing, refining, packaging, spraying/harvesting by non-farm processors, and certain other activities.
  • Family farm and related trusts/entities: rules for ownership by families or family-related trusts and the ability to transfer shares within those lines of related persons without losing eligibility.
  • New and clarified entity types: detailed standards for authorized farm corporations, authorized livestock farm corporations, authorized farm partnerships, authorized farm limited liability companies, and related family-farm versions.
  • Land and ownership caps: entity ownership and control limits, including caps on acres and on how land is owned or controlled by shareholders or members.
  • Residency and active farming: a majority of control or ownership must reside on the farm or be actively engaged in farming.

• Ownership limits and structure

  • Authorized farm corporations and authorized livestock farm corporations
  • No more than five shareholders (spouses counted as one for the purpose of the limit).
  • All shareholders other than estates must be natural persons or family farm trusts/related structures.
  • No more than one class of shares.
  • Revenue from rents, royalties, dividends, interest, and annuities cannot exceed 20% of gross receipts.
  • 51% or more of the governance, financial, and investment rights must be held by people who reside on the farm or are actively engaged in farming.
  • Land ownership limited to 1500 acres per entity; no shareholder may own or have an interest in more land than allowed when combined with other authorized farm corporations.
  • No cross-ownership with other authorized farm corporations that would push total land ownership above 1500 acres.
  • Authorized farm partnerships and authorized farm limited liability companies
  • Similar caps on the number of partners/members (generally up to five).
  • Most partners/members must be natural persons or family-farm-related entities.
  • Land ownership or control limits and residency/active-farming requirements apply similarly to ensure farming focus.
  • General partners (for partnerships) or governance and financial rights holders (for LLCs) must reside on the farm or actively farm the land.
  • Family farm entities and transfer rules
  • Transfers within family relationships or to family trusts can occur without losing eligibility, subject to defined limits.
  • Transfers and distributions to current beneficiaries are treated as held in equal shares among current beneficiaries.

• Land thresholds and exemptions

  • Exempt land and grandfathering
  • The bill sets conditions for land previously owned under certain exemptions (with dates dating back to 1973, 1981, 1988, and 2010-like adjustments), including expansion limits (e.g., up to 20% additional land) and ongoing lease arrangements.
  • Longstanding exemptions may continue under the same conditions, including leasing to eligible entities.
  • Gifted land and repossessed land
  • Gifted land: land acquired as a gift by a nonprofit or similar entity must be disposed of within ten years after acquiring title.
  • Repossessed land: land acquired through debt collection or enforcement actions must be disposed of within five years, with limited exceptions; in some cases, a financial institution may continue to own the land if leased to the prior owner, but must dispose of it within ten years.
  • Special rules apply for land tied to banks/financial institutions and for the use of the land during the divestiture period.
  • De minimis exception
  • Small holdings: entities that own or obtain 40 acres or less and generate less than $150 per acre in gross revenue from rental or production may be exempt from some restrictions.

• Special farming categories

  • Research or experimental farms, breeding stock farms, aquatic farms
  • Religious farms and utility corporations with land ownership aligned to specific regulatory definitions
  • Development organizations with land held for nonfarming purposes, subject to eventual nonfarm use within six years or under certain zoning or regulatory conditions

• Operational definitions

  • Farmer: someone who regularly participates in physical labor or management and files Schedule F with the IRS.
  • Actively engaged in livestock production: ongoing day-to-day labor or management that significantly contributes to livestock production.

Significant changes to existing law

• Expanded framework for land ownership

  • Introduces and formalizes several categories of farm-ownership entities (authorized farm corporations, LLCs, partnerships) with explicit ownership, residency, and farming-activity requirements.
  • Tightens caps on land ownership, shareholder counts, and nonfarm income for these entities.
  • Allows nonprofit corporations to own farmland under specified conditions, expanding the scope of who can hold land for farming purposes.

• Strengthened restrictions to keep land within farming-focused ownership

  • Limits on the total acreage that can be owned by these entities (generally 1500 acres per entity or per related group).
  • Residency and active-farming requirements tie control to actual farming activity on the ground.

• Transfers and divestiture mechanisms

  • Adds explicit rules for transfers within family lines and for distributions from family trusts.
  • Establishes divestiture timelines for gifted and repossessed land, with exceptions for certain financial institutions and lease arrangements.

• Enhanced definitions and categories

  • Adds detailed definitions for multiple farming-entity types and related concepts (family farm trusts, family farm partnerships, authorized farm partnerships, etc.) to create a more nuanced governance framework around ownership and operation.

Practical implications for farmers and landowners

• For farming families and eligible organizations

  • More structured pathways to own farmland through family-based trusts and carefully defined corporate structures.
  • Clear ownership and control rules designed to keep farming as the primary use and prevent rapid or non-farming consolidation of land.

• For nonprofit and investment entities

  • Nonprofit corporations and certain investment entities may own farmland, but only under strict limits that emphasize farming activity and family/controlled ownership.
  • New divestiture and land-use rules may affect how these entities manage and dispose of land over time.

• For current landholders

  • Existing arrangements using certain exemption categories may continue, but future acquisitions must comply with new acreage caps and governance requirements.
  • Gifted or repossessed land must follow specified timelines for disposal to avoid lingering ownership that is not farm-focused.

Relevant Terms - farming - family farm - family farm corporation - family farm trust - authorized farm corporation - authorized livestock farm corporation - authorized farm partnership - family farm partnership - family farm limited liability company (LLC) - authorized farm limited liability company (LLE) - farmer - actively engaged in livestock production - farm land / agricultural land - exempt land - gifted land - repossessed land - de minimis - current beneficiary - nonprofit corporation - research or experimental farm - breeding stock farm - aquatic farm - development organization - farm homestead - Schedule F - five-year / ten-year divestiture timelines - 1500 acres - 20 percent of gross receipts - one class of shares - residency on the farm