SF2665

Purpose of the Bill

The bill aims to modify existing tax laws related to agricultural property ownership, specifically increasing the allowable number of shareholders for family farm corporations, joint family farm ventures, limited liability companies, or partnerships that qualify for certain property tax classifications.

Main Provisions

• Shareholder Limit Increase: The bill proposes to increase the maximum number of shareholders, members, or partners in a family farm entity from the limit under current law to a new limit specified in the legislation.
• Homestead and Agricultural Property Classification: It provides guidelines for family farm entities to qualify their properties for homestead treatment or agricultural classification, even if these properties are leased.
• Eligibility for Tax Classification: Clarifies the conditions under which agricultural properties owned or leased by family farms are classified as class 1b or class 2a for tax purposes. This includes ensuring that shareholders, members, or partners associated with the farm are actively engaged in farming.

Significant Changes to Existing Law

• The bill increases the number of allowable shareholders in a family farm-related entity to no more than 12, who are either related by blood or marriage.
• Maintains that these entities must still meet specific requirements for their properties to receive favorable tax classifications, such as class 1b or 2a, and applies irrespective of certain legal possession nuances under lease agreements.

Relevant Terms

• Shareholders
• Family Farm Corporation
• Joint Family Farm Venture
• Limited Liability Company
• Partnership
• Homestead Classification
• Agricultural Property
• Class 1b Property
• Class 2a Property
• Tax Classification