Establishes a farm savings account program

1 Co-sponsor

• George D. Maziarz

BILL NUMBER:S3692A

Title of bill

An act to amend the tax law, in relation to farm savings accounts

Purpose

To establish a farm savings accounts plan in statute that will allow farmers to self insure part of their risk to counter-act strong cyclical downturns in the farm economy.

Summary of provisions

Section 1 adds a new section 41 to the Tax Law which establishes farm savings accounts. This section outlines the definitions of farm savings accounts. It also provides the requirements for deductions, contributions, and distributions with regard to a variety of contingencies for farm savings accounts.

Section 2 adds a new paragraph 40, to subsection (b) of section 612 of the Tax Law to add a non-qualifying distribution from a farm savings account to a person's adjusted gross income.

Section 3 amends subsection (c) of section 612 of the Tax Law by adding a new paragraph 41, to exempt a contribution to a farm savings account from a person's adjusted gross income.

Section 4 amends subdivision 4 of section 209 of the Tax Law, as amended by section 2 of part FF-1 of chapter 57 of the laws of 2008, to exempt farm savings accounts from the list of corporations liable for taxation.

Section 5 amends section 601 of the Tax Law by adding a new subsection (g-1) to exempt farm savings accounts from inclusion as personal income, subject to taxation.

Section 6 provides that this act shall take effect immediately and shall apply to taxable years commencing after the effective date. Effective immediately, the Commissioner may make changes necessary to the rules and regulations to provide for the timely implementation of the provisions of this act on their effective date.

JUSTIFICATION:. Agriculture, by the nature of its business, is extremely dependent upon weather and pricing. We have seen the impacts of weather on farm business during Hurricane Irene and Tropical Storm Lee, where farms lost cows and a year's worth of forage, fruit and produce. Add to these weather events, the strong cyclical nature of commodity pricing - especially in the dairy industry. The succession of low milk price cycles has negatively impacted farm income over the last ten years. A viable alternative that can help farmers offset their losses in years of low return are farm savings accounts.

A farm savings account is a tax deferred account that offers farmers the unique opportunity to self-insure part of their risk. Some of the methods used by farmers to help offset losses in difficult years include delaying the purchase of equipment and the repayment of loans. A farm savings account will offer farmers another management tool to help offset their costs. Farm savings accounts will encourage farmers to place revenue gained during years of good economic times into a tax

deferred savings account. That can be drawn on during times of depressed markets to pay for expenses and offset losses. This will provide farmers with an investment mechanism that can help farmers plan for their future.

Legislative history

New Bill

Fiscal implications

Minimal

Effective date

This act shall take effect immediately and shall apply to taxable years commencing after such effective date. Effective immediately, the Commissioner of Taxation and Finance may add, amend, or repeal any rule or regulation necessary to timely implement the provisions of this act on its effective date.