Establishes, in the department of agriculture and markets, the matching enterprise grants for agriculture program to provide moneys to new farmers

To encourage the proliferation of small and traditional private farming enterprises by establishing a matching grant program for beginning farm- ers and establishing an income tax deduction for life insurance compa- nies that lend money to agricultural producers.

Summary of Provisions:

Section 1: Adds new section 325-b to the Agriculture and Markets Law to establish a matching grant program within the Department of Agriculture and Markets to be used for the purchase of equipment, structures, live- stock, and other items necessary for the running of a farm. Defines eligible farmers as those who own or have a long term lease (at least 5 years) upon a parcel of land of at least five acres where they engage in agricultural production on at least a half-time basis and have done so for at least one year but less than five. Empowers the Department of Agriculture and Markets to create guidelines and requirements for solic- iting grant proposals and awarding grants and limits grants to not exceed $10,000.

Section 2: Adds new section 220-b to the county law to offer a conserva- tion easement, as defined under title three of article 49 of the envi- ronmental conservation law, for property that is engaged in producing or processing agricultural products.

Section 3: Amends paragraph 3 of subsection (a) of section 1405 of the insurance law to allow life insurers to invest up to one percent of admitted assets in obligations subject to the provisions of paragraph 17 subdivision (b) of section 1503 of the tax law.

Section 4: Amends subdivision (b) of section 1503 of the tax law to allow the exclusion from taxable income of 30% of interest received by a taxpayer on loans used to purchase or by people who have purchased not more than 50 acres of land which is Used in agricultural production. In the event that the loan applies to more than 50 acres of land, the deduction will apply only to that ratio of the interest paid which is equal to the ratio between 50 acres and the total area of land upon which interest is paid. Requires the land to be eligible for an agricul- tural assessment as well as subject to a conservation easement. Defines the terms "agricultural assessment," "agricultural products," and "land used in agricultural production."

Section 5: Allows the act to take effect immediately, and applies sections two, three, and four to taxable years beginning on or after January 1 of the year in which the act shall have become law.

Justification:

Agriculture has traditionally been a leading industry in New York State, and continues to be one of the largest sectors of the state's economy. The value of agricultural production in 2012 was over 5.7 billion dollars, and the state Department of Agriculture and Markets estimates that 23 percent of the state's land area, some 7 million acres, is used for agricultural purposes. New York is also one of the largest agricul- tural producers in the nation, ranking among the top five states in producing milk, apples, cherries, pears, sweet corn, onions, snap beans, tomatoes, pumpkins, cucumbers, squash, cauliflower, and maple syrup in 2012.

Agriculture is also a valuable engine of economic development for New York State. For many upstate areas, it is the single largest industry and is critical to the community and economic health of the region. Furthermore, New York City's large population necessitates a comparably large need for agricultural products, meaning that New York farms are adjacent to one of the largest purchasers of their products on the continent. To top this off, investment in farms is one of the most stable investments in economic development that the state can make; a farmer will not pack up their business and go off shore for cheaper labor or tax incentives, and farmers cannot move their land to another state. While there are some challenges to farming in NY there are also some real advantages like readily accessible water and proximity to a huge food consuming population.

Large initial capital costs associated with the purchase of land, equip- ment, and infrastructure required to open or expand a commercially viable farm are a powerful deterrent for young people interested in agriculture, however. This has lead to a decline in the number of new or family-operated farms, orchards, and vineyards operating throughout the state. The long-term trend has been toward fewer, larger farms as aging farmers pass away and retire, while fewer young people enter the indus- try to replace them. This can be seen in the average age of farmers in New York State, which is now 57 years old, up from 56 last year. There are two farmers aged 65 and older for every one under 35.

To further complicate matters, commercial banks and Federal Housing Administration loans had been the primary financing mechanisms used to purchase farm land. However, they have generally left the business of lending money to farm operations, and it has become substantially more difficult for farmers to get loans to buy the land and other capital equipment that they need to start or expand a farm.

To address these issues, the Agriculture Resurgency Program takes a two-pronged approach. First is the creation of a matching grant fund for young and beginning farmers. Those who own or lease five acres or more

of land and have been in operation for at least one year but less than five can apply for matching funds of up to $10,000 for the purchase of equipment, infrastructure, or buildings which are necessary for a farm to be economically viable. In doing so, the state will help alleviate some of the high start-up capital costs that currently disincentivize people from entering the agricultural industry.

The second is to leverage private funding for the purchase of farmland by incentivizing insurers to lend to farmers and potential farmers. Many of the farming-rich Midwest states have long adopted this stance, and by allowing insurers a small tax deduction on loan interest received from farmland loans, the State can follow their lead and encourage the commercial availability of these loans. Further, once money is lent by the insurer to the new farming operation, the land purchased by that loan must remain in agriculture pursuant to a conservation easement that is filed in the county clerk's office. Hence, these agricultural lands must remain in agriculture as a condition on the continued use of the land in the future.

Legislative History:

New bill.

Fiscal Implications:

New York State would budget $500,000 annually to the matching grant program administered through the Department of Agriculture and Markets. The loan encouragement program would have an impact on income tax collected from life insurance providers.

Effective Date:

This bill shall take effect immediately. Sections two, three, and four shall apply to taxable years beginning on or after January 1 of the year in which this act shall have become law, provided that any and all rules, regulations, and other measures necessary to implement it shall be promulgated immediately, and, if deemed necessary, on an emergency basis.