Establishes a farm savings account program.
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.
STATE OF NEW YORK ________________________________________________________________________ 3692--A 2013-2014 Regular Sessions IN SENATE February 11, 2013 ___________Introduced by Sens. RITCHIE, MAZIARZ -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations -- recommitted to the Committee on Investi- gations and Government Operations in accordance with Senate Rule 6, sec. 8 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the tax law, in relation to farm savings accounts THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The tax law is amended by adding a new section 41 to read as follows: S 41. FARM SAVINGS ACCOUNTS. 1. DEFINITIONS. (A) QUALIFIED FARMER. FOR PURPOSES OF THIS SECTION, THE TERM "QUALIFIED FARMER" MEANS, WITH RESPECT TO ANY TAXABLE YEAR, ANY INDIVIDUAL WHO, DURING SUCH YEAR, WAS ENGAGED IN THE TRADE OR BUSINESS OF FARMING. (B) FARM SAVINGS ACCOUNT. FOR PURPOSES OF THIS SECTION, THE TERM "FARM SAVINGS ACCOUNT" MEANS A TRUST CREATED OR ORGANIZED IN THE UNITED STATES AS A FARM SAVINGS ACCOUNT EXCLUSIVELY FOR THE PURPOSE OF MAKING QUALI- FIED DISTRIBUTIONS FOR PURPOSES OF FARM SUSTAINABILITY, BUT ONLY IF THE WRITTEN GOVERNING INSTRUMENT CREATING THE TRUST MEETS THE FOLLOWING REQUIREMENTS: (I) NO CONTRIBUTION WILL BE ACCEPTED UNLESS IT IS IN CASH. (II) THE TRUSTEE IS A BANK, CREDIT UNION OR OTHER APPROPRIATE INSTITU- TION THAT DEMONSTRATES ADMINISTRATION OF THE TRUST IN A MANNER THAT IS CONSISTENT WITH THE REQUIREMENTS OF THIS SECTION. (III) THE ASSETS OF THE TRUST WILL NOT BE COMMINGLED WITH OTHER PROP- ERTY EXCEPT IN A COMMON TRUST FUND OR COMMON INVESTMENT FUND. (IV) THE INTEREST OF AN INDIVIDUAL IN THE BALANCE IN HIS OR HER ACCOUNT IS NONFORFEITABLE.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD08790-04-4 S. 3692--A 2
(C) QUALIFIED DISTRIBUTION. THE TERM "QUALIFIED DISTRIBUTION" MEANS ANY AMOUNT PAID FROM A FARM SAVINGS ACCOUNT TO THE ACCOUNT BENEFICIARY EXCLUSIVELY FOR PURPOSES OF FARM SUSTAINABILITY. (D) ACCOUNT BENEFICIARY. THE TERM "ACCOUNT BENEFICIARY" MEANS THE INDIVIDUAL OR BUSINESS ON WHOSE BEHALF THE FARM SAVINGS ACCOUNT WAS ESTABLISHED. 2. PROGRAM DESCRIPTION. (A) DEDUCTIONS ALLOWED. IN THE CASE OF A QUAL- IFIED FARMER, THERE SHALL BE ALLOWED AS A DEDUCTION FOR THE TAXABLE YEAR AN AMOUNT EQUAL TO THE AGGREGATE AMOUNT PAID IN CASH DURING SUCH TAXABLE YEAR BY OR ON BEHALF OF SUCH INDIVIDUAL TO A FARM SAVINGS ACCOUNT OF SUCH INDIVIDUAL. (B) CONTRIBUTION REQUIREMENT. THERE SHALL BE NO MINIMUM OR MAXIMUM CONTRIBUTION REQUIREMENT. HOWEVER, AGGREGATE CONTRIBUTIONS MAY NOT EXCEED TOTAL INCOME DERIVED FROM FARMING DURING A GIVEN TAXABLE YEAR. (C) TAX TREATMENT OF ACCOUNTS. A FARM SAVINGS ACCOUNT IS EXEMPT FROM TAXATION UNDER THIS CHAPTER UNLESS SUCH ACCOUNT HAS CEASED TO BE A FARM SAVINGS ACCOUNT. (D) TERMINATION OF ACCOUNTS. IF THE ACCOUNT BENEFICIARY CEASES TO ENGAGE IN THE TRADE OR BUSINESS OF FARMING, ALL FARM SAVINGS ACCOUNTS OF SUCH INDIVIDUAL SHALL CEASE TO BE SUCH ACCOUNTS AND THE BALANCE OF ALL SUCH ACCOUNTS SHALL BE TREATED AS (I) DISTRIBUTED TO SUCH INDIVIDUAL, AND (II) NOT PAID IN A QUALIFIED DISTRIBUTION. (E) TAX TREATMENT OF DISTRIBUTIONS. (I) GENERAL. IN GENERAL, ANY AMOUNT PAID OR DISTRIBUTED OUT OF A FARM SAVINGS ACCOUNT SHALL BE INCLUDED IN GROSS INCOME. (II) ADDITIONAL TAX ON NON-QUALIFIED DISTRIBUTIONS. (1) IN ADDITION TO ANY OTHER TAX IMPOSED BY THIS CHAPTER, ANY NON-QUALIFIED DISTRIBUTION FROM A FARM SAVINGS ACCOUNT SHALL BE SUBJECT TO A FIFTEEN PERCENT SURCHARGE ON THE AMOUNT OF SUCH NON-QUALIFYING DISTRIBUTION. (2) CLAUSE ONE OF THIS SUBPARAGRAPH SHALL NOT APPLY IF THE PAYMENT OR DISTRIBUTION IS MADE AFTER THE ACCOUNT BENEFICIARY BECOMES DISABLED OR DIES. (III) ROLLOVER CONTRIBUTIONS. FOR PURPOSES OF THIS SECTION, ANY AMOUNT PAID OR DISTRIBUTED FROM A FARM SAVINGS ACCOUNT TO THE ACCOUNT BENEFICI- ARY SHALL BE TREATED AS A QUALIFIED DISTRIBUTION TO THE EXTENT THE AMOUNT RECEIVED IS PAID INTO A FARM SAVINGS ACCOUNT FOR THE BENEFIT OF SUCH BENEFICIARY NOT LATER THAN THE SIXTIETH DAY AFTER THE DAY ON WHICH THE BENEFICIARY RECEIVES THE PAYMENT OR DISTRIBUTION. (IV) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE. THE TRANSFER OF AN INDI- VIDUAL'S INTEREST IN A FARM SAVINGS ACCOUNT TO AN INDIVIDUAL'S SPOUSE OR FORMER SPOUSE UNDER A DIVORCE OR SEPARATION INSTRUMENT SHALL NOT BE CONSIDERED A TAXABLE TRANSFER MADE BY SUCH INDIVIDUAL NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION, AND SUCH INTEREST SHALL, AFTER SUCH TRANSFER, BE TREATED AS A FARM SAVINGS ACCOUNT WITH RESPECT TO WHICH SUCH SPOUSE IS THE ACCOUNT BENEFICIARY. (V) TREATMENT AFTER DEATH OF ACCOUNT BENEFICIARY. (1) TREATMENT IF DESIGNATED BENEFICIARY IS SPOUSE. IF THE ACCOUNT BENEFICIARY'S SURVIVING SPOUSE ACQUIRES SUCH BENEFICIARY'S INTEREST IN A FARM SAVINGS ACCOUNT BY REASON OF BEING THE DESIGNATED BENEFICIARY OF SUCH ACCOUNT AT THE DEATH OF THE ACCOUNT BENEFICIARY, SUCH FARM SAVINGS ACCOUNT SHALL BE TREATED AS IF THE SPOUSE WERE THE ACCOUNT BENEFICIARY. (2) OTHER CASES. IF, BY REASON OF THE DEATH OF THE ACCOUNT BENEFICI- ARY, ANY PERSON ACQUIRES THE ACCOUNT BENEFICIARY'S INTEREST IN A FARM SAVINGS ACCOUNT IN A CASE TO WHICH CLAUSE ONE OF THIS SUBPARAGRAPH DOES NOT APPLY:S. 3692--A 3
(A) SUCH ACCOUNT SHALL CEASE TO BE A FARM SAVINGS ACCOUNT AS OF THE DATE OF DEATH, AND (B) AN AMOUNT EQUAL TO THE FAIR MARKET VALUE OF THE ASSETS IN SUCH ACCOUNT ON SUCH DATE SHALL BE INCLUDED IN SUCH PERSON'S GROSS INCOME FOR THE TAXABLE YEAR WHICH INCLUDES SUCH DATE IF SUCH PERSON IS NOT THE ESTATE OF SUCH BENEFICIARY; OR IF SUCH PERSON IS THE ESTATE OF SUCH BENEFICIARY, IN SUCH BENEFICIARY'S GROSS INCOME FOR THE LAST TAXABLE YEAR OF SUCH BENEFICIARY. S 2. Subsection (b) of section 612 of the tax law is amended by adding a new paragraph 40 to read as follows: (40) ANY NON-QUALIFYING DISTRIBUTIONS MADE FROM A FARM SAVINGS ACCOUNT. THIS SHALL NOT INCLUDE ANY DISTRIBUTIONS THAT ARE EXEMPT FROM TAXATION AS SPECIFIED IN PARAGRAPH (E) OF SUBDIVISION TWO OF SECTION FORTY-ONE OF THIS CHAPTER. S 3. Subsection (c) of section 612 of the tax law is amended by adding a new paragraph 41 to read as follows: (41) AN AMOUNT EQUAL TO ANY QUALIFIED CONTRIBUTION TO A FARM SAVINGS ACCOUNT ESTABLISHED PURSUANT TO SECTION FORTY-ONE OF THIS CHAPTER. S 4. 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, is amended to read as follows: 4. Corporations liable to tax under sections one hundred eighty-three to one hundred eighty-five, inclusive, corporations taxable under arti- cles thirty-two and thirty-three of this chapter, any trust company organized under a law of this state all of the stock of which is owned by not less than twenty savings banks organized under a law of this state, bank holding companies filing a combined return in accordance with subdivision (f) of section fourteen hundred sixty-two of this chap- ter, a captive REIT or a captive RIC filing a combined return under either subdivision (f) of section fourteen hundred sixty-two or subdivi- sion (f) of section fifteen hundred fifteen of this chapter,
[and]hous- ing companies organized and operating pursuant to the provisions of article two or article five of the private housing finance law [and], housing development fund companies organized pursuant to the provisions of article eleven of the private housing finance law, AND FARM SAVINGS ACCOUNTS PROPERLY ESTABLISHED UNDER SECTION FORTY-ONE OF THIS CHAPTER, shall not be subject to tax under this article. S 5. Section 601 of the tax law is amended by adding a new subsection (g-1) to read as follows: (G-1) FARM SAVINGS ACCOUNTS. ANY FARM SAVINGS ACCOUNT PROPERLY ESTAB- LISHED UNDER SECTION FORTY-ONE OF THIS CHAPTER SHALL NOT BE SUBJECT TO TAX UNDER THIS ARTICLE. S 6. 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.