Colorado income tax deduction created for leasing agricultural assets to new farmers

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Reading Time: 3 minutesColorado—Income Tax: Deduction Created for Leasing Out Agricultural Assets Colorado Gov. John Hickenlooper has signed legislation creating a corporate and personal Colorado income tax deduction for taxpayers that lease an agricultural asset, which is defined as “land, crops, livestock, livestock facilities, farm equipment, grain storage, or irrigation equipment,” to a beginning farmer or rancher satisfying certain qualifications. The deduction is equal to 20% of the lease payment received from the beginning farmer or rancher for a lease of agricultural assets with a term of at least three years and is available for tax years beginning after 2017 and before 2020. Under the legislation, more than one deduction certificate may be issued to a qualified taxpayer, except that the deductions are capped at $25,000 per taxpayer, per year. In order for the lessor to receive a deduction, the beginning farmer or rancher lessee must:
  • live in Colorado;
  • have a net worth of less than $2 million;
  • be responsible for the majority of the labor on and management of the leased agricultural asset the majority of the time;
  • have plans to farm or ranch full-time;
  • have less than 10 years of experience in farming or ranching;
  • have some prior farming or ranching experience or education; and
  • participate in a financial management educational program approved by the Colorado Agricultural Development Authority.
Taxpayers must submit a deduction certificate from the Colorado Agricultural Development Authority when filing their state income tax return. The Colorado Agricultural Development Authority is permitted to issue a maximum of 100 deduction certificates each tax year and must notify the Department of Revenue of all deductions awarded. H.B. 1194, Laws 2016, effective August 10, 2016 Colorado—Income Tax: First-Time Home Buyer Savings Account Tax Deduction Created Colorado Gov. John Hickenlooper has signed legislation allowing for the creation of first-time home buyer savings accounts and a personal income tax deduction for account holders equal to the interest and other income earnings on account contributions, for tax years beginning after 2016. H.B. 1467, Laws 2016, effective August 10, 2016, and applicable as noted above Colorado—Miscellaneous Tax: Retail Marijuana Sunset Date Extended, Other Changes Enacted Enacted legislation continues the Colorado Retail Marijuana Code until September 1, 2019 (previously scheduled to terminate July 1, 2016). Further, the law creates licenses for retail marijuana transporters and retail marijuana establishment operators, and repeals the requirement that a license application be denied based on a previous denial at the same location. Additionally, the law requires that not less than 15% of the registered electors in a county sign a petition for a county-initiated measure related to retail marijuana in order for it to be placed on the ballot. Other changes regarding licensing, rulemaking, industry operations, and criminal provisions are included in the law. H.B. 1261, Laws 2016, effective June 10, 2016 Colorado—Miscellaneous Tax: Marijuana Licensing Provisions Amended Enacted Colorado legislation replaces the current statutory definition for owner of a licensed medical or retail marijuana business with two new ownership categories: direct beneficial interest owners (direct owners) and indirect beneficial interest owners (indirect owners). “Direct beneficial interest owner” means a person or closely held business entity that owns a share or shares of stock in a licensed marijuana business, including the officers, directors, managing members, or partners of the licensed marijuana business or closely held business entity, or a qualified limited passive investor. “Indirect beneficial interest owner” means a holder of a permitted economic interest, a recipient of a commercial reasonable royalty associated with the use of intellectual property by a licensee, a licensed employee who receives a share of the profits from an employee benefit plan, a qualified institutional investor, or another similarly situated person or entity. The enacted law provides qualifications and requirements for licensees and applicants. S.B. 40, Laws 2016, effective June 10, 2016, and applicable to applications made on or after January 1, 2017 Colorado—Multiple Taxes: Sunset of DOR Authority to Issue Taxpayer Guidance Letters Extended Enacted legislation continues the authority of the Colorado Department of Revenue to issue general information letters and private letter rulings governing state tax matters through September 1, 2023. The authority was previously scheduled to sunset on September 1, 2016. H.B. 1232, Laws 2016, effective June 10, 2016

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