H.R. 6836 — Beginning Farmer Tax Incentive Act

This section establishes a new exclusion from gross income under new IRC §139M for (1) 40% of capital gain from the sale or exchange of qualifying farmland held more than one year if transferred to a beginning farmer, with an aggregate limit of $1,500,000 over five taxable years (current year plus four preceding years); and (2) rental income from qualifying farmland leased to a beginning farmer for up to 10 years, limited to $25,000 per taxable year. Qualifying farmland is real property used for farming that was owned by the taxpayer, family member, or revocable grantor trust and materially participated in by the taxpayer or family for at least five of the prior eight years, with special rules for retired or disabled owners and surviving spouses (i.e., similar to IRC §2032A rules). A beginning farmer is a U.S. citizen certified by the Secretary of Agriculture based on criteria including one to 10 years of Schedule F reporting (excluding years before age 18), approval for a Farm Service Agency beginning farmer loan, substantial farming knowledge as principal operator of new production agriculture, or relation within the fourth degree to the transferor; the definition extends to entities over 50% owned by qualifying individuals. The exclusion is subject to aggregation rules (similar to IRC §194(b)(2)) and recapture if the farmland ceases farm use within five years of sale (100% in year one, declining to 20% in year five). The provision applies to taxable years beginning after enactment and requires annual Treasury Department reports to Congress on costs, benefits, statistics, and total excluded income.