The importance of persistence

I have been considering a story I heard from a colleague about the beginning farmers who are currently renting his crop land.  The beginning farmers began to cultivate (pun not intended) a relationship with my colleague for a few years.  They would call my colleague, ask if he had any land they could rent without disrupting any current tenants, if he knew of any other landowners looking for a tenant, keeping my colleague up-to-date on their operation and plans, and generally letting my colleague know they were interested should an opportunity ever arise.

The opportunity then came.  My colleague was considering renting his land and, as he had in years past, received a phone call from the prospective tenant.  This time, my colleague indicated he was interested in renting the land and asked for more details regarding the tenants’ operation, their agriculture and educational background, and ideas for maintaining the environmental integrity of the land.  My colleague also discussed the use of the Nebraska Beginning Farmer Tax Credit program and the requirements for both himself and the tenants to qualify.

What have I gleaned from this story from the perspective of a beginning farmer?

  1. Polite persistence is key.  We all know that access to land is the single most difficult barrier for beginning farmers to overcome.  But that doesn’t mean you can’t talk to people in your community, create relationships with landowners, and generally let the word out that you’d like to rent land.
  2. Don’t expect immediate results.  It took the tenants in the above story a few years for their persistence to pay off.  But when my colleague was considering renting his land, the first people he thought of were the people who maintained a relationship with him and let him know about their interest in renting his land.
  3. Have a plan.  Don’t just approach a landowner and state you’d like to rent the land.  Know what type(s) of crops you wish to grow, your ideas on fertilization and pesticide use, whether you wish to pursue cash rent or share rent, your farming background, and any other pertinent details that demonstrate that renting to you is in the best business interest of the landowner.
  4. Be aware of any programs that assist beginning farmers.  A tax credit is a wonderful tool in your plan.  Know about it and discuss it with potential landlords.

What have I gleaned from this story from the perspective of the landowner?

  1. Be receptive to renting to beginning farmers.  Sure, it may be a bit outside your comfort zone to rent to a beginning farmer but it may make business sense as well.  Listen to the ideas and keep them in mind.
  2. Be aware of any programs that assist beginning farmers.  Who doesn’t like a tax credit?  As a landowner, you may qualify for the Nebraska Beginning Farmer Tax Credit.  Calculate the tax credit and consider it in the larger picture of your operation’s financials.
  3. Have a plan.  There may be a time when you can no longer cultivate your own fields.  If that time comes, do you have relationships with other farmers who would be interested in renting your land to maintain your income stream?  More long-term, if you want a successor to the operation, do you have one?  Renting to a beginning farmer may provide you with a mechanism to maintain your operation for another generation.

Ultimately, there are benefits to both beginning farmers and landowners by being persistent and allowing persistence.  You never know — you may just find the perfect fit if you persist.

Timing the Nebraska Personal Property Tax Exemption

We previously discussed the math of the Nebraska Beginning Farmer Tax Credit.  Nebraska also offers a personal property tax exemption to beginning farmers for the purchase of personal property, such as machinery, used in the production of agriculture or horticulture.  Unlike the Beginning Farmer Tax Credit, the Personal Property Tax Exemption is provided to the beginning farmer, not the owner of agricultural assets (i.e. the person a beginning farmer leases from).

We have discussed the requirements for eligibility of the personal property exemption previously, but nonetheless, the requirements for the beginning farmer are the same as for the Beginning Farmer Tax Credit, with one exception: the personal property tax exemption does not require the beginning farmer to rent from someone to be eligible.

Why is timing important for the personal property tax exemption?  It is because the personal property tax exemption allows for a personal property tax exemption up to $100,000 a year for three years.  Once a beginning farmer is uses in the program, the beginning farmer may not use it again.  Thus, the beginning farmer should time when they apply for the tax exemption so as to maximize its potential.

Lets say that you are a beginning farmer.  Your business plan is to grow your business slowly but steadily.  Your business plan calls for you to steadily purchase equipment and machinery throughout your ten years as a beginning farmer.  You may begin with a drill or small tractor.  You plan to expand to a larger tractor and perhaps haying equipment.  Or, your operation may require specialized equipment.

Knowing this, it is best to plan when to apply for the personal property tax exemption at a time in your operation when you plan to outlay the most money on personal property purchases.  That way, the beginning farmer can use the personal property tax exemption to the maximum effect, helping the cash flow of the operation.

Keep in mind that the application for the personal property tax exemption is due by November 1st of the year prior to the year the exemption is sought.  For example, to apply for the exemption for 2014 through 2016, a beginning farmer must apply to the Beginning Farmer Board by November 1, 2013.  Then, to claim the exemption, the beginning farmer must present the eligibility certificate issued by the Beginning Farmer Board to proper county assessor by December 31 for approval.

Have questions?  Or just want to talk about the math?  Feel free to contact us!