SOUTH DAKOTA DEPARTMENT OF AGRICULTURE

NEWS RELEASE

For Immediate Release: October 21, 2013
Contact: Terri LaBrie 605.773.4026

Farm Transition and Tax-Exempt Bond Financing

PIERRE, S.D.- The Beginning Farmer Bond program through the South Dakota Department of Agriculture (SDDA) is available for eligible beginning farmers to purchase agricultural land at lower interest rates. 

“The Beginning Farmer Bond program is a great way for a beginning farmer to buy land, but it’s also advantageous for a retiring farmer that would be willing to enter into a contract for deed with that beginning farmer,” says Terri LaBrie, finance administrator with the South Dakota Department of Agriculture.

Typically, the Beginning Farmer Bond program works through a local lender; however, if retiring farmers are interested in passing on their land to a beginner farmer, the interest off that contract sale is federally tax exempt, providing substantial savings to the seller.

“Regulations prohibit this type of transaction with closely related parties such as parents or grandparents," says LaBrie.

The SDDA administers the Beginning Farmer Bond program through the Value Added Finance Authority board. The board meets monthly and reviews the applications for the program and issues the bonds for approved projects. 

To be eligible for the program, an applicant must be at least 18 years old and a resident of South Dakota, have a net worth of under $400,000 and cannot own or previously have owned more than 30 percent of the county median acres. 

The maximum amount of a beginning farmer bond is $501,100 for calendar year 2013. This limit is set annually by the federal government. There is no upper age limit and there is no limit on off-farm income.

“With rising land costs and a $501,100 limit on the bond, this is only one piece of the puzzle,” says LaBrie. “But it’s an important piece of that puzzle that may provide the tax incentive to that contract seller; as well as better terms for that beginning farmer to have the opportunity to start their own farm.”

SDDA does not finance operating expenses or refinance prior debt. However, other programs are available for the purchase of livestock, dairy financing, feedlot financing, grain storage and value-added businesses.

Program information can be found at sdda.sd.gov or by calling SDDA, Division of Agricultural Development at 605.773.5436. 

Agriculture is South Dakota's No. 1 industry, generating over $21 billion in annual economic activity and employing more than 122,000 South Dakotans. The South Dakota Department of Agriculture's mission is to promote, protect, preserve and improve this industry for today and tomorrow. Visit us online at http://sdda.sd.gov or find us on Facebook at https://www.facebook.com/SDAgDept and Twitter @SDAgriculture.

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