Creating a program for reimbursing the higher education debt of beginning farmers, creating an individual income tax deduction for certain amounts received from such a program, granting rule-making authority, making an appropriation, and providing a penalty. (FE)

To obtain reimbursement from HEAB, the bill requires an individual to apply to the Beginning Farmer Higher Education Debt Council, which is created in DATCP. The council consists of the secretary of agriculture, trade and consumer protection or his or her designee and the dean and director of the UW-Madison division of extension or his or her designee. The secretary appoints the following other members for three-year terms: 1) an individual who administers or participates or cooperates in programs of the Farm Service Agency of the U.S.

Department of Agriculture; 2) a representative of agricultural lenders; and 3) a representative of higher education loan providers or servicers. The council must advise HEAB on carrying out its duties and promulgating rules under the bill.

DATCP is required to provide administrative support to the council.

To be eligible for reimbursement, an individual must be a state resident who is a beginning farmer as defined above. In addition, the individual must intend to manage a farm or component of a farm in this state as his or her primary occupation for at least five years after applying for reimbursement. Also, the individual must have completed one of the following educational requirements: 1) graduated from an accredited public or nonprofit institution with an associate or baccalaureate degree;

2) completed a farm and industry short course offered by the University of Wisconsin System; or 3) obtained a technical college diploma or certificate in agriculture or a field related to agriculture. The council must advise HEAB on whether an applicant is eligible for reimbursement. If there are insufficient funds to make payments to all eligible applicants, the council must advise HEAB to give priority to applicants in specified categories, including financial need, likelihood to successfully continue farming in this state, progress toward farm ownership, and use of sustainable best practices.

The bill requires HEAB to enter into reimbursement agreements with eligible individuals. An agreement must express an individual's commitment to pursue a long-term career in farming in this state and to make a good faith effort to comply with the requirements of the program. An individual must also agree to annually submit documentation to HEAB showing that the individual continues to be a state resident who is managing a farm or a component of a farm in this state as his or her primary occupation. The documentation must also show that in the preceding year the individual has made all required payments on outstanding higher education debt in amounts not less than amounts reimbursed under the program. The individual must also agree to notify HEAB within 60 days if he or she ceases to be a state resident or ceases to manage a farm or farm component in this state as his or her primary occupation. The agreement must also describe the grounds for terminating an agreement, which are described below, and the penalties for intentionally providing false information to HEAB or the council, which are a civil forfeiture of no more than $500, and, for individuals with agreements with HEAB, liability under the clawback provision described below.

The bill requires HEAB to make five annual payments of equal amounts to individuals who satisfy the bill's requirements. HEAB must make the first payment as soon as practicable after entering into the agreement and the subsequent payments annually thereafter after receiving the documentation described above.

The total amount of payments over five years is $30,000, which is adjusted for inflation, or the total amount of an individual's outstanding higher education debt, whichever is less. The bill appropriates the following maximum amounts for the program: in fiscal year 2019-20, $120,000; in fiscal year 2020-21, $240,000; in fiscal year 2021-22, $360,000; in fiscal year 2022-23, $480,000; and in fiscal year 2023-24 and each fiscal year thereafter, $600,000. The Department of Administration must adjust the foregoing amounts based on inflation.

The bill specifies four grounds for terminating agreements. First, if an individual ceases to be a state resident or ceases to manage a farm or component of a farm in this state as his or her primary occupation, the agreement and payments terminate, except as provided in rules that HEAB must promulgate. Under those rules, an individual's agreement is suspended, instead of terminated, if, due to circumstances beyond the individual's control, including deployment in the U.S.

armed forces or national guard, the individual ceases to be a state resident or ceases engaging in the required farm management. The rules must provide for suspending the payments until an individual resumes state residency or engaging in the required farm management. Second, an agreement terminates if an individual fails to submit the required annual documentation by a due date determined by HEAB.

However, the bill allows HEAB, at its discretion, to grant an extension for submitting the documentation. The bill allows an individual whose agreement is terminated on this basis to reapply for reimbursement under the program. If an individual's agreement terminates under the first or second grounds, he or she is liable to HEAB under a clawback provision for a portion of his or her most recent annual payment that corresponds to the portion of the year that the agreement is no longer in effect.

For example, for termination under the first ground, the liability corresponds to the portion of the year the individual was no longer a state resident or did not engage in farming.

Third, if an individual intentionally provides false information to HEAB or the council, HEAB must terminate the agreement and the individual is liable to HEAB under a clawback provision for the total amount of payments made to the individual at a 10 percent interest rate. Fourth, if an individual fails to comply with a requirement in an agreement to notify HEAB within 60 days of ceasing to be a state resident or ceasing the required farm management activities, HEAB must terminate the agreement and the individual is liable to HEAB for the most recent payment received at a 5 percent interest rate.

The bill also does the following:

1. Provides that no more than 30 percent of the amount appropriated for the program in a fiscal year may be used to reimburse individuals who completed a farm and industry short course or obtained the technical college diploma or certificate described above.

2. To the extent funding is available in a fiscal year, allows HEAB to make total annual payments that are less then $30,000 to additional eligible individuals.

3. Creates an individual income tax subtract modification (deduction) for payments made to an individual under the bill. The deduction first applies to taxable years beginning after December 31, 2018.

4. Requires the Legislative Audit Bureau to evaluate the effectiveness of the program and, no later than July 1, 2026, and every ten years thereafter, submit a report to the legislature regarding its evaluation.

Because this bill relates to an exemption from state or local taxes, it may be referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix to the bill.