Economic Tidbits

NextGen Assists the Next Generation

Entering production agriculture is hard. The capital requirements in the form of land and machinery can be daunting for beginning crop and livestock producers. To help overcome the obstacles and provide opportunities for persons wanting to enter production agriculture, the Nebraska Legislature in 1999 passed the Beginning Farmer Tax Credit Act. The Act, now known as the NextGen program, has evolved over the years but the goal remains the same—to link landowners and beginning producers and provide access to land for beginning producers. Landowners participating in NextGen receive refundable income tax credits for leasing land to eligible beginning producers. Eligible beginning farmers and ranchers who participate must attend a financial management class and can receive a personal property tax exemption for 3 years. A $500 income tax credit helps offset the cost of the management class.

Julia Valliant and Marie O’Neill, researchers at the Indiana University Sustainable Food Science research group, as part of a study funded by the USDA to learn more about beginning farmer tax credit programs conducted a survey of participants in several states including Nebraska. A total of 150 Nebraska participants, both beginning farmers and landowners, responded to the survey. Valliant and O’Neill list several takeaways from the study:

  • Participants rate NextGen highly, are satisfied with it, and view it as a good tool for Nebraska, yet land access challenges remain. Seventy percent of beginning farmers and ranchers who have enrolled in NextGen say they continue to face land access challenges.
  • The NextGen program is sparking more beginning farmer-landlord relationships compared to programs in other states. In Nebraska, 28 percent of respondents enrolled in NextGen with someone who was already their landlord or tenant. This compares to 40 percent in Iowa and 42 percent in Minnesota. But, in just over 50 percent of cases, landowners and beginning producers say the program supported a lease that would have happened anyway.
  • In about half of cases, landowners who participated in NextGen provided discounted rental rates to the beginning farmers or ranchers.
  • Of the participating beginning producers, 78 percent were under 35 years of age at enrollment.
  • Only 5 percent of the lease agreements under NextGen led to the sale of assets to the beginning producer.

The NextGen program is sparking relationships between landlords and beginning farmers, and resulting in discounted rental rates for beginning producers, but is not resulting in land ownership by beginning producers. Valliant and O’Neill suggest an income tax credit on the sale of land might make it more likely a landowner would transfer land to a beginning producer. In the survey, 78 percent of participating landowners said such a credit could or would influence their decision on whether to transfer the land. 

FIGURE 2. PARTICIPANTS IN NEBRASKA’S NEXTGEN PROGRAM

Source: Julia Valliant and Marie O’Neill, Survey of Nebraska Beginning Farmer Tax Credit Participants: Results Summary, Indiana University, USDA Land Access Policy Incentives Research & Extension project, Summer 2023.

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