Goals and issues

The National Council of State Agriculture Finance Programs (NCOSAFP) is an informal organization, whose affairs are conducted by a Steering Committee selected from the NCOSAFP membership, that keeps its members informed on state programs being developed across the nation and on farm finance issues emerging in Washington, D.C.

National Council Goals

To represent the interest of state agriculture finance programs in the development of legislation, regulation and consideration of other issues that affect the ability of such programs to meet the intended public purposes.

To facilitate continuing communication and educational programs among the membership.

To explore and evaluate new ideas in agriculture financing.

To offer assistance to states that may be interested in developing state agriculture finance programs.

Proposals to Enhance Financing Opportunities for
Beginning Farmers and Ranchers

March 2008

Overview/What Will The Bill Do?

The Agricultural Bond Improvement Act of 2007 was introduced in the 110th Congress by Rep. Earl Pomeroy of North Dakota on October 10, 2007.  It was assigned bill number HR 3817. The bill proposed three changes to the existing Agricultural Bond language contained in the Internal Revenue Code of 1986. 

Section 2 of the bill would exempt Aggie Bonds from the limitation of a state’s Industrial Revenue Bond (IRB) Cap.  Currently most states offering the Aggie Bond program must compete with housing, manufacturing, etc. for allocation under the bond cap.  All states except Iowa are given insufficient allocation to meet the needs of beginning farmers in their states. 

Section 3 of the bill would increase the maximum bond amount to $450,000 and index the maximum bond amount to an inflation index annually.  The current maximum of $250,000 has been in place since the program was created in 1980. 

Section 4 of the bill would repeal the maximum $125,000 value of current or previously owned real estate.  This section would also change the current or previously owned real estate threshold from 30% of the median size farm in the county to 30% of the average size farm. 

Co-Sponsors

  • Rep. Leonard Boswell (IA)                                       
  • Rep. Steve Kagen (WI)
  • Rep. David Loebsack (IA)                                               
  • Rep. Jeff Fortenberry (NE)
  • Rep. Stephanie Herseth Sandlin (SD)                                     
  • Rep. Kenny Hulshof (MO)             
  • Rep. Ron Paul (TX)                                                    
  • Rep. Dennis Rehberg (MT)
  • Rep. John Salazar (CO)                                               
  • Rep. Steve King (IA)
  • Rep. Timothy Walz (MN)                                                   
  • Rep. Lee Terry (NE)

Copy of HR3817

Explanation/Justification

Exempt Aggie Bonds from the Volume Cap on Industrial Revenue Bonds.  There are many states that cannot meet the demand for Aggie Bonds because they do not have enough volume cap allocation.  Also, there are other states that want to start an Aggie Bond Program but can’t because their state’s volume cap is already used up.  Aggie Bonds are small, private placement bonds used by young farmers and ranchers and cannot exceed $250,000 ($450,000 if the act is  passed).  Exempting Aggie Bonds from the volume cap would greatly enhance the opportunities for young, less established farmers and ranchers to acquire affordable, low cost credit for land purchases.  Exempting Aggie Bonds would also free up volume cap used by Aggie Bonds for other eligible purposes.  This provision is included in Title 1B-Section 113 of the Heartland Investment and Rural Employment (HIRE) Act, S.2761 introduced by Sen. Charles Grassley in the 109th Congress

Increase the loan limits on Agricultural “Aggie” Bonds and index the limit.  The present limit of $250,000 has been in effect since the programs were first offered in 1981.  Assuming nominal inflation of about 3% per year, $250,000 in 1981 would be equivalent to $450,000 today.  The Aggie Bond maximum size should be raised to $450,000 and indexed to inflation using the same index that FSA uses to adjust its maximum loan amount.

Eliminate the dollar limitation on owned farmland and change the previous land ownership limitation to 30% of the AVERAGE size farm.  Under current law, a beginning farmer is not eligible if the value of currently owned or prior owned farmland exceeds $125,000.  With ever increasing real estate values, in many cases this limitation is much more restrictive than the acreage restriction of 30% of the median size farm in the county.  In addition to the $125,000 maximum value, current law also restricts current or previous land ownership to 30% of the median size farm in the county.  FSA currently uses 30% of the average size farm in the county.  The two programs should be consistent and therefore the land ownership limitation should be changed to 30% of the average size farm.

For additional information, please contact Jeff Ward, Chairman, National Council of State Ag Finance Programs(515/281-6444)


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