Form 4594 - Michigan Farmland Preservation Tax Credit

4594, Page 5

preceding the tax year of this claim to property taxes on the

ending after December 31, 2011, in order for the taxpayer

enrolled land in the first year under the agreement. If average

to remain taxable under the MBT and claim certificated

receipts are more than five times property taxes in the first

credits. If a taxpayer properly made this election with either

year, this formula may be used.

a certificated farmland preservation agreement or another

certificated credit and the taxpayer purchases a farm already

line 9: Enter each of the years immediately preceding the

in the program then the credit will only be processed if the

claim year. Enter the most current year in column A.

ownership on the FDRA on file with the MDARD IS THE

line 10: Enter the property taxes for each year reported

SAME AS oN THE TAxPAyER’S DEED. The taxpayer must

on line 9 that are attributable to land enrolled on or after

prorate the 2016 taxes for the period the land was owned and

January 1, 1978. Do not include property taxes on land enrolled

claim the credit based only on those taxes.

before January 1, 1978, or property taxes on structures or any

Line-by-Line Instructions

other lands not enrolled in an FDRA.

Lines not listed are explained on the form.

line 12: Enter the agricultural gross receipts for the tax years

immediately preceding the tax year of this claim. Agricultural

Dates must be entered in MM-DD-yyyy format, unless

gross receipts are receipts from the business of farming as

otherwise instructed.

defined in the Internal Revenue Service Regulation 1.175-3.

line 1: Tax year of claim. Enter the ending month, day, and

For land rent to qualify as agricultural gross receipts, the owner

year of the annual accounting period in which this credit is

must participate in the business of farming to a material extent.

claimed.

IRS Regulation 1.175-3 indicates the business of farming to be:

ExamplE: A participant with a tax year ending

December 31 claims a credit for the 2016 property taxes in the

1. A t axpayer is engaged in the business of farming if he

tax year ending in December 2016.

cultivates, operates, or manages a farm for gain or profit,

either as owner or tenant.

line 2: Country Code: If other than the United States, enter

the country code. See the list of country codes in the MBT

2. A t axpayer who received a rental (either in cash or kind)

Instruction Booklet for Standard Taxpayers (Form 4600)

which is based upon farm production (output) is engaged

available on our Web site at

in the business of farming.

line 3: Enter the entity’s six-digit North American Industry

3. A taxpayer who received a fixed rental (without reference

Classification System (NAICS) code. For a complete list of

to production) is engaged in the business of farming only

six-digit NAICS codes, see the U.S. Census Bureau Web site

if he participates to a material extent in the operation or

at , or enter the same

management of the farm.

NAICS code used when filing the entity’s U.S. Form 1120,

4. For purposes of this section, the term farm is used in

Schedule K, U.S. Form 1120S, U.S. Form 1065, or U.S. Form

its ordinary accepted sense and includes stock, dairy,

1040, Schedule C.

poultry, fish, fruit, and plantations, ranches, and orchards.

line 6: Check the box that describes the organization type. A

5. A fish farm is an area where fish are grown or raised, as

Trust or Limited Liability Company (LLC) should check the

opposed to merely caught or harvested: that is, an area

appropriate box based on its federal return.

where they are artificially fed, protected and cared for.

PART 1: GROSS RECEIPTS QUALIFICATION

The taxpayer has participated in the operation of the farm to a

material extent if any one of the following tests are met:

Applies only to agreements entered into on or after

January 1, 1978.

1. The landowner does any three of the following:

If agreements were entered into on or after January 1, 1978,

a. advances, buys or stands good for at least half the

eligibility for a Farmland Preservation Tax Credit must be

direct costs of producing the crops.

determined using one of the two qualification formulas

b. furnishes at least half the tools, equipment, and

provided below. If all agreements began before January 1, 1978,

livestock used in producing the crops.

skip to Part 2.

c. advises and consults with the tenant periodically

ImpOrTaNT: once a qualification formula is elected, all

future claims must be filed using that formula.

d. inspects the production activities periodically

Total receipts Formula on line 13: This formula compares

2. The landowner regularly and frequently makes or takes

agricultural gross receipts to property taxes on the enrolled

an important part in making management decisions

land in each of the five tax years preceding the tax year of this

substantially contributing to or affecting the success of

claim. If gross receipts are more than five times property taxes

the farming enterprise.

in at least three of the five tax years, this formula may be used.

3. T he landowner works 100 hours or more spread over a

average receipts Formula on line 18: This compares the

period of 5 weeks or more in activities connected with

average of the agricultural gross receipts for the three tax years

producing the crop.

Form 4594 - Michigan Farmland Preservation Tax Credit - 2016 Page 5

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