1.1                          A bill for an act 
  1.2             relating to agriculture; changing the law limiting 
  1.3             corporate farming; expanding the definition of 
  1.4             authorized farm corporation; clarifying enforcement; 
  1.5             amending Minnesota Statutes 1994, section 500.24, 
  1.6             subdivisions 2, 3, and 5. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1994, section 500.24, 
  1.9   subdivision 2, is amended to read: 
  1.10     Subd. 2.  [DEFINITIONS.] For the purposes of this section, 
  1.11  the terms defined in this subdivision have the meanings here 
  1.12  given them: 
  1.13     (a) "Farming" means the production of (1) agricultural 
  1.14  products; (2) livestock or livestock products; (3) milk or milk 
  1.15  products; or (4) fruit or other horticultural products.  It does 
  1.16  not include the processing, refining, or packaging of said 
  1.17  products, nor the provision of spraying or harvesting services 
  1.18  by a processor or distributor of farm products.  It does not 
  1.19  include the production of timber or forest products or the 
  1.20  production of poultry or poultry products. 
  1.21     (b) "Family farm" means an unincorporated farming unit 
  1.22  owned by one or more persons residing on the farm or actively 
  1.23  engaging in farming. 
  1.24     (c) "Family farm corporation" means a corporation founded 
  1.25  for the purpose of farming and the ownership of agricultural 
  1.26  land in which the majority of the voting stock is held by and 
  2.1   the majority of the stockholders are persons or the spouses of 
  2.2   persons related to each other within the third degree of kindred 
  2.3   according to the rules of the civil law, and at least one of 
  2.4   said related persons is residing on or actively operating the 
  2.5   farm, and none of whose stockholders are corporations; provided 
  2.6   that a family farm corporation shall not cease to qualify as 
  2.7   such hereunder by reason of any devise or bequest of shares of 
  2.8   voting stock. 
  2.9      (d) "Authorized farm corporation" means a corporation 
  2.10  meeting the following standards under clause (1) or (2): 
  2.11     (1)(i) its shareholders do not exceed five in number; 
  2.12     (ii) all its shareholders, other than any estate are 
  2.13  natural persons; 
  2.14     (iii) it does not have more than one class of shares; and 
  2.15     (iv) its revenues from rent, royalties, dividends, interest 
  2.16  and annuities does not exceed 20 percent of its gross receipts; 
  2.17  and 
  2.18     (v) shareholders holding 51 percent or more of the interest 
  2.19  in the corporation must be residing on the farm or actively 
  2.20  engaging in farming; 
  2.21     (vi) the authorized farm corporation, directly or 
  2.22  indirectly, owns or otherwise has an interest, whether legal, 
  2.23  beneficial, or otherwise, in any title to no more than 1,500 
  2.24  acres of real estate used for farming or capable of being used 
  2.25  for farming in this state; and 
  2.26     (vii) a shareholder of the authorized farm corporation is 
  2.27  not a shareholder in other authorized farm corporations that 
  2.28  directly or indirectly in combination with the authorized farm 
  2.29  corporation own not more than 1,500 acres of real estate used 
  2.30  for farming or capable of being used for farming in this state; 
  2.31  or 
  2.32     (2)(i) the corporation is engaged in the production of 
  2.33  livestock other than including dairy cattle and dairying; and 
  2.34  not engaged in farming activities otherwise prohibited under 
  2.35  this section; 
  2.36     (ii) all its shareholders other than an estate, are natural 
  3.1   persons or a family farm corporation, a family farm partnership, 
  3.2   an authorized farm partnership, or an authorized farm 
  3.3   corporation; 
  3.4      (iii) it does not have more than one class of shares; 
  3.5      (iv) its revenue from rent, royalties, dividends, interest 
  3.6   and annuities does not exceed 20 percent of its gross receipts; 
  3.7      (v) shareholders holding 75 percent or more of the control 
  3.8   and financial investment in the corporation must be farmers 
  3.9   residing in Minnesota and at least 51 percent of the required 
  3.10  percentage of farmers must be actively engaged in livestock 
  3.11  production; 
  3.12     (vi) the authorized farm corporation, directly or 
  3.13  indirectly, owns or otherwise has an interest, whether legal, 
  3.14  beneficial, or otherwise, in any title to no more than 1,500 
  3.15  acres of real estate used for farming or capable of being used 
  3.16  for farming in this state; 
  3.17     (vii) a shareholder of the authorized farm corporation is 
  3.18  not a shareholder in other authorized farm corporations formed 
  3.19  for the production of livestock that directly or indirectly in 
  3.20  combination with the authorized farm corporation own not more 
  3.21  than 1,500 acres of real estate used for farming or capable of 
  3.22  being used for farming in this state; and 
  3.23     (viii) the corporation was formed for the production of 
  3.24  livestock other than, including dairy cattle, or dairying by 
  3.25  natural persons or, family farm corporations, family farm 
  3.26  partnerships, authorized farm partnerships, or authorized farm 
  3.27  corporations that provide 75 percent or more of the capital 
  3.28  investment. 
  3.29     (e) "Agricultural land" means land used for farming. 
  3.30     (f) "Pension or investment fund" means a pension or 
  3.31  employee welfare benefit fund, however organized, a mutual fund, 
  3.32  a life insurance company separate account, a common trust of a 
  3.33  bank or other trustee established for the investment and 
  3.34  reinvestment of money contributed to it, a real estate 
  3.35  investment trust, or an investment company as defined in United 
  3.36  States Code, title 15, section 80a-3.  "Pension or investment 
  4.1   fund" does not include a benevolent trust established by the 
  4.2   owners of a family farm, authorized farm corporation or family 
  4.3   farm corporation.  
  4.4      (g) "Farm homestead" means a house including adjoining 
  4.5   buildings that has been used as part of a farming operation or 
  4.6   is part of the agricultural land used for a farming operation. 
  4.7      (h) "Family farm partnership" means a limited partnership 
  4.8   formed for the purpose of farming and the ownership of 
  4.9   agricultural land in which the majority of the interests in the 
  4.10  partnership is held by and the majority of the partners are 
  4.11  persons or the spouses of persons related to each other within 
  4.12  the third degree of kindred according to the rules of the civil 
  4.13  law, and at least one of the related persons is residing on or 
  4.14  actively operating the farm, and none of the partners are 
  4.15  corporations.  A family farm partnership does not cease to 
  4.16  qualify as a family farm partnership because of a devise or 
  4.17  bequest of interest in the partnership.  
  4.18     (i) "Authorized farm partnership" means a limited 
  4.19  partnership meeting the following standards:  
  4.20     (1) it has been issued a certificate from the secretary of 
  4.21  state or is registered with the county recorder and farming and 
  4.22  ownership of agricultural land is stated as a purpose or 
  4.23  character of the business; 
  4.24     (2) its partners do not exceed five in number; 
  4.25     (3) all its partners, other than an estate, are natural 
  4.26  persons; 
  4.27     (4) its revenues from rent, royalties, dividends, interest, 
  4.28  and annuities do not exceed 20 percent of its gross receipts; 
  4.29     (5) its general partners hold at least 51 percent of the 
  4.30  interest in the land assets of the partnership and reside on the 
  4.31  farm or are actively engaging in farming not more than 1,500 
  4.32  acres as a general partner in an authorized limited partnership; 
  4.33     (6) its limited partners do not participate in the business 
  4.34  of the limited partnership including operating, managing, or 
  4.35  directing management of farming operations; 
  4.36     (7) the authorized farm partnership, directly or 
  5.1   indirectly, does not own or otherwise have an interest, whether 
  5.2   legal, beneficial, or otherwise, in a title to more than 1,500 
  5.3   acres of real estate used for farming or capable of being used 
  5.4   for farming in this state; and 
  5.5      (8) a limited partner of the authorized farm partnership is 
  5.6   not a limited partner in other authorized farm partnerships that 
  5.7   directly or indirectly in combination with the authorized farm 
  5.8   partnership own not more than 1,500 acres of real estate used 
  5.9   for farming or capable of being used for farming in this state.  
  5.10     (j) "Farmer" means a person who regularly participates in 
  5.11  physical labor or operations management in the farmer's of a 
  5.12  farming operation and files "Schedule F" as part of the person's 
  5.13  annual Form 1040 filing with the United States Internal Revenue 
  5.14  Service. 
  5.15     (k) "Actively engaged in livestock production" means that a 
  5.16  person performs day-to-day physical labor or day-to-day 
  5.17  operations management that significantly contributes to 
  5.18  livestock production and the functioning of a livestock 
  5.19  operation shares in the risk of production, or a family farm 
  5.20  corporation, family farm partnership, authorized farm 
  5.21  partnership, or authorized farm corporation that manages a 
  5.22  farming operation and shares in the risk of production. 
  5.23     Sec. 2.  Minnesota Statutes 1994, section 500.24, 
  5.24  subdivision 3, is amended to read: 
  5.25     Subd. 3.  [FARMING AND OWNERSHIP OF AGRICULTURAL LAND BY 
  5.26  CORPORATIONS RESTRICTED.] No corporation, limited liability 
  5.27  company, pension or investment fund, or limited partnership 
  5.28  shall engage in farming; nor shall any corporation, limited 
  5.29  liability company, pension or investment fund, or limited 
  5.30  partnership, directly or indirectly, own, acquire, or otherwise 
  5.31  obtain an interest, whether legal, beneficial or otherwise, in 
  5.32  any title to real estate used for farming or capable of being 
  5.33  used for farming in this state.  Livestock that are delivered 
  5.34  for slaughter or processing may be fed and cared for by a 
  5.35  corporation up to 20 days prior to slaughter or processing.  
  5.36  Provided, however, that the restrictions in this subdivision do 
  6.1   not apply to corporations or partnerships in clause (b) and do 
  6.2   not apply to corporations, limited partnerships, and pension or 
  6.3   investment funds that record its name and the particular 
  6.4   exception under clauses (a) to (s) under which the agricultural 
  6.5   land is owned or farmed, have a conservation plan prepared for 
  6.6   the agricultural land, report as required under subdivision 4, 
  6.7   and satisfy one of the following conditions under clauses (a) to 
  6.8   (s): 
  6.9      (a) a bona fide encumbrance taken for purposes of security; 
  6.10     (b) a family farm corporation, an authorized farm 
  6.11  corporation, a family farm partnership, or an authorized farm 
  6.12  partnership as defined in subdivision 2 or a general 
  6.13  partnership; 
  6.14     (c) agricultural land and land capable of being used for 
  6.15  farming owned by a corporation as of May 20, 1973, or a pension 
  6.16  or investment fund as of May 12, 1981, including the normal 
  6.17  expansion of such ownership at a rate not to exceed 20 percent 
  6.18  of the amount of land owned as of May 20, 1973, or, in the case 
  6.19  of a pension or investment fund, as of May 12, 1981, measured in 
  6.20  acres, in any five-year period, and including additional 
  6.21  ownership reasonably necessary to meet the requirements of 
  6.22  pollution control rules; 
  6.23     (d) agricultural land operated for research or experimental 
  6.24  purposes with the approval of the commissioner of agriculture, 
  6.25  provided that any commercial sales from the operation must be 
  6.26  incidental to the research or experimental objectives of the 
  6.27  corporation.  A corporation, limited partnership, or pension or 
  6.28  investment fund seeking to operate agricultural land for 
  6.29  research or experimental purposes must submit to the 
  6.30  commissioner a prospectus or proposal of the intended method of 
  6.31  operation, containing information required by the commissioner 
  6.32  including a copy of any operational contract with individual 
  6.33  participants, prior to initial approval of an operation.  A 
  6.34  corporation, limited partnership, or pension or investment fund 
  6.35  operating agricultural land for research or experimental 
  6.36  purposes prior to May 1, 1988, must comply with all requirements 
  7.1   of this clause except the requirement for initial approval of 
  7.2   the project; 
  7.3      (e) agricultural land operated by a corporation or limited 
  7.4   partnership for the purpose of raising breeding stock, including 
  7.5   embryos, for resale to farmers or operated for the purpose of 
  7.6   growing seed, wild rice, nursery plants or sod.  An entity that 
  7.7   is organized to raise livestock other than dairy cattle under 
  7.8   this clause that does not meet the definition requirement for an 
  7.9   authorized farm corporation must: 
  7.10     (1) sell or contract all castrated animals to be fed out or 
  7.11  finished to farming operations that are neither directly nor 
  7.12  indirectly owned by the business entity operating the breeding 
  7.13  stock operation; and 
  7.14     (2) report its total production and sales annually to the 
  7.15  commissioner of agriculture; 
  7.16     (f) agricultural land and land capable of being used for 
  7.17  farming leased by a corporation or limited partnership in an 
  7.18  amount, measured in acres, not to exceed the acreage under lease 
  7.19  to such corporation as of May 20, 1973, or to the limited 
  7.20  partnership as of May 1, 1988, and the additional acreage 
  7.21  required for normal expansion at a rate not to exceed 20 percent 
  7.22  of the amount of land leased as of May 20, 1973, for a 
  7.23  corporation or May 1, 1988, for a limited partnership in any 
  7.24  five-year period, and the additional acreage reasonably 
  7.25  necessary to meet the requirements of pollution control rules; 
  7.26     (g) agricultural land when acquired as a gift (either by 
  7.27  grant or a devise) by an educational, religious, or charitable 
  7.28  nonprofit corporation or by a pension or investment fund or 
  7.29  limited partnership; provided that all lands so acquired by a 
  7.30  pension or investment fund, and all lands so acquired by a 
  7.31  corporation or limited partnership which are not operated for 
  7.32  research or experimental purposes, or are not operated for the 
  7.33  purpose of raising breeding stock for resale to farmers or 
  7.34  operated for the purpose of growing seed, wild rice, nursery 
  7.35  plants or sod must be disposed of within ten years after 
  7.36  acquiring title thereto; 
  8.1      (h) agricultural land acquired by a pension or investment 
  8.2   fund or a corporation other than a family farm corporation or 
  8.3   authorized farm corporation, as defined in subdivision 2, or a 
  8.4   limited partnership other than a family farm partnership or 
  8.5   authorized farm partnership as defined in subdivision 2, for 
  8.6   which the corporation or limited partnership has documented 
  8.7   plans to use and subsequently uses the land within six years 
  8.8   from the date of purchase for a specific nonfarming purpose, or 
  8.9   if the land is zoned nonagricultural, or if the land is located 
  8.10  within an incorporated area.  A pension or investment fund or a 
  8.11  corporation or limited partnership may hold such agricultural 
  8.12  land in such acreage as may be necessary to its nonfarm business 
  8.13  operation; provided, however, that pending the development of 
  8.14  agricultural land for nonfarm purposes, such land may not be 
  8.15  used for farming except under lease to a family farm unit, a 
  8.16  family farm corporation, an authorized farm corporation, a 
  8.17  family farm partnership, or an authorized farm partnership, or 
  8.18  except when controlled through ownership, options, leaseholds, 
  8.19  or other agreements by a corporation which has entered into an 
  8.20  agreement with the United States of America pursuant to the New 
  8.21  Community Act of 1968 (Title IV of the Housing and Urban 
  8.22  Development Act of 1968, United States Code, title 42, sections 
  8.23  3901 to 3914) as amended, or a subsidiary or assign of such a 
  8.24  corporation; 
  8.25     (i) agricultural lands acquired by a pension or investment 
  8.26  fund or a corporation or limited partnership by process of law 
  8.27  in the collection of debts, or by any procedure for the 
  8.28  enforcement of a lien or claim thereon, whether created by 
  8.29  mortgage or otherwise; provided, however, that all lands so 
  8.30  acquired be disposed of within ten years after acquiring the 
  8.31  title if acquired before May 1, 1988, and five years after 
  8.32  acquiring the title if acquired on or after May 1, 1988, 
  8.33  acquiring the title thereto, and further provided that the land 
  8.34  so acquired shall not be used for farming during the ten-year or 
  8.35  five-year period except under a lease to a family farm unit, a 
  8.36  family farm corporation, an authorized farm corporation, a 
  9.1   family farm partnership, or an authorized farm partnership.  The 
  9.2   aforementioned ten-year or five-year limitation period shall be 
  9.3   deemed a covenant running with the title to the land against any 
  9.4   grantee, assignee, or successor of the pension or investment 
  9.5   fund, corporation, or limited partnership.  Notwithstanding the 
  9.6   five-year divestiture requirement under this clause, a financial 
  9.7   institution may continue to own the agricultural land if the 
  9.8   agricultural land is leased to the immediately preceding former 
  9.9   owner, but must divest of the agricultural land within the 
  9.10  ten-year period.  Livestock acquired by a pension or investment 
  9.11  fund, corporation, or limited partnership in the collection of 
  9.12  debts, or by a procedure for the enforcement of lien or claim on 
  9.13  the livestock whether created by security agreement or otherwise 
  9.14  after August 1, 1994, must be sold or disposed of within one 
  9.15  full production cycle for the type of livestock acquired or 18 
  9.16  months after the livestock is acquired, whichever is later; 
  9.17     (j) agricultural land acquired by a corporation regulated 
  9.18  under the provisions of Minnesota Statutes 1974, chapter 216B, 
  9.19  for purposes described in that chapter or by an electric 
  9.20  generation or transmission cooperative for use in its business, 
  9.21  provided, however, that such land may not be used for farming 
  9.22  except under lease to a family farm unit, a family farm 
  9.23  corporation, or a family farm partnership; 
  9.24     (k) agricultural land, either leased or owned, totaling no 
  9.25  more than 2,700 acres, acquired after May 20, 1973, for the 
  9.26  purpose of replacing or expanding asparagus growing operations, 
  9.27  provided that such corporation had established 2,000 acres of 
  9.28  asparagus production; 
  9.29     (l) all agricultural land or land capable of being used for 
  9.30  farming which was owned or leased by an authorized farm 
  9.31  corporation as defined in Minnesota Statutes 1974, section 
  9.32  500.24, subdivision 1, clause (d), but which does not qualify as 
  9.33  an authorized farm corporation as defined in subdivision 2, 
  9.34  clause (d); 
  9.35     (m) a corporation formed primarily for religious purposes 
  9.36  whose sole income is derived from agriculture; 
 10.1      (n) agricultural land owned or leased by a corporation 
 10.2   prior to August 1, 1975, which was exempted from the restriction 
 10.3   of this subdivision under the provisions of Laws 1973, chapter 
 10.4   427, including normal expansion of such ownership or leasehold 
 10.5   interest to be exercised at a rate not to exceed 20 percent of 
 10.6   the amount of land owned or leased on August 1, 1975, in any 
 10.7   five-year period and the additional ownership reasonably 
 10.8   necessary to meet requirements of pollution control rules; 
 10.9      (o) agricultural land owned or leased by a corporation 
 10.10  prior to August 1, 1978, including normal expansion of such 
 10.11  ownership or leasehold interest, to be exercised at a rate not 
 10.12  to exceed 20 percent of the amount of land owned or leased on 
 10.13  August 1, 1978, and the additional ownership reasonably 
 10.14  necessary to meet requirements of pollution control rules, 
 10.15  provided that nothing herein shall reduce any exemption 
 10.16  contained under the provisions of Laws 1975, chapter 324, 
 10.17  section 1, subdivision 2; 
 10.18     (p) an interest in the title to agricultural land acquired 
 10.19  by a pension fund or family trust established by the owners of a 
 10.20  family farm, authorized farm corporation or family farm 
 10.21  corporation, but limited to the farm on which one or more of 
 10.22  those owners or shareholders have resided or have been actively 
 10.23  engaged in farming as required by subdivision 2, clause (b), 
 10.24  (c), or (d); 
 10.25     (q) agricultural land owned by a nursing home located in a 
 10.26  city with a population, according to the state demographer's 
 10.27  1985 estimate, between 900 and 1,000, in a county with a 
 10.28  population, according to the state demographer's 1985 estimate, 
 10.29  between 18,000 and 19,000, if the land was given to the nursing 
 10.30  home as a gift with the expectation that it would not be sold 
 10.31  during the donor's lifetime.  This exemption is available until 
 10.32  July 1, 1995; 
 10.33     (r) the acreage of agricultural land and land capable of 
 10.34  being used for farming owned and recorded by an authorized farm 
 10.35  corporation as defined in Minnesota Statutes 1986, section 
 10.36  500.24, subdivision 2, paragraph (d), or a limited partnership 
 11.1   as of May 1, 1988, including the normal expansion of the 
 11.2   ownership at a rate not to exceed 20 percent of the land owned 
 11.3   and recorded as of May 1, 1988, measured in acres, in any 
 11.4   five-year period, and including additional ownership reasonably 
 11.5   necessary to meet the requirements of pollution control rules; 
 11.6      (s) agricultural land owned or leased as a necessary part 
 11.7   of an aquatic farm as defined in section 17.47, subdivision 3. 
 11.8      Sec. 3.  Minnesota Statutes 1994, section 500.24, 
 11.9   subdivision 5, is amended to read: 
 11.10     Subd. 5.  [ENFORCEMENT.] With If the commissioner of 
 11.11  agriculture has reason to believe that a corporation, limited 
 11.12  partnership, or pension or investment fund is violating 
 11.13  subdivision 3, the commissioner shall inform the corporation, 
 11.14  limited partnership, pension, or investment fund of the alleged 
 11.15  violation and may request the attorney general shall to commence 
 11.16  an action in the district court in which any agricultural lands 
 11.17  relative to such violation are situated, or if situated in two 
 11.18  or more counties, in any county in which a substantial part of 
 11.19  the lands are situated.  The attorney general shall file for 
 11.20  record with the county recorder or the registrar of titles of 
 11.21  each county in which any portion of said lands are located a 
 11.22  notice of the pendency of the action as provided in section 
 11.23  557.02.  If the court finds that the lands in question are being 
 11.24  held in violation of subdivision 3, it shall enter an order so 
 11.25  declaring.  The attorney general shall file for record any such 
 11.26  order with the county recorder or the registrar of titles of 
 11.27  each county in which any portion of said lands are located.  
 11.28  Thereafter, the pension or investment fund, limited partnership, 
 11.29  or corporation owning such land shall have a period of five 
 11.30  years from the date of such order to divest itself of such 
 11.31  lands.  The aforementioned five-year limitation period shall be 
 11.32  deemed a covenant running with the title to the land against any 
 11.33  pension or investment fund, limited partnership, or corporate 
 11.34  grantee or assignee or the successor of such pension or 
 11.35  investment fund, limited partnership, or corporation.  Any lands 
 11.36  not so divested within the time prescribed shall be sold at 
 12.1   public sale in the manner prescribed by law for the foreclosure 
 12.2   of a mortgage by action.  In addition, any prospective or 
 12.3   threatened violation may be enjoined by an action brought by the 
 12.4   attorney general in the manner provided by law.