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Published August 08, 2011, 03:15 PM

Passing on farmland

KANSAS CITY, Mo. — Aging farmers are beginning to will land to community foundations that promise to rent it to local farmers and use the income for projects to improve the community, foundation executives said at a recent conference on rural philanthropy in Kansas City, Mo.

By: Jerry Hagstrom, Special to Agweek

KANSAS CITY, Mo. — Aging farmers are beginning to will land to community foundations that promise to rent it to local farmers and use the income for projects to improve the community, foundation executives said at a recent conference on rural philanthropy in Kansas City, Mo.

“Did you know that Southwest Initiative Foundation can accept gifts of farmland and retain the land as an asset so it can continue to be farmed while benefiting our region and communities?” asked a brochure handed out by Sherry Ristau, president of SWIF, which is located in Hutchinson, Minn., and serves 18 counties in the area “Through our Farmland Retention Program, we can provide a vehicle for giving that preserves one of the greatest natural assets of southwest Minnesota — farmland,” the brochure continued.

Farmers have left land to churches and other institutions for decades, but the receiving institutions usually sold the land at auction to the highest bidder and used the money for their activities. Those sales sometimes led to land moving into the hands of absentee owners. That concern is rising as land becomes more valuable and outside investors get more interested in buying farmland.

For the donor, the benefit of SWIF’s farmland retention program is that the ownership of the land “stays local in the hands of SWIF and is tended to by local hands,” Ristau said. The donor receives a tax deduction for the fair market value of the property and bypasses all capital gains taxes, she added.

The foundation rents out the land for a market-level cash rent, pays the property taxes, takes 5 percent as a management fee and uses the rest of the revenue for its programs, which include everything from local economic development to modernizing playgrounds with newer, safer equipment.

Ristau noted that the new program only has 350 acres of land so far, but is expanding rapidly. One family recently gave the foundation their farm land because they wanted the tenant who had been farming the land for the last 30 years to continue farming it.

“SWIF now owns the land and upholds the lease agreement with the current tenant,” Ristau said.

Staying home

The foundation also gives donors the option of restricting the funds to benefit their hometown rather than the wider area that SWIF serves. Ristau stressed, however, that the land is part of SWIF’s investment portfolio and that the foundation does negotiate market rents because it depends on the income to run its programs.

Farmers should be aware that once the donors give the land to the foundation it owns the land permanently and also retains the right to sell the land if the farmland retention project becomes unfeasible, Ristau noted. But she said she foresees the foundation holding the land in the long run because farmland “is a precious, precious, awesome asset.”

Bob Sutton, of the South Dakota Community Foundation, said his organization has just accepted a gift of 4,000 acres with an agreement that it will hold the land for at least 20 years. Family members, Sutton said, “were not excited about absentee landowners” getting hold of the land and wanted it rented to local farmers. The South Dakota Community Foundation, based in Pierre, S.D., will manage this gift as a model and may expand the program if it works smoothly, Sutton said. The land is rented on a cash basis.

The Galesburg Community Foundation in Illinois has some farmland in its portfolio that is rented on a crop share basis. Some farmers in Illinois prefer that land bequeath be rented on a crop share basis rather than rent, said Josh Gibb, a foundation official who attended the conference in Kansas City.

The Galesburg foundation has not been seeking additional land donations, but is considering expanding the program, he added. The Galesburg foundation uses the income to fund its education, physical activity, health care and arts access programs.

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