informational paper #13

homestead tax credit

legislative fiscal bureau state of wisconsin january 2021

Homestead Tax Credit

Prepared by

Dan Spika

Wisconsin Legislative Fiscal Bureau One East Main, Suite 301 Madison, WI 53703 http://legis.wisconsin.gov/lfb

1 Homestead Tax Credit

The homestead tax credit program directs property tax relief to low-income homeowners and renters. The program is often referred to as a "cir- cuit breaker" since it is intended to provide relief once property taxes exceed a taxpayer's ability to pay them. Relief is provided as a refundable credit, which reduces individual income tax liability or provides a cash refund if the credit exceeds in- come tax due. Credits are limited to Wisconsin residents 18 years of age or older. Unlike any other state individual income tax credit, homestead claimants can file for the credit without also filing an income tax return. For tax year 2019, home- stead credits of $62.2 million were extended for property taxes or rent accrued in 2019. These cred- its were provided to approximately 126,000 households.

This paper provides the following: (a) a de- scription of the formula used to determine the credit and eligibility requirements; (b) historical data regarding annual claims and program expend- itures; (c) information regarding characteristics of program participants; and (d) a discussion of the program's effectiveness as a means for providing property tax relief.

Homestead Tax Credit Formula

The amount of the credit received by claimants depends on the interaction of household income and allowable property taxes or rent under the three primary factors used in the homestead tax credit formula: (a) the income threshold; (b) the maximum income level; and (c) the maximum property taxes or rent constituting property taxes. Appendix 1 displays the historical development of the credit's parameters.

For claimants with incomes below the income threshold, the credit is equal to 80% of their prop- erty taxes, or rent constituting property taxes, up to the maximum in property taxes or rent. Rent constituting property taxes is 25% of rent if pay- ment for heat is not included in rent and 20% of rent if payment for heat is included.

The credit formula factors are as follows: (a) the maximum property taxes or rent constituting property taxes is $1,460; (b) the income threshold is $8,060; and (c) the maximum income level is $24,680. These factors produce a maximum credit of $1,168.

Credit calculations for claimants with house- hold income exceeding $8,060 require two steps. First, allowable property taxes are reduced by 8.785% of income exceeding $8,060. Second, the result is multiplied by 80%. The homestead credit formula may be expressed mathematically as:

For households with property taxes or rent equal to or exceeding the $1,460 maximum, the credit becomes zero when income reaches $24,680. For households with property taxes or rent less than $1,460, the credit will reach zero at a lower income level. Figure 1 provides examples of the computation of the homestead tax credit for two hypothetical households. Table 1 shows the homestead tax credit available to claimants at var- ious levels of income and property taxation.

Credit = [Property Taxes - 8.785% x (Household Income - $8,060)] x 80%

2

Figure 1: Homestead Tax Credit Computation Example A: For a claimant with household income less than the income threshold ($8,060). Calculation of homestead tax credit for a claimant with $6,000 of household income and property taxes of $1,460.

Homestead tax = Property taxes x 80%

credit = $1,460 x 80%

= $1,168*

Example B: For a claimant with household income greater than the income threshold ($8,060). Calculation of homestead tax credit for a claimant with $12,000 of household income and property taxes of $1,460.

Homestead tax = [Property taxes - 8.785% x (Income - $8,060)] x 80%

credit = [$1,460 - 8.785% x ($12,000 - $8,060)] x 80%

= [$1,460 - 8.785% x $3,940] x 80%

= [$1,460 - $346] x 80%

= $1,114 x 80%

= $891*

*The actual credit received may be slightly different because the credit is taken from a table supplied with the homestead tax credit form, rather than computed by formula for every income and property tax combination.

Table 1: Homestead Tax Credit (Based on Various Levels of Income and Taxes)

Household Homeowners' Property Taxes

Renters' Monthly Rent** Income $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500* $100 $200 $300 $400 $500*

$0 to 8,000 $640 $720 $800 $880 $960 $1,040 $1,120 $1,168 $240 $480 $720 $960 $1,168 9,000 574 654 734 814 894 974 1,054 1,102 174 414 654 894 1,102 10,000 504 584 664 744 824 904 984 1,032 104 344 584 824 1,032 11,000 433 513 593 673 753 833 913 961 33 273 513 753 961 12,000 363 443 523 603 683 763 843 891 0 203 443 683 891 13,000 293 373 453 533 613 693 773 821 0 133 373 613 821 14,000 223 303 383 463 543 623 703 751 0 63 303 543 751 15,000 152 232 312 392 472 552 632 680 0 0 232 472 680 16,000 82 162 242 322 402 482 562 610 0 0 162 402 610 17,000 12 92 172 252 332 412 492 540 0 0 92 332 540 18,000 0 21 101 181 261 341 421 469 0 0 21 261 469 19,000 0 0 31 111 191 271 351 399 0 0 0 191 399 20,000 0 0 0 41 121 201 281 329 0 0 0 121 329 21,000 0 0 0 0 51 131 211 259 0 0 0 51 259 22,000 0 0 0 0 0 60 140 188 0 0 0 0 188

23,000 0 0 0 0 0 0 70 118 0 0 0 0 118 24,000 0 0 0 0 0 0 0 48 0 0 0 0 48 Over 24,680 0 0 0 0 0 0 0 0 0 0 0 0 0

* Only the first $1,460 of property taxes or rent constituting property taxes is considered in determining the amount of the credit. **Assumes no heat included in rent; rent constituting property taxes equals 25% of gross rent for the year. Note: If the amount of credit determined by the formula is more than $0 and less than $10, the amount of the credit equals $10. The actual credit received may be slightly different than the amounts shown because the credit is read off of a table supplied with the homestead tax credit form, rather than computed by formula for every income and property tax combination.

3 Application Requirements

A claimant must meet each of the following el- igibility conditions to qualify for the homestead credit:

Age. The claimant must have been 18 years of age or older by December 31 of the year for which the claim is filed. For example, an applicant must have reached 18 years of age by December 31, 2020, in order to file a claim based on 2020 taxes.

Dependent Status. The claimant cannot have been claimed as a dependent for federal income tax purposes in the year to which the claim relates, except for persons 62 years of age or older.

Residency. The claimant must have been a le- gal resident of Wisconsin for all of the preceding year.

Nursing Home Residents. At the time of fil- ing the claim, the claimant may not be a nursing home resident participating in the medical assistance program.

Public Assistance Recipients. A credit cannot be received for any month that the claimant re- ceived $400 or more of cash benefits under a county relief program. Further, a credit cannot be received for any month that the claimant partici- pated in a community service job or transitional placement or received a grant as the custodial par- ent of an infant under the Wisconsin Works (W-2) program. A claimant can receive a prorated credit for each month not affected by these restrictions.

Other Credit Participants. The claimant can- not receive a homestead tax credit in a year in which a pre-2010 or a per-acre farmland preserva- tion tax credit is received. Also, no claimant for a homestead tax credit may claim a veterans or sur- viving spouses property tax credit in the same year for which a homestead tax credit is being claimed.

Tax-Exempt Housing Residents. The claim- ant cannot have lived the entire year in housing that is exempt from property taxes (unless the housing is owned and operated by a housing au- thority that makes payments in lieu of property taxes). Persons who live in tax-exempt housing and who still own their former home may claim a credit based on property taxes accrued on their for- mer home for up to one year if the claimant has attempted to sell the home, but has not rented or leased the home. A prorated credit can be received for the portion of the year that a claimant resided in housing subject to property taxation.

Earned Income. Beginning in tax year 2017, claimants with no earned income are not eligible for the credit, unless the claimant, or the claimant's spouse, is at least 62 years of age or disabled in the year for which the claim is filed. For the tax year of the claim, individuals claiming a disability must provide proof of their disability, which may in- clude a statement from the Veteran's Administra- tion certifying the claimant is receiving a disabil- ity benefit due to a 100% disability, documenta- tion from the Social Security Administration stat- ing the date the disability began, or a statement from a physician stating the beginning date of the disability and whether the disability is permanent or temporary.

Due Date for Filing Claims, Penalties, and Administration. Eligible households are required to file a claim for the homestead credit with the Department of Revenue (DOR). Claims are gener- ally due on the 15th of April four years after the 15th of April following the year to which the claim relates (for example, the deadline for filing a 2020 homestead credit form is April 15, 2025). Income tax provisions related to assessments, appeals, col- lection, and penalties for fraudulent or excessive claims apply to the homestead credit.

Since tax year 2013, individuals filing a fraud- ulent credit claim are prohibited from filing a claim for a homestead credit, or any refundable state income tax credit, for the next 10 tax years. Since tax year 2013, a total of 27 individuals have been prohibited from filing a homestead credit

4 claim for the next 10 tax years due to fraud. In 2019-20, DOR determined one homestead claim was fraudulent. Individuals filing a reckless credit claim are prohibited from filing a claim for a homestead credit, or any refundable state income tax credit, for the next two tax years. In 2019-20, DOR declared reckless 11 homestead claims total- ing $975.

Household Income and Property Taxes

Household Income. Household income in- cludes only the income of the claimant and his or her spouse. There is no test for total wealth or as- sets owned by claimants.

Household income is broadly defined to reflect most cash resources available to claimants, and in- cludes all income that is taxable for Wisconsin in- come tax purposes. It also includes the full amount of income sources that are only partially taxable by Wisconsin, such as unemployment compensa- tion and capital gains. Also, certain items that are excluded from taxation are included in the defini- tion of household income, such as social security benefits, excluded dividends and interest, contri- butions to IRAs, and child support. Appendix 2 lists all of the income sources included in house- hold income.

A downward adjustment is made to household income for family size. The adjustment equals $500 for each dependent who lives with the claim- ant for more than six months during the year (de- pendent adjustment). This provision helps target funds to families with dependents.

Property Taxes. In determining the homestead credit, eligible households can claim up to the $1,460 maximum allowable property taxes or rent constituting property taxes. This is the claimant's property tax levy, or rent, exclusive of special assessments, delinquent interest, and charges for services. Property taxes include any municipal permit fees assessed on mobile and manufactured homes. For farmers, the credit can be claimed on property taxes or rent constituting property taxes accrued on up to 120 acres of land contiguous to the claimant's principal residence.

For renters, rent constituting property taxes is equal to 25% of actual rent if payment for heat is not included in the rent payment and 20% of actual rent if payment for heat is included. Otherwise, rent may include the value of utilities if utility pay- ments are included in gross rent paid to the land- lord. Rent includes any rent paid to a landlord for the parking of a mobile or manufactured home and any municipal fee assessed on a rented mobile or manufactured home. A certificate filed by the landlord documents rent payments and adjusts gross rent to exclude nonoccupancy services.

Program Expenditure History

The annual cost of the homestead program grew from $2 million in 1964, when the program began, to $10 million in 1972. During this period, the credit was limited to elderly claimants. Since then, expenditure levels have changed in response to modifications to the formula factors, as well as to economic conditions and other influences, such as changes to state property tax relief programs. Without changes to the formula factors, the pro- gram's cost generally decreases over time because increases in household income cause fewer indi- viduals to be eligible for the credit and smaller credits for claimants who remain eligible.

The credit's first major change occurred for tax year 1973, for claims filed in 1974, when eligibility was expanded from individuals 62 years of age or older (60 if disabled) to individuals 18 years of age or older, and the program's cost sub- sequently increased to over $35 million. The credit's cost increased in ensuing years and ex- ceeded $100 million in 1984 in response to various changes to the formula factors. It remained at or above that level through 1994. Fewer formula

5 modifications, as well as several state property tax relief initiatives, caused program expenditures to decrease to $80 million in 1999. Credits increased to almost $100 million in 2000 when the maxi- mum income factor was increased from $20,290 to $24,500, and surpassed the $100 million level in the succeeding year.

Table 2 reports homestead credit expenditures, by tax year, since 2009. Since the tax year 2000 increase in the maximum income factor, the only formula change occurred in tax year 2010, when the income threshold, maximum income, and maximum property tax factors were indexed for inflation and the dependent adjustment was in- creased from $250 to $500. In response, the credit's cost increased from $121.1 million in tax year 2009 to $125.2 million for tax years 2010 and 2011. The indexing provision was in effect for only one year and was sunset in 2011. Without changes in the formula factors, the credit's cost has decreased since 2011.

A provision in 2017 Act 59 requires homestead credit claimants who are not disabled or at least 62 years of age to have earned income in order to qualify for the credit, effective for tax year 2017. Act 59 also stipulated that, beginning in tax year 2018, certain disqualified losses must be added back to household income when calculating the credit. These policy changes help explain the 11% annual decrease in the number of claimants and the greater than 12% annual decline in the total credit amount in tax years 2017 and 2018.

Table 3 shows homestead credit expenditures by fiscal year since 2009-10. Total expenditures in Table 2 differ from the amounts shown in Table 3 because Table 2 reports tax year information, using annual, aggregate statistics data, and Table 3 shows expenditures by fiscal year. The year-to- year expenditure changes in Table 3 are similar to those reported in Table 2. The credit amounts Table 3: Homestead Tax Credit Expenditures

Fiscal Amount

Year (Millions) % Change

2009-10 $129.2 3.7% 2010-11 133.9 3.6 2011-12 133.7 -0.1 2012-13 122.8 -8.2 2013-14 118.0 -3.9 2014-15 106.4 -9.8 2015-16 99.9 -6.1 2016-17 95.4 -4.5 2017-18 83.5 -12.5 2018-19 72.7 -12.9 2019-20 65.5 -9.9 Table 2: Homestead Tax Credit Participation and Formula Factors by Tax Year

Maximum Tax

% Amount % Average % Income Maximum Property

Year Count Change (Millions) Change Credit Change Threshold Income* Taxes

2009 235,094 5.7% $121.1 4.5% $515 -1.1% $8,000 $24,500 $1,450 2010 238,172 1.3 125.2 3.4 526 2.0 8,060 24,680 1,460 2011 234,996 -1.3 125.2 0.1 533 1.4 8,060 24,680 1,460 2012 222,356 -5.4 115.9 -7.5 521 -2.2 8,060 24,680 1,460 2013 212,343 -4.5 110.8 -4.4 522 0.2 8,060 24,680 1,460 2014 193,575 -8.8 99.9 -9.8 516 -1.1 8,060 24,680 1,460 2015 183,529 -5.2 93.9 -6.1 511 -0.9 8,060 24,680 1,460 2016 174,925 -4.7 89.3 -4.8 511 -0.2 8,060 24,680 1,460 2017 155,903 -10.9 78.0 -12.6 501 -2.0 8,060 24,680 1,460 2018 138,912 -10.9 68.3 -12.4 492 -1.8 8,060 24,680 1,460 2019 126,303 -9.1 62.2 -8.9 493 0.2 8,060 24,680 1,460 *Household income was reduced by $250 for each dependent in tax years 2008 and 2009 and by $500 for each dependent beginning in tax year 2010.

6 reported in Table 3 are higher because claims may be filed for the current tax year, as well as for the four previous tax years.

Characteristics of Program Participants

Tables 4 and 5 provide descriptive information about characteristics of homestead credit claim- ants, based on tax year 2019 aggregate statistics. Table 4 shows the distribution of homestead cred- its by household income. The majority of claim- ants were in the middle of the homestead income distribution (57.6% had household income be- tween $7,500 and $17,500). However, claimants within this group received lower average credits (a $593 average for the group) than those with lower income levels, illustrating the "circuit breaker" na- ture of the credit formula.

Table 5 shows the distribution of homestead credits by age for 2019. Claimants over age 65 represented 33.3% of total claimants and received 28.7% of total credits. Conversely, only 7.7% of all claimants were 25 years old or younger and these individuals received 7.6% of total credits.

In 2019, the amount of credits received by renters exceeded the amount received by home- owners. Renters totaled 79,890 claims (63.3%) and received a total of $38.8 million (62.3%) in credits. Homeowners totaled 46,413 claims (36.7%) and received a total of $23.4 million (37.7%) in credits.

Although not shown in the tables, social secu- rity and supplemental security income made up 51.5% of total household income for all home- stead credit claimants combined. Overall, nontax- able income (income not included in adjusted gross income) comprised 58.4% of total house- hold income. The remaining 41.6% of household income was taxed. Table 4: Distribution of Total Homestead Tax Credit Payments by Household Income (Tax Year 2019)

Cumulative

Cumulative Household Count of Percent of Percent of Total Percent of Percent of Average Income Claimants Claimants Claimants Credits Credits Credits Credit

Less than $2,500 2,543 2.0% 2.0% $2,084,904 3.3% 3.3% $820 2,500 - 4,999 3,169 2.5 4.5 2,623,044 4.2 7.5 828 5,000 - 7,499 4,937 3.9 8.4 4,065,032 6.5 14.0 823 7,500 - 9,999 11,780 9.3 17.7 8,960,568 14.4 28.4 761 10,000 - 12,499 24,796 19.6 37.3 15,654,274 25.2 53.6 631

12,500 - 14,999 18,376 14.6 51.9 10,313,684 16.6 70.2 561 15,000 - 17,499 17,796 14.1 66.0 8,234,630 13.2 83.4 463 17,500 - 19,999 16,788 13.3 79.3 5,887,990 9.5 92.9 351 20,000 - 22,499 15,950 12.6 91.9 3,551,256 5.7 98.6 223 22,500 - 24,680 10,168 8.1 100.0 849,880 1.4 100.0 84

Total 126,303 100.0%

$62,225,262 100.0%

$493 Table 5: Homestead Tax Credits by Age (Tax Year 2019)

Claimants

Credits Claimed

% of

% of Avg. Age Count Total Amount Total Credit Unknown 574 0.5% $260,430 0.4% $454 18 - 25 9,758 7.7 4,713,074 7.6 483 26 - 35 16,267 12.9 8,451,198 13.6 520 36 - 45 13,654 10.8 7,341,826 11.8 538 46 - 55 16,389 13.0 9,093,354 14.6 555 56 - 65 27,556 21.8 14,492,682 23.3 526 Over 65 42,105 33.3 17,872,698 28.7 424

Total 126,303 100.0% $62,225,262 100.0% $493

7 Formula Changes and Program Participation

Homestead participation and credit amounts can change over time in three major ways. First, rising income will cause some claimants to exceed the maximum income level of $24,680. Second, other claimants' income may rise above the in- come threshold of $8,060, resulting in diminished credits or no credits. Third, rising property taxes or rents may increase credits, until the tax bill or rent exceeds the $1,460 in maximum allowable property taxes or rent constituting property taxes.

The net impact on a claimant's credit depends on the interaction of changes in the claimant's in- come and property taxes. Over time, as overall in- come and property tax levels change, some poli- cymakers have suggested changes in the five for- mula factors:

Percent of Property Taxes Reimbursed. In- creasing this percentage (currently 80%) would in- crease credits for all claimants. This would not af- fect the distribution of benefits or the number of claimants.

Property Tax Limit. Increasing just the $1,460 limit would target the expansion to those claimants with property taxes, or rent constituting property taxes, that exceed the current limit. Claimants with relatively low property tax amounts would either be unaffected or experience a decrease in their homestead credits depending on changes to the other formula factors.

Reduction Rate for Excessive Income. If the 8.785% reduction percentage in the phase-out range for the credit is lowered and the maximum property tax and income threshold are left unchanged (this would also imply an increase in the maximum income level due to the interdependence of the formula factors), benefits to all claimants with incomes above the income threshold of $8,060 would increase. Also, there would be an increase in the number of eligible claimants.

Maximum Income Level. Increasing this level of $24,680 while holding the maximum property tax and income threshold constant (this would imply a lower reduction rate for excessive income) would also expand benefits to all claimants above the threshold factor and would increase the number of eligible claimants. Increasing the dependent adjustment (currently $500) would have these same effects for claimants with eligible dependents.

Income Threshold. Increasing the $8,060 in- come threshold along with the maximum income level, while holding the maximum property tax and reduction rate constant, would extend maxi- mum benefits (80% of eligible property taxes) to all claimants between the old and new thresholds. All claimants above the new threshold would also receive increased credits, and the number of eligi- ble claimants would increase.

Homestead as a Mechanism for Property Tax Relief

In 1964, Wisconsin pioneered the circuit breaker approach to property tax relief by estab- lishing the homestead tax credit to relieve low-in- come homeowners and renters aged 65 or older of excessive property taxes. The homestead tax credit program targets property tax relief to low-income households through the income-based formula. The program attempts to address the property tax "burden" on an individual household. For affected households, the homestead credit introduces an ability-to-pay factor into the property tax system. Property tax relief programs paid directly or indirectly to municipalities cannot achieve such income-based targeting.

In 1966, the Wisconsin Supreme Court ruled that the homestead program was a relief program, since it considered the individual's income and needs, was available to renters as well as

8 homeowners, and was not linked to the property tax administrative system. This finding was cen- tral to the Court's decision that the program did not violate uniformity requirements of the State Con- stitution (Harvey v. Morgan, 1966). This ruling has not been subsequently changed.

The homestead program grants relief solely to residential property owners and renters, unlike property tax relief programs paid directly or indirectly to municipalities. Credits paid to local governments benefit all property owners, but do not directly benefit renters. Renters may indirectly benefit from these credits (lower property taxes may result in smaller rent increases), but landlords are not required to pass along these savings.

Since homestead credits are paid directly to individuals and are not provided to all property owners, it is more difficult for local governments to increase spending to "capture" these credits. Taxpayers who receive these credits may offer less resistance to property tax increases, but spending increases would result in higher gross property tax levies and taxpayers not receiving homestead credits would pay higher net taxes.

The homestead program cannot address other objectives frequently cited in property tax relief discussions. For example, it cannot reduce overall municipal tax rates or levies, or equalize tax bases among municipalities. If funds are distributed through the homestead program rather than through credits to local governments, the net nonresidential property tax will increase, although this type of property may also need relief. Finally, since homestead credits are not automatically applied to tax bills but must be claimed on an individual basis, some individuals who are eligible for these credits may not receive relief.

9 APPENDIX 1

Historical Development of the Homestead Tax Credit Parameters

A. Tax Years 1964 through 1974 1964-1965 1966-1968 1969-1970 1971-1972 1973-1974

Maximum Credit $225 $225 $248 $400 $400 Phase-out Income Threshold N/A 500 500 1,000 3,500 Maximum Income 3,000 3,500 3,700 7,000 7,000 Maximum Allowable Property Taxes 300 300 330 500 500

B. Tax Years 1975 through 1983 1975-1976 1977-1978 1979-1980 1981-1982 1983

Maximum Credit $428 $640 $800 $800 $880 Phase-out Income Threshold 3,750 4,000 5,000 6,000 7,000 Maximum Income 7,500 9,300 14,000 14,000 15,500 Maximum Allowable Property Taxes 535 800 1,000 1,000 1,100

C. Tax Years 1984 through 1999 1984-1985 1986-1988 1989 1990-1998 1999

Maximum Credit $960 $960 $1,080 $1,160 $1,160 Phase-out Income Threshold 7,400 7,600 8,000 8,000 8,000 Maximum Income 16,500 16,500 18,000 19,154 20,290 Maximum Allowable Property Taxes 1,200 1,200 1,350 1,450 1,450

D. Tax Years 2000 through 2020 2000-2009 2010-2020

Maximum Credit $1,160 $1,168

Phase-out Income Threshold 8,000 8,060

Maximum Income 24,500 24,680

Maximum Allowable Property Taxes 1,450 1,460

10 APPENDIX 2

Sources of Income Included in "Household Income" Under the Homestead Tax Credit Program

Household income means Wisconsin adjusted gross income (AGI) plus the following amounts to the extent not included in Wisconsin AGI:

• Support money

• Cash public assistance (not including credits from this program) and cash benefits paid under county

relief programs

• Maintenance payments (except that foster care maintenance and supplementary foster care

payments are excludable)

• Gross amount of any pension or annuity

• Railroad retirement benefits

• Social security benefits

• Veterans disability pensions

• Nontaxable interest received from the federal government, or any of its instrumentalities

• Nontaxable interest received on state and municipal bonds

• Worker's compensation

• Unemployment insurance compensation

• Gross amount of "loss of time" insurance

• Compensation and other cash benefits received from the United States for past or present

services in the armed forces

• Scholarship, fellowship, or educational grants, gifts, or income

• Capital gains

• Gain on the sale of a personal residence that is excluded from taxable income

• Dividends

• Income of a nonresident or part-year resident who is married to a full-year resident

• Housing allowances provided to members of the clergy

• Amount by which a resident manager's rent is reduced

• Nontaxable income of an American Indian

• Nontaxable income from sources outside this state

• Nontaxable deferred compensation

• Intangible drilling costs

• Depletion allowances and depreciation

• Amortization

• Contributions to individual retirement accounts

• Contributions to Keogh plans

• Net operating loss carry-forwards and carry-backs

• Capital loss carry-forwards

• Disqualified losses, which include net capital, business, and farm losses, except farm losses where the

claimant's primary income is from farming and whose farming generates gross receipts of less than

$250,000 in the year of the claim