Session of 1998
                   
SENATE BILL No. 594
         
By Senator Biggs
         
2-5
            9             AN ACT concerning agricultural corporations; relating to swine produc-
10             tion facilities; amending K.S.A. 1997 Supp. 17-5903 and 17-5904 and
11             repealing the existing sections.
12            
13       Be it enacted by the Legislature of the State of Kansas:
14           Section 1. K.S.A. 1997 Supp. 17-5903 is hereby amended to read as
15       follows: 17-5903. As used in this act:
16           (a) ``Corporation'' means a domestic or foreign corporation organized
17       for profit or nonprofit purposes.
18           (b) ``Nonprofit corporation'' means a corporation organized not for
19       profit and which qualifies under section 501(c)(3) of the federal internal
20       revenue code of 1986 as amended.
21           (c) ``Limited partnership'' has the meaning provided by K.S.A. 56-
22       1a01, and amendments thereto.
23           (d) ``Limited agricultural partnership'' means a limited partnership
24       founded for the purpose of farming and ownership of agricultural land in
25       which:
26           (1) The partners do not exceed 10 in number;
27           (2) the partners are all natural persons, persons acting in a fiduciary
28       capacity for the benefit of natural persons or nonprofit corporations, or
29       general partnerships other than corporate partnerships formed under the
30       laws of the state of Kansas; and
31           (3) at least one of the general partners is a   person residing on the
32       farm or resident of the county and actively engaged in the labor or man-
33       agement of the farming operation. If only one partner is meeting the
34       requirement of this provision and such partner dies, the requirement of
35       this provision does not apply for the period of time that the partner's
36       estate is being administered in any district court in Kansas.
37           (e) ``Corporate partnership'' means a partnership, as defined in
38       K.S.A. 56-306, and amendments thereto, which has within the association
39       one or more corporations or one or more limited liability companies.
40           (f) ``Feedlot'' means a lot, yard, corral, or other area in which live-
41       stock, except swine, fed for slaughter are confined. The term includes
42       within its meaning agricultural land in such acreage as is necessary for
43       the operation of the feedlot.

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  1           (g) ``Agricultural land'' means land suitable for use in farming.
  2           (h) ``Farming'' means the cultivation of land for the production of
  3       agricultural crops, the raising of poultry, the production of eggs, the pro-
  4       duction of milk, the production of fruit or other horticultural crops, graz-
  5       ing or the production of livestock. Farming does not include the produc-
  6       tion of timber, forest products, nursery products or sod, and farming does
  7       not include a contract to provide spraying, harvesting or other farm serv-
  8       ices.
  9           (i) ``Fiduciary capacity'' means an undertaking to act as executor, ad-
10       ministrator, guardian, conservator, trustee for a family trust, authorized
11       trust or testamentary trust or receiver or trustee in bankruptcy.
12           (j) ``Family farm corporation'' means a corporation:
13           (1) Founded for the purpose of farming and the ownership of agri-
14       cultural land in which the majority of the voting stock is held by and the
15       majority of the stockholders are persons related to each other, all of whom
16       have a common ancestor within the third degree of relationship, by blood
17       or by adoption, or the spouses or the stepchildren of any such persons,
18       or persons acting in a fiduciary capacity for persons so related;
19           (2) all of its stockholders are natural persons or persons acting in a
20       fiduciary capacity for the benefit of natural persons; and
21           (3) at least one of the stockholders with ownership of 10% or more
22       of the corporate stock is a   person residing on the farm or resident of the
23       county and actively engaged in the labor or management of the farming
24       operation.   A stockholder who is an officer of any corporation referred to
25       in this subsection and who is one of the related stockholders holding a
26       majority of the voting stock shall be deemed to be actively engaged in the
27       management of the farming corporation. If only one stockholder is meet-
28       ing the requirement of this provision and such stockholder dies, the re-
29       quirement of this provision does not apply for the period of time that the
30       stockholder's estate is being administered in any district court in Kansas.
31           (k) ``Authorized farm corporation'' means a Kansas corporation, other
32       than a family farm corporation, all of the incorporators of which are Kan-
33       sas residents, family farm corporations or family farm limited liability
34       agricultural companies or any combination thereof, and which is founded
35       for the purpose of farming and the ownership of agricultural land in
36       which:
37           (1) The stockholders do not exceed 15 in number; and
38           (2) the stockholders are all natural persons, family farm corporations,
39       family farm limited liability agricultural companies or persons acting in a
40       fiduciary capacity for the benefit of natural persons, family farm corpo-
41       rations, family farm limited liability agricultural companies or nonprofit
42       corporations; and
43           (3) if all of the stockholders are natural persons, at least one   §ock-

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  1       holder must be a person residing on the farm or of the stockholders with
  2       ownership of 10% or more of the corporate stock is a resident of the county
  3       and actively engaged in labor or management of the farming operation.
  4       If only one stockholder is meeting the requirement of this provision and
  5       such stockholder dies, the requirement of this provision does not apply
  6       for the period of time that the stockholder's estate is being administered
  7       in any district court in Kansas.
  8           (l) ``Trust'' means a fiduciary relationship with respect to property,
  9       subjecting the person by whom the property is held to equitable duties
10       to deal with the property for the benefit of another person, which arises
11       as a result of a manifestation of an intention to create it. A trust includes
12       a legal entity holding property as trustee, agent, escrow agent, attorney-
13       in-fact and in any similar capacity.
14           (m) ``Family trust'' means a trust in which:
15           (1) A majority of the equitable interest in the trust is held by and the
16       majority of the beneficiaries are persons related to each other, all of whom
17       have a common ancestor within the third degree of relationship, by blood
18       or by adoption, or the spouses or stepchildren of any such persons, or
19       persons acting in a fiduciary capacity for persons so related; and
20           (2) all the beneficiaries are natural persons, are persons acting in a
21       fiduciary capacity, other than as trustee for a trust, or are nonprofit cor-
22       porations.
23           (n) ``Authorized trust'' means a trust other than a family trust in
24       which:
25           (1) The beneficiaries do not exceed 15 in number;
26           (2) the beneficiaries are all natural persons, are persons acting in a
27       fiduciary capacity, other than as trustee for a trust, or are nonprofit cor-
28       porations; and
29           (3) the gross income thereof is not exempt from taxation under the
30       laws of either the United States or the state of Kansas.
31           For the purposes of this definition, if one of the beneficiaries dies, and
32       more than one person succeeds, by bequest, to the deceased beneficiary's
33       interest in the trust, all of such persons, collectively, shall be deemed to
34       be one beneficiary, and a husband and wife, and their estates, collectively,
35       shall be deemed to be one beneficiary.
36           (o) ``Testamentary trust'' means a trust created by devising or be-
37       queathing property in trust in a will as such terms are used in the Kansas
38       probate code.
39           (p) ``Poultry confinement facility'' means the structures and related
40       equipment used for housing, breeding, laying of eggs or feeding of poultry
41       in a restricted environment. The term includes within its meaning only
42       such agricultural land as is necessary for proper disposal of liquid and
43       solid wastes and for isolation of the facility to reasonably protect the con-

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  1       fined poultry from exposure to disease. As used in this subsection, ``poul-
  2       try'' means chickens, turkeys, ducks, geese or other fowl.
  3           (q) ``Rabbit confinement facility'' means the structures and related
  4       equipment used for housing, breeding, raising, feeding or processing of
  5       rabbits in a restricted environment. The term includes within its meaning
  6       only such agricultural land as is necessary for proper disposal of liquid
  7       and solid wastes and for isolation of the facility to reasonably protect the
  8       confined rabbits from exposure to disease.
  9           (r) ``Swine marketing pool'' means an association whose membership
10       includes three or more business entities or individuals formed for the sale
11       of hogs to buyers but shall not include any trust, corporation, limited
12       partnership or corporate partnership, or limited liability company other
13       than a family farm corporation, authorized farm corporation, limited lia-
14       bility agricultural company, limited agricultural partnership, family trust,
15       authorized trust or testamentary trust.
16           (s) ``Swine production facility'' means the land, structures and related
17       equipment owned or leased by a corporation   or, limited liability company,
18       limited partnership, corporate partnership or trust and used for housing,
19       breeding, farrowing   or, feeding or finishing of swine. The term includes
20       within its meaning only such agricultural land as is necessary for proper
21       disposal of liquid and solid wastes in environmentally sound amounts for
22       crop production and to avoid nitrate buildup and for isolation of the fa-
23       cility to reasonably protect the confined animals from exposure to disease.
24       The term also includes a lot, yard, corral or other area in which swine
25       fed for slaughter are confined.
26           (t) ``Limited liability company'' has the meaning provided by K.S.A.
27       17-7602, and amendments thereto.
28           (u) ``Limited liability agricultural company'' means a limited liability
29       company founded for the purpose of farming and ownership of agricul-
30       tural land in which:
31           (1) The members do not exceed 10 in number; and
32           (2) the members are all natural persons, family farm corporations,
33       family farm limited liability agriculture companies, persons acting in a
34       fiduciary capacity for the benefit of natural persons, family farm corpo-
35       rations, family farm limited liability agricultural companies or nonprofit
36       corporations, or general partnerships other than corporate partnerships
37       formed under the laws of the state of Kansas; and
38           (3) if all of the members are natural persons, at least one member
39       must be a   person residing on the farm or resident of the county and
40       actively engaged in labor or management of the farming operation. If only
41       one member is meeting the requirement of this provision and such mem-
42       ber dies, the requirement of this provision does not apply for the period
43       of time that the member's estate is being administered in any district

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  1       court in Kansas.
  2           (v) ``Dairy production facility'' means the land, structures and related
  3       equipment used for housing, breeding, raising, feeding or milking dairy
  4       cows. The term includes within its meaning only such agricultural land
  5       as is necessary for proper disposal of liquid and solid wastes and for iso-
  6       lation of the facility to reasonably protect the confined cows from expo-
  7       sure to disease.
  8           (w) ``Family farm limited liability agricultural company'' means a lim-
  9       ited liability company founded for the purpose of farming and ownership
10       of agricultural land in which:
11           (1) The majority of the members are persons related to each other,
12       all of whom have a common ancestor within the third degree of relation-
13       ship, by blood or by adoption, or the spouses or the stepchildren of any
14       such persons, or persons acting in a fiduciary capacity for persons so
15       related;
16           (2) the members are natural persons or persons acting in a fiduciary
17       capacity for the benefit of natural persons; and
18           (3) at least one of the members is a   person residing on the farm or
19       resident of the county and actively engaged in the labor or management
20       of the farming operation. If only one member is meeting the requirement
21       of this provision and such member dies, the requirement of this provision
22       does not apply for the period of time that the member's estate is being
23       administered in any district court in Kansas.
24           (x) ``Hydroponics'' means the growing of vegetables, flowers, herbs,
25       or plants used for medicinal purposes, in a growing medium other than
26       soil.
27           Sec. 2. K.S.A. 1997 Supp. 17-5904 is hereby amended to read as
28       follows: 17-5904. (a) No corporation, trust, limited liability company, lim-
29       ited partnership or corporate partnership, other than a family farm cor-
30       poration, authorized farm corporation, limited liability agricultural com-
31       pany, family farm limited liability agricultural company, limited
32       agricultural partnership, family trust, authorized trust or testamentary
33       trust shall, either directly or indirectly, own, acquire or otherwise obtain
34       or lease any agricultural land in this state. The restrictions provided in
35       this section do not apply to the following:
36           (1) A bona fide encumbrance taken for purposes of security.
37           (2) Agricultural land when acquired as a gift, either by grant or devise,
38       by a bona fide educational, religious or charitable nonprofit corporation.
39           (3) Agricultural land acquired by a corporation or a limited liability
40       company in such acreage as is necessary for the operation of a nonfarming
41       business. Such land may not be used for farming except under lease to
42       one or more natural persons, a family farm corporation, authorized farm
43       corporation, family trust, authorized trust or testamentary trust. The cor-

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  1       poration shall not engage, either directly or indirectly, in the farming
  2       operation and shall not receive any financial benefit, other than rent, from
  3       the farming operation.
  4           (4) Agricultural land acquired by a corporation or a limited liability
  5       company by process of law in the collection of debts, or pursuant to a
  6       contract for deed executed prior to the effective date of this act, or by
  7       any procedure for the enforcement of a lien or claim thereon, whether
  8       created by mortgage or otherwise, if such corporation divests itself of any
  9       such agricultural land within 10 years after such process of law, contract
10       or procedure, except that provisions of K.S.A. 9-1102, and amendments
11       thereto, shall apply to any bank which acquires agricultural land.
12           (5) A municipal corporation.
13           (6) Agricultural land which is acquired by a trust company or bank in
14       a fiduciary capacity or as a trustee for a nonprofit corporation.
15           (7) Agricultural land owned or leased or held under a lease purchase
16       agreement as described in K.S.A. 12-1741, and amendments thereto, by
17       a corporation, corporate partnership, limited corporate partnership or
18       trust on the effective date of this act if: (A) Any such entity owned or
19       leased such agricultural land prior to July 1, 1965, provided such entity
20       shall not own or lease any greater acreage of agricultural land than it
21       owned or leased prior to the effective date of this act unless it is in com-
22       pliance with the provisions of this act; (B) any such entity was in compli-
23       ance with the provisions of K.S.A. 17-5901 prior to its repeal by this act,
24       provided such entity shall not own or lease any greater acreage of agri-
25       cultural land than it owned or leased prior to the effective date of this act
26       unless it is in compliance with the provisions of this act, and absence of
27       evidence in the records of the county where such land is located of a
28       judicial determination that such entity violated the provisions of K.S.A.
29       17-5901 prior to its repeal shall constitute proof that the provisions of this
30       act do not apply to such agricultural land, and that such entity was in
31       compliance with the provisions of K.S.A. 17-5901 prior to its repeal; or
32       (C) any such entity was not in compliance with the provisions of K.S.A.
33       17-5901 prior to its repeal by this act, but is in compliance with the
34       provisions of this act by July 1, 1991.
35           (8) Agricultural land held or leased by a corporation or a limited li-
36       ability company for use as a feedlot, a poultry confinement facility or
37       rabbit confinement facility.
38           (9) Agricultural land held or leased by a corporation for the purpose
39       of the production of timber, forest products, nursery products or sod.
40           (10) Agricultural land used for bona fide educational research or sci-
41       entific or experimental farming.
42           (11) Agricultural land used for the commercial production and con-
43       ditioning of seed for sale or resale as seed or for the growing of alfalfa by

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  1       an alfalfa processing entity if such land is located within 30 miles of such
  2       entity's plant site.
  3           (12) Agricultural land owned or leased by a corporate partnership or
  4       limited corporate partnership in which the partners associated therein are
  5       either natural persons, family farm corporations, authorized farm corpo-
  6       rations, limited liability agricultural companies, family trusts, authorized
  7       trusts or testamentary trusts.
  8           (13) Any corporation, either domestic or foreign, or any limited lia-
  9       bility company, organized for coal mining purposes which engages in
10       farming on any tract of land owned by it which has been strip mined for
11       coal.
12           (14) Agricultural land owned or leased by a limited partnership prior
13       to the effective date of this act.
14           (15) Except as provided by K.S.A. 17-5908 and amendments thereto,
15       agricultural land held or leased by a corporation or a limited liability
16       company for use as a swine production facility in any county which has
17       voted favorably pursuant to K.S.A. 17-5908 and amendments thereto,
18       either by county resolution or by the electorate.
19           (16) Agricultural land held or leased by a corporation or a limited
20       liability company for use as a dairy production facility in any county which
21       has voted favorably pursuant to K.S.A. 17-5907 and amendments thereto,
22       either by county resolution or by the electorate.
23           (17) Agricultural land held or leased by a corporation or a limited
24       liability company used in a hydroponics setting.
25           (18) Agricultural land held or leased by a corporation or a limited
26       liability company prior to July 1, 1998, for use as a swine feedlot.
27           (b)  Production contracts entered into by a corporation, trust, limited
28       liability company, limited partnership or corporate partnership and a per-
29       son engaged in farming for the production of agricultural products shall
30       not be construed to mean the ownership, acquisition, obtainment or lease,
31       either directly or indirectly, of any agricultural land in this state.
32           (c) Any corporation, trust, limited liability company, limited partner-
33       ship or corporate partnership, other than a family farm corporation, au-
34       thorized farm corporation, limited liability agricultural company, family
35       farm limited liability agricultural company, limited agricultural partner-
36       ship, family trust, authorized trust or testamentary trust, violating the
37       provisions of this section shall be subject to a civil penalty of not more
38       than $50,000 and shall divest itself of any land acquired in violation of
39       this section within one year after judgment is entered in the action. The
40       district courts of this state may prevent and restrain violations of this
41       section through the issuance of an injunction. The attorney general or
42       district or county attorney shall institute suits on behalf of the state to
43       enforce the provisions of this section.

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  1           (d) Civil penalties sued for and recovered by the attorney general
  2       shall be paid into the state general fund. Civil penalties sued for and
  3       recovered by the county attorney or district attorney shall be paid into
  4       the general fund of the county where the proceedings were instigated.
  5           Sec. 3. K.S.A. 1997 Supp. 17-5903 and 17-5904 are hereby repealed.
  6           Sec. 4. This act shall take effect and be in force from and after its
  7       publication in the statute book.
  8