February 24, 2011
Tax Credit Refund Will Provide Incentive for
Farm Clean-Water Practices
(RICHMOND, VA)—The Virginia General Assembly has passed a measure that will provide an important new incentive for farmers who voluntarily implement a variety of clean-water conservation practices critical to restoring Virginia streams, rivers, and the Chesapeake Bay.
Introduced by Senator Mary Margaret Whipple (D - 31st) and Delegate Lynwood Lewis, Jr. (D- 100th), the legislation establishes a refundable tax credit program for implementing farm best management practice (BMP) in Virginia. The legislation allows farmers that qualify for an existing credit based on out-of-pocket expenses for installing BMPs to receive a refund from the state if the tax credit exceeds their taxable income. Only certain BMPs qualify, and farmers are limited to an amount equaling 25 percent of their costs, not to exceed $17,500 in any one year.
Virginia's plan for restoring the Chesapeake Bay calls for widespread adoption of agricultural BMPs—fencing livestock out of streams or planting winter cover crops and stream-bank buffers to keep soil, fertilizer, and manure on farm fields and out of streams and rivers. While there are state and federal programs that help farmers with the cost of implementing such practices, farmers must also contribute their own funds.
Over the past five years, approximately 900 farmers per year have qualified for tax credits under Virginia's existing BMP tax credit program. Qualifying projects have excluded cattle from nearly 1,000 miles of Virginia's streams since 2006.
Currently, however, only farmers who have taxable income can benefit. There are many reasons why a farmer might not have taxable income to report, and therefore be unable to use a tax credit—fluctuating prices for farm commodities, crop failures due to unforeseen circumstances (such as droughts), and expenses related to equipment and infrastructure that offset income. Allowing farmers to receive a refund for tax credits earned for installing BMPs would allow farmers to realize the benefit of the existing program, whether or not their farm earns a profit that year.
"Financial assistance for farmers to install conservation practices is an important component of meeting Virginia's water quality goals," said Ann F. Jennings, Chesapeake Bay Foundation (CBF) Virginia Executive Director. "The efforts of Senator Whipple and Delegate Lewis to establish a refundable tax credit program will help to accelerate the adoption of BMPs that are critical to restoring our streams, rivers, and the Chesapeake Bay."
The legislation was strongly supported by CBF, as well as the Virginia Farm Bureau and the Virginia Agribusiness Council.