With the advent of the new year, the state is rolling out a new $10 million tax credit program for farmers across the state.Eligible farmers can get up to a $150,000 tax credit on approved projects, but it is on a first-come, first-served basis.
The program, Resource Enhancement and Protection Program, REAP, promotes the use of best management practices on farms that have a conservation plan or are planning to get a conservation plan.
While many farms may not generate enough income and consequently owe taxes for the tax credit to be valuable, the credits can be sold. A farmer can also get a sponsor who fills out the application with the farmer. If the project is approved, the sponsor provides the money for the project and gets the tax benefit.
Michael McCann, the owner of MVM Associates Inc., a tax credit broker in Ambler, said the majority of farmers will probably use the tax credit or a portion of the tax credit to offset their own taxes. The credit must be held for one year before it can be used. If a farmer has a tax credit of $50,000 and uses $10,000 to offset their taxes, they can sell the remaining $40,000.
McCann said his firm will guarantee 90 cents on the dollar for farmers selling tax credits.
His company is also in touch with sponsors who will underwrite projects with farmers. But he said, the payment is less than 90 cents on the dollar.
The broker said that since the State Conservation Commission released the details of the program in the beginning of December, he has gotten dozens of calls from farmers and from farm equipment dealers.
He predicted the REAP program would boost sales of no-till planters, which is one project covered under REAP. With no-till, the farmer plants crops directly into existing crop residue or cover crop without using tillage. Fields tilled by traditional means can lead to soil erosion and excessive sediment being deposited in waterways.
To be eligible for the program, a farmer must have a current conservation plan, an agricultural erosion and sedimentation control plan and a nutrient management plan if required. But the cost of developing and implementing these plans may be included to qualify for the tax credit.
More than half the farmers in Chester County have a conservation plan, said Chotty Sprenkle, a watershed coordinator with the Chester County Conservation District, in an interview Friday.
State law requires that farmers have conservation plans. While not all farmers have a formal conservation plan, farmers could be utilizing conservation techniques.
Farmers with conservation plans work with conservation district personnel to determine what best management practices should be implemented on their farm. Some of the practices are planting cover crops, contour farming, which is planting crops that follow the natural contours of the land, fencing streams from livestock, planting riparian or streamside buffers with shrubs and trees to minimize soil erosion. Projects that have already received public money are not eligible. For more information or to download an application, go to www.agriculture.state.pa.us/REAP.