Establishes business franchise and personal income tax credits for expenses of soil improvement projects on farmlands

Summary of provisions

Section 1 adds a new paragraph (r) to subdivision 9, section 208 of the tax law, and section 612 (b) of the tax law is amended to provide that any soil improvement credit must be deducted from the taxpayer's total net income, or total gross income, on their federal income tax return.

Section 2 through 4 amends the tax law to provide for the allowance of a soil improvement credit after January 1, 2012 of 25% of eligible expenditures, up to $50,000, to farmland entitled to an agricultural assessment under article twenty-five-AA of the agriculture and markets law during that taxable year.

Eligible expenditures include architectural, archeological, geological and engineering services, the cost of developing plans and specifications, consultation and legal services fees, and expenditures defined in section 175(c) (1) of the internal revenue code. Soil improvement projects are defined as the restoration of farmland for the production of agricultural perennial crops, including crops intended for energy production purposes, provided the land has not been used in agricultural production for at least two years prior to the initiation of soil improvement project. The credit would be refundable.

Review of existing law

Current law does not contain any tax credits specifically intended to encourage landowners to make soil improvements necessary to restore land for the production of agricultural perennial crops, including those intended for energy production purposes. In addition, current law does not contain any tax credits specifically intended to encourage landowners to make necessary farmland improvements. However, a taxpayer may be entitled to a deduction for some of those expenses, if the taxpayer is using the property for business purposes.

Justification

This proposal will provide a one-time State personal income tax credit, up to $50,000, for 25 percent of the capital costs for specified land improvements designed to restore farmland to active production of

perennial crops, including those intended for energy production, beginning in the 2012 tax year.

Much more extensive planting of perennial energy crops is necessary to balance the opportunity that will be presented by next-generation renewable energy production. New York State lands could be brought into production for such purposes without impinging on either the State's livestock industry or its food supply. In addition, investments in cellulosic ethanol and other advanced green energy technologies will go to other states if New York does not move to encourage feedstock production. Failure to bring idle open land back into production denies the potential for economic development while continuing to promote the land's use for warehouses, shopping centers, and low-density housing developments.

There are several million acres of open "farmland" in New York State that are owned by non-farmers or not actively farmed by farmer owners. Demographic trends suggest that the non-farmer owned area will continue to grow at the expense of owner-operated farms. Some of the land owned by non-farmers is currently rented to farmers, but an even larger share is found in the tens of thousands of parcels of "exfarmland" which lie virtually neglected from a land management perspective, gradually growing up to second-growth forest. An effective policy to deal with the loss of New York's agricultural base must include incentives to keep in or return to production, under sound long-term management practices, farmland that is not farmer-owned.

The State Constitution charges the people of New York State with encouraging the development and improvement of agricultural lands for the production of food and other agricultural products, as well as providing for the conservation of state soil and water resources. Agricultural production has become an increasingly competitive industry, which accounts for farms going out of business and land out of production. A limited amount of funds are available for long term agricultural land retention strategies such as purchase of development rights. At the same time, many farmers are seeking land to supplement their current land base. Due to competing interests for the land, depressed farm incomes, and costs of improving the land to an acceptable level of productivity, farmers are experiencing difficulty in acquiring additional lands for their operations. This legislation will provide tax incentives to maintain existing farmland and restore other land to agricultural biomass production. This, in turn, will help protect the long-term agricultural base, preserve the open space benefits, protect water quality and provide economic development opportunities to economically depressed regions of the state.

Legislative history

This is a new bill.

Fiscal implications

None to the State.

Effective date

Effective immediately.