Establishes business franchise and personal income tax credits for expenses of natural resources improvement projects on farmlands and forestlands

Summary of provisions

Section 1 adds a new paragraph (r) to subdivision 9, section 208 of the tax law, to provide that any natural resource 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 natural resource improvement credit after January 1, 2015 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 or forestland entitled to a forest assessment under section four hundred eighty-a of the real property tax 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, forestland improvements and expenditures defined in section 175(c)(1) of the internal revenue code. Natural resource improvement projects are defined as the restoration of farmland and forestland 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 such restoration or had a timber harvest within the past five years. The credit would be refundable.

Section 5 amends paragraph 4 of section 612 (b) of the tax law to provide that any natural resource improvement credit must be deducted from the taxpayer's total net income, or total gross income, on their federal income tax return.

Review of existing law

Current law does not contain any tax credits specifically intended to encourage landowners to make natural resource 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 and forestland 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 or forest-land to active Production of perennial crops, including those intended for energy production, beginning in the 2015 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 and forest 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 two million acres of open farm lands and more than seven million acres of eligible forestland in New York State. Some of the farmland 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 becoming 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 or has become forestland.

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 would potentially impact all available lands not currently in agricultural production and forest stands that are too young to produce a marketable crop. More forest owners will have an incentive to develop management plans and potentially invest in pre-commercial improvements to assure a future forest biomass crop, while providing a feedstock to the biomass industry that is beginning to grow in New York State. In addition, existing farmland can be maintained and other lands can be restored 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:

2013: S.4387-A REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS 2012: S.6598-B COMMITTED TO FINANCE; A.9425-B Committed to Ways and Means

Fiscal implications

Undetermined.

Effective date

Effective immediately.