The following is information changes to the Virginia Agriculture Tax Credit program from the Eastern Shore Soil and Water District.
Agricultural Best Management Practices (BMP) Tax Credits:
Producers may take a credit against state income tax for actual out-of-pocket expenses for agricultural BMPs. An enhanced rate is also available for producers implementing a Resource Management Plan (RMP):
- 50% tax credit up to $50,000 cap per individual for BMPs implemented on acreage included in a District approved RMP in implementation stage or beyond.
- 25% tax credit up to $25,000 cap per individual for BMPs implemented on acres not eligible for the enhanced RMP tax credit.
The total amount of tax credit may not exceed $75,000. If the amount of tax credit exceeds the taxpayer’s liability in a taxable year, the excess shall be refunded to the taxpayer by the Virginia Department of Taxation. Tax credits must meet practice criteria and must be approved by the District Board. Agricultural operators’ BMPs, if approved, will be inspected by the SWCD after installation.
By January 31st, for those approved for tax credits, the Eastern Shore SWCD will send VA Form ABM (partially filled), Tax Credit Certification Letter, Approved Conservation Plan Verification Letter (if applicable), RMP Verification Letter (if applicable), Nutrient Management Plan Verification Form to be filled in by Producer and NMP planner. The producer’s Statement/ Invoice/ Receipts must accompany the application and supporting documents. In order to claim the tax credit, taxpayers must submit the application with all supporting documentation to the Virginia Department of Taxation by April 1.
The 2021 VA General Assembly and Governor significantly increased tax credits in the Commonwealth for no-till and precision agricultural equipment as well as agricultural water quality best management practices.
The total credit granted to all taxpayers is limited to $2 million for each fiscal year so, if the total qualifying credits exceed this amount, each taxpayer’s credit will be prorated. Notification of the authorized credit amount must be received before the credit can be claimed on the taxpayer’s tax return.
Equipment Tax Credits:
There is also a tax credit to encourage farmers to use conservation equipment. Currently, an Equipment tax credit is available for the purchase of no-till or precision agriculture equipment. Equipment eligible for this tax credit may include:
• Sprayers for pesticides and liquid fertilizers
• Pneumatic fertilizer applicators
• Monitors and flow regulators
• Manure applicators
• Tramline adapters
• Starter fertilizer banding and in-furrow attachments for planters
• Variable-rate application equipment using spatial positioning systems
• A planter, drill, or other equipment, commonly known as a “no-till” planter or drill, used to
reduce soil compaction
• Other equipment used to reduce soil compaction, including guidance systems to control traffic patterns in order to minimize disturbance of the soil in planting crops. This includes planters and drills, which may be attached to equipment already owned by the taxpayer, and other equipment designed to reduce soil compaction.
Individuals may claim a state tax credit of 25% of all expenditures made for the purchase and installation of equipment not exceeding $17,500 per individual/entity and must meet state-established criteria. More details can be found here. The Equipment Tax Credit is retroactively available for the taxable year beginning January 1, 2021, through December 31, 2021.
The District will provide the VA Form AEC for the producer to fill in, Nutrient Management Plan Verification Form to be filled in by Producer and NMP planner, Approved Conservation Plan Verification Letter. Producer’s Statement/ Invoice/ Receipts must accompany the application and supporting documents. The application and all supporting documents must be sent to the VA Department of Taxation at least 90 days upon which the tax credit will be claimed is due.
Eastern Shore SWCD is not permitted to provide any tax advice. This article is being provided only to educate readers of the new tax credit changes in VA. The responsibility of completing the application falls on the producer/ tax pre-payer. For more information please watch https://www.youtube.com/watch?v=Uv5_XqYCNj0