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Click here to read the bill.
Eligible applicants may receive between 25% and 75% of project costs as
state tax credits for up to $150,000 per agricultural operation. The amount of
tax credit available to a recipient is dependent on the type of BMP implemented.
Up to $10 million in credits may be issued in fiscal year 2007-2008.
PARTICIPATION
There are three ways for farmers to participate in the REAP program –
Self, Sell or Sponsor
- Implement eligible BMPs and receive tax credits directly to reduce a state
tax bill. (Self)
- Sell tax credits to another Pennsylvania taxpayer. (Sell)
- Work with a sponsor that will help finance a farmer’s BMPs. The farmer will
be compensated for making improvements and the sponsor will receive the tax
credit. (Sponsor)
GENERAL ELIGIBILITY
- Any farmer who is subject to taxation by the Commonwealth of Pennsylvania is
eligible to participate in REAP.
- Agricultural operations must have a current :
- conservation plan
- an agricultural erosion and sedimentation control plan (Ag E&S plan)
- a nutrient management plan, if required.
- The cost of developing and implementing these plans may be included to
qualify for the tax credit.
- An agricultural operation with an animal concentration area must have
implemented the Best Management Practices (BMPs) to abate storm water runoff,
loss of sediment and nutrients, and runoff of other pollutants from the animal
concentration area, or the implementation of these BMPs must be included in the
application for a tax credit.
- An agricultural operation with uncompleted BMPs required in an Ag E&S
plan and/or a nutrient management plan must first include the remaining BMPs
included in these plans in the application for a tax credit.
USING REAP TAX CREDITS
- Tax credits for 75% of eligible costs include the following:
- Nutrient Management Plan, Ag. E&S Plan and/or Conservation Plan
development
- BMPs for animal concentration areas and barnyard runoff, stream bank fencing
and 50 foot forested riparian buffers.
- Tax credits for 50% of eligible costs include:
- operation, design and equipment to reduce existing sediment and nutrient
concerns
- stream bank fencing and 35 foot riparian buffers.
- Eligible BMPs and equipment approved by the Commission for tax credits of
50% may include:
- manure storage systems
- alternative manure treatment practices
- filter strips, grassed waterways, management intensive grazing systems
- no-till planting equipment.
- Tax credits for 25% of eligible costs include remediation of legacy
sediments (after July 1, 2008).
- No tax credit will be provided for a publicly funded portion of a project.
- The tax credit is to be returned if the practice is not maintained for the
life span of the practice.
- Tax credits can only be awarded to projects completed after the effective
date of the Act, which is October 23, 2007.
ELIGIBLE PROJECT COSTS
The following are eligible costs of a project to which a tax credit may be
applied:
- Project design, engineering, and associated planning
- Project management costs, including constructing, document preparation and
applications
- Project construction and installation
- Equipment, materials and other eligible project components
- Post construction expenses
- Interest payments on loans for project implementation for up to one year
prior to the awarded of the tax credit.
- Any of the above services provided by a Conservation District
- A tax credit may not be applied to any portion of the project cost for which
public funding was received.
GETTING READY FOR REAP
The State Conservation Commission intends to have REAP program guidelines
available on December 1, 2007.
A project will be reviewed by the Commission and a determination on
eligibility made within 60 days of receipt of a complete application.
Applications will be reviewed on a first-come, first-served basis.
The first round of tax credits will be issued no later than June 30, 2008.
Tax credits will be granted by the Department of Revenue within 60 days
of receipt of notification of completion of the project by the Commission.
Some steps producers can take NOW are:
- Determine if you are eligible for the program. Is there a conservation
plan, ag erosion and sedimentation control plan, and a nutrient management plan
(if required) for the agriculture operation? Are the plans current?
- Before applications become available later this year, a farmer should visit
the County Conservation District, or Natural Resource and Conservation Service
(NRCS) office, or qualified technical service provider to evaluate the status of
these plans.
- The REAP law requires agricultural operations with animal concentration
areas (barnyards, feedlots, exercise areas, etc) to implement BMPs necessary to
abate runoff and loss of nutrients from these areas. It also requires
uncompleted BMPs as part of Ag E&S and nutrient management plans to be
addressed before any new BMPs or equipment may be considered for a tax credit.
Priority should be given to addressing these areas of concern first.
- Producers may wish to contact qualified farm planners, engineering firms, or
technical service providers, in addition to the County Conservation District or
NRCS staff, to discuss possible plans or projects.
SOME REMINDERS
- REAP differs from traditional conservation programs. It is a tax credit
where, unless the farmer works with a sponsoring business, the farmer must
finance all up-front costs. The tax credit is issued after the installation of
a practice, or purchase of eligible equipment. State or federal cost-share
portions of a project are ineligible for REAP tax credits.
- Some producers owe few, if any, state taxes. REAP tax credits can be used
for up to fifteen years, and are transferable and can be sold to other
taxpayers. Through REAP’s sponsorship program, another business could help
finance a project and apply for the tax credit instead of the producer. An
accountant or other financial professional can advise farmers on the benefits of
REAP for their operation.
- REAP tax credits may also be sold, and there are individuals and
corporations that wish to reduce their tax liability by purchasing tax credits.
Several brokers in Pennsylvania help arrange tax credit transfers.
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