Watch the quick introduction before you get started...

 

Here's what's included in the Kit...

• Key Definitions that are critical to understand to become eligible for certain tax credits and deductions.
• An overview of the Farm Workforce Retention Credit.
• An overview of the Farmer's School Property Tax Credit.
• A Resource Bundle (links and forms) of the primary NYS tax advantages available to farmers.
• A downloadable Tip Sheet on farm income and deduction to help you with your federal income tax return.

 

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KEY DEFINITIONS

Farm employer

A farm employer is a taxpayer subject to tax under Article 9-A or Article 22 that:

• is a corporation (including a New York S corporation), a sole proprietorship, a limited liability partnership (LLC), or a partnership

AND

• is also an eligible farmer.

 

Eligible farmer

An eligible farmer is a taxpayer whose federal gross income from farming for the tax year is at least two-thirds of excess federal gross income.

Excess federal gross income is the amount of federal gross income from all sources for the tax year in excess of $30,000. For purposes of the Farm Workforce Retention Credit, farmers must include payments from the state's Agricultural and Farmland Protection Program administered by the New York State Department of Agriculture and Markets in federal gross income from farming.

Farming includes the operation or management of livestock, dairy, poultry, fish, fruit, fur-bearing animal, and vegetable (often referred to as truck) farms. Farming also includes the operation or management of plantations, ranches, ranges and orchards.

For example, farming includes (but isn't necessarily limited to) the raising or production of the following commodities:

• field crops, including corn, wheat, oats, rye, barley, hay, potatoes and dry beans;
• fruits, including apples, peaches, grapes, cherries and berries;
• vegetables, whether raised conventionally or hydroponically, including tomatoes, snap beans, cabbage, carrots, beets and onions;
• horicultural specialties, including nursery stock, ornamental shrubs and ornamental trees and flowers;
• livestock and livestock products, including cattle, sheep, hogs, goats, horses, poultry, farmed deer, farmed buffalo, ostrich, emus, fur-bearing animals, milk and eggs;
• aquaculture products, including fish, fish products, water plants and shellfish (provided the aquaculture products are grown and raised as opposed to merely being harvested or caught); and
• honey and beeswax produced from the farmer's own bees.

 

Eligible farm employee

An eligible farm employee is an individual who is employed for 500 or more hours per tax year by a farm employer in New York State, but excluding general executive officers of the farm employer. Workers who are part of the H-2A Temporary Agricultural Worker Program that meet the definition of an eligible farm employee may be included in the computation of this credit.

 

In the case of illness or disability

If an individual employed by a farm employer in New York State becomes unable to work due to a documented illness or disability, the farmer may combine the hours the individual was employed during the tax year with the hours of another individual hired to replace the ill or disabled individual in the same tax year when determining the 500 hour per year threshold for an eligible farm employee. The ill or disabled worker and the worker hired to replace him or her are considered one eligible farm employee for purposes of computing the credit.

 

Proof of illness or disability

In order to receive the credit, the farm employer must obtain proof of illness or disability for the ill or disabled worker in the form of a written statement from a physician or other health care provider licensed, certified or otherwise permitted by law to diagnose or treat the physical or mental condition that led to the claimed illness or disability. The statement must include:

• the name and description of the farm employee's illness or disability;
• the physician's or health care provider's medical opinion that the illness or disability prevented the individual from working;
• to the best of the physician's or health care provider's knowledge, the specific time period during which the individual was unable to work due to their illness or disability; and
• the following certification signed by the physician or health care provider: "I hereby certify that, to the best of my knowledge and belief, the above representations are true, correct and complete."

 

Documentation

A farm employer must retain documentation of the hours worked (and proof of illness or disability, if applicable) for all eligible farm employees and to make it available to the New York State Department of Tax and Finance upon request.

 

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NEW: THE FARM WORKFORCE RETENTION CREDIT

 

 

Overview

The Farm Workforce Retention Credit is a New York State program enacted in 2016 that provides refundable tax credits for farm employers and owners of farm employers. Currently it's effective for any tax years beginning after January 1, 2017 and before January 1, 2022.

The amount of credit

The Farm Workforce Retention Credit is equal to a fixed dollar amount per eligible farm employee. The adopted legislation contains numerous provisions that will benefit farmers. In particular, the Farm Workforce Retention Credit establishes a new tax credit for farm employers based on the number of eligible employees employed by the farm operation. Beginning January 1, 2017, and updating annually through 2021 (for now), eligible farm employers will be entitled to claim a tax credit equal to the number of eligible farm employees employed by the farm operation multiplied by the applicable credit amount.

The credit amounts per eligible farm employee by tax year are shown in the chart below:

 

 

Credit limitation(s)

According to the New York State Department of Tax and Finance...

For Article 9-A taxpayers, the credit cannot reduce the tax due to less than the applicable fixed dollar minimum tax under Tax Law section 210(1)(d). However, if the credit allowed for any tax year reduces the tax to the minimum amount, any excess credit may be treated as an over payment of tax to be credited or refunded. However, no interest will be paid on the refund.

For Article 22 taxpayers, the credit may reduce the tax to zero. If the credit allowed exceeds the tax, the excess may be treated as an over payment of tax to be credited or refunded. However, no interest will be paid on the refund.

Why is this relevant?

The Farm Workforce Retention Credit establishes new provisions in the State Tax Law providing credits previously unavailable to farm employers. This new credit, along with other changes made by the legislation, is expected to provide farming operations significant tax savings over the next several years.

For example, a farm employer with 20 eligible farmers should see a tax credit amount of $5,000 for the tax year of 2017 (20 x $250) and $12,000 for the tax year of 2021 (20 x $600). 

How else might you be affected?

As a result of the this program, farm employers should review their work forces to ensure they are taking full advantage of the newly-available credit. Farm employers should also monitor advisories issued by the New York State government as they will provide additional clarification on the implementation of the legislation as it evolves.

What should you do next?

First, you should determine whether your operation is affected by developments resulting from the passage of the legislation.

Then, you should contact your Accountant for help applying for the credit. If you don't have an accountant, feel free to get in touch with us. While we can't apply for the tax credit on your behalf, we can help steer you in the right direction.

 

 

 

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THE FARMER'S SCHOOL PROPERTY TAX CREDIT

 

 

The Farmer's School Property Tax Credit enables farmers to receive a tax credit from the state personal income tax or the corporation franchise tax to reimburse farmers of some or all of the school district property taxes they pay.

Determining if you're eligible

According to the New York Farm Bureau, the following must be met in order to be eligible for the Farmer's School Property Tax Credit:

• An individual farmer or corporation must be defined as an eligible farmer.
• The individual or corporation must own qualified agricultural property.
• The individual or corporation must pay eligible school taxes during the year.
• The individual's or corporation's income must be below the income limitation amount.

Determining the amount of the deduction

The credit equals 100% of the school taxes paid on qualified agricultural property where the acreage does not exceed the base acreage amount, and 50% of the school taxes paid on acres exceeding the base acreage amount, which is 250 acres.

Farmers that participate in a federal environmental conservation program are allowed to exceed the 250 acres threshold. 

What is defined as qualified agricultural property?

Qualified agricultural property includes land and land improvements in New York State that are used in agricultural production. Structures and buildings that are located on the land and used or occupied to perform agricultural production are also included. Furthermore, land set aside in federal supply management programs or soil conservation programs are included.

Residential property does not qualify

Residential property is not qualified agricultural property. This includes your personal house, mobile home and any buildings associated with the owner's residence (like a garage or shed).

However, housing that's provided for essential farm employees (excluding the owner's) does meet the definition of qualified agricultural property and therefore qualifies for the credit.

What about woodland?

Woodland property that is used for agricultural production for the production of woodland products used in the farm operation is included as qualified agricultural property. Therefore, woodland used for pasture qualifies, as does woodland adjacent to the agricultural property because it typically provides wind protection or erosion control.

Rented land

Rented land for agricultural purposes does not qualify; only land that is owned qualifies for the credit.

If you own land that you rent to someone else, and that person uses the land for agricultural purposes, then those acres may be counted as party of your qualified agricultural property.

In the case of a land contract, the buyer will be treated as the owner of the property as long as they are obligated under the land contract to pay the school district property tax and deduct those taxes as a tax expense for federal income tax purposes.

What is the income limitation amount?

The income limitation reduces or eliminated the credit for higher income taxpayers. The limitation is based on modified adjusted gross income (for individuals) OR modified entire net income (for corporations). If your taxable income is between $100,000 and $150,000, your credit will be reduced by a percentage.

Applying for the credit...

Eligible farmers can claim the credit on their personal income tax return or the corporation franchise tax return when they file each year. 

For Corporations: Form IT-217, and its instructions, Form IT-217-I

All Others: Form CT-47, and it's instructions, Form CT-47-I 

 

 

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BUNDLE: NEW YORK STATE TAX ADVANTAGES FOR FARMERS AND AGRIBUSINESS

 

 

Agricultural Assessment Program

The State Legislature enacted the New York Agricultural Districts Law in 1971 to protect and promote the availability of land for farming purposes.  Subsequent amendments have broadened its scope.  The law provides a locally initiated mechanism for creating agricultural districts.  Forming agricultural districts is intended to counteract the impact that non farm development can have upon the continuation of farm businesses.

Farm Building Exemption

For newly constructed or reconstructed agricultural structures, New York's Real Property Tax Law allows a 10-year property tax exemption. Application for the exemption must be made within one year after the completion of such construction. The agricultural structures and buildings will be exempt from any increase in the property's assessed value resulting from the improvement.

Labor Tax Credits

Employers that do business in New York State can trim their labor costs through several workforce and economic development programs. Employment-based tax credits may save your business money by cutting federal or state tax liability.

NYS Federal Bonding Program

The NYS Federal Bonding Program is a unique tool to help a “high risk” job applicant get and keep a job. The program issues Fidelity Bonds, and is sponsored by the New York State Department of Labor. It serves as a business insurance policy that protects the employer in case of any loss of money or property due to employee dishonesty.

Employment Incentive Credit (EIC)

You're entitled to credit if you or your business have qualified for the investment tax credit, and have increased your average number of employees in New York State to at least 101% of your number of employees in New York State during your base year.

Exemptions for Farmers and Commercial Horse Boarding Operations

Farmers and commercial horse boarding operators can buy certain items and services without paying state and local sales or use taxes. This bulletin identifies what purchases are exempt from tax, identifies what purchases are eligible for a refund or credit of tax, and describes what exemption or other documents should be used to make these purchases or apply for refunds or credits.

Farm Workforce Retention Credit

Explained above. Beginning January 1, 2017, and updating annually through 2021 (for now), eligible farm employers will be entitled to claim a tax credit equal to the number of eligible farm employees employed by the farm operation multiplied by the applicable credit amount.

Farmer's School Property Tax Credit

Explained above. The Farmer's School Property Tax Credit enables farmers to receive a tax credit from the state personal income tax or the corporation franchise tax to reimburse farmers of some or all of the school district property taxes they pay.

Historic Barn Rehabilitation and Employment Incentive Credit

Form IT‑212 is used to claim an investment credit (including the employment incentive credit computed on Form IT-212-ATT, Claim for Historic Barn Rehabilitation Credit and Employment Incentive Credit) for qualified property used in manufacturing and production, retail enterprise, waste treatment, pollution control, research and development, or for qualified expenditures incurred in the rehabilitation of a historic barn (submit Form IT‑212‑ATT with Form IT‑212).

 

 

THE TIP SHEET

 

 

Sourced from the IRS, we created a Tip Sheet to help you with critical elements related to filing your federal income tax deduction to maximize your tax advantages as a farmer. 

 

 

 

HELPFUL LINKS AND RESOURCES

 

The New York State Agriculture and Farmland Protection Program

The Agricultural and Farmland Protection Program was formed under Article 25-AAA of the Agriculture and Markets law in an effort to encourage further development of agriculture and farmland as part of the NYS Legislature’s constitutional mandate to provide for the protection of agricultural lands.

The Farmer's Tax Guide: IRS Publication 225 (2019)

This publication explains how the federal tax laws apply to farming. Use this publication as a guide to figure your taxes and complete your farm tax return. If you need more information on a subject, get the specific IRS tax publication covering that subject.

 

 

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