Updated: Jan 6
The 2021 Virginia General Assembly and Governor significantly increased tax credits for agricultural best management practices (BMPs) and related equipment in the Commonwealth. The new tax law came into effect on July 1, 2021 and is retroactive back to January 1, 2021 to include all qualified BMPs and eligible equipment purchases completed this calendar year.
The agricultural BMP tax credit has been split into a two-tiered system for the first time. The standard credit for participants with an approved soil Conservation Plan at their local Soil and Water Conservation District can be taken on 25% of the out-of-pocket costs for installing qualifying agricultural BMPs as outlined in the Virginia Agricultural BMP Cost-Share Program (VACS) Manual found here: https://consapps.dcr.virginia.gov/htdocs/agbmpman/agbmptoc.htm. The cap for this credit has been raised from $17,500 to $25,000 per taxpayer. Additionally, for those taxpayers with an approved Resource Management Plan (RMP), they can claim an additional 50% tax credit on out-of-pocket costs up to $50,000 for agricultural BMPs implemented on RMP acreage. This means that some Virginia producers may be eligible for up to $75,000 in agricultural BMP tax credits!
The agricultural equipment tax credit meanwhile provides a 25% tax credit on out-of-pocket expenses, up to $17,500 per taxpayer, for eligible no-till or precision agricultural equipment as defined in the VACS Manual. It is important to note that in order to claim the credit, producers must have an approved soil Conservation Plan at their local Soil and Water Conservation District and must be implementing a Nutrient Management Plan.
While all of these changes provide fantastic opportunities for producers, it is important to note that the Virginia Department of Taxation (TAX) also has created new application forms for both credits and will require a suite of supporting documentation for each. Due to a statewide cap on agricultural BMP tax credits of $2 Million, TAX has established a firm deadline of April 1 for accepting applications. If more than $2 Million in eligible applications are received, tax credits will be prorated. Applications for the agricultural equipment credits on the other hand do not have a set calendar deadline, but must be turned in at least 90 days before the return upon which the tax credit will be claimed is due.
Producers interested in further information on these credits, the application process and required supporting documentation can view an on-demand training webinar hosted by the Virginia Department of Recreation at: https://www.youtube.com/watch?v=Uv5_XqYCNj0. Partnering organizations of the Soil Health Coalition can feel free to contact David Bryan, Agricultural Incentives Program Manager at DCR, for more information: firstname.lastname@example.org. Producers should utilize the training above or coordinate with their tax preparer and the Virginia Department of Taxation if they have any more questions.
(Photo courtesy of Virginia NRCS)