Amendments to Agricultural Best Practices Tax Credit
Agricultural Best Practices Tax Credit established in 1998
Amendments signed into law on March 11, 2021
The Virginia Agricultural BMP Tax Credit Program began in 1998. It incentivizes farmers to voluntarily apply best management practices (BMPs) in support of Virginia’s nonpoint source pollution water quality objectives. In order to be eligible for the tax credit, a resource management plan is required, which has to be approved by the local Soil and Water Conservation District. Districts are also tasked with validating the implementation of BMPs by farmers.
The 2021 amendment moves eligibility criteria for BMPs to the annually updated Virginia Agricultural BMP Manual, aligning tax credit rates with the rates offered for eligible practices under the Virginia Agricultural Best Management Practices Cost-Share Program.
The amendment increases the amount of the income tax credit for eligible BMPs from 25% to 50% to be applied to the first $100,000 expended in implementing these practices.
The bill retains a tax credit for 25% of expenses made for all other agricultural best management practices that are not eligible for the enhanced credit rate but increases the maximum amount of expenses to which one can apply the 25% credit from $70,000 to $100,000.
The maximum amount of credit an agricultural producer may claim is increased from $17,500 to $75,000 per year but may not exceed the total state income tax obligation. The aggregate amount of all individual and corporate credits claimed is capped at a total of $2M per year.
The bill sunsets the existing agricultural best management practices tax credits after the taxable year 2024.
Soil Health Definition:
To “provide a significant improvement to water quality in the state’s streams and rivers and the Chesapeake Bay and is consistent with other state and federal programs that address agricultural, nonpoint source pollution management.”
Program Required Measurements:
Agricultural producers must have a conservation plan approved by their soil and water conservation district (SWCD) in order to be eligible for the tax credit.
Income tax refund
Practices eligible for funding:
The Virginia Agricultural BMP Manual lists agricultural best management practices eligible. It is updated and published annually prior to July 1 by the Department of Conservation and Recreation.
The 2021 Manual lists:
- Small Acreage Grazing System
- Alternative Water System
- Farm Road, Animal Travel Lane, Heavy Use Area Stabilization
- Stream Crossings & Hardened Access
- Stream Channel Stabilization
- Animal Waste Structure Pumping Equipment
- Stormwater Retention Pond
- Surface Water Runoff Impoundment for Water Quality
- Relocation of Confined Feeding Operations from Environmentally Sensitive Areas
- Constructed Wetlands
- Wetland Restoration
- Irrigation Water Recycling System
- Capping/Plugging of Abandoned Wells
- Integrated Pest Management
State Universities & Researchers:
- Virginia Polytechnic Institute & State University: Land-grant university
- Virginia State University: Land-grant university
- Virginia Cooperative Extension Composting
Agricultural Organizations & Technical Assistance:
- Virginia Soil and Water Conservation Districts
- The Virginia Association of Soil and Water Conservation Districts
- Virginia NRCS
Education & Advocacy Groups:
- Virginia Soil Health Coalition
- Virginia No Till Alliance
- Virginia Forage and Grassland Council
- Virginia Association of Biological Farming
- The Common Grain Alliance
- Sustainable Chesapeake
Last updated 4/13/21