Recent New York State Tax Law Updates: Impact on Farmers

By Dave Porter, CPA on June, 20 2022
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Dave Porter, CPA

Senior Manager

Farmers-Tax

When the New York State budget was passed this spring, there were numerous law changes included that will affect farmers in New York State. While some of them are certain to be less popular with their constituency, there were other changes made to help alleviate the burden placed on taxpayers. Below, we discuss the tax law changes that will largely affect farmers in 2022.

Investment Tax Credit for Farmers

Previously, the investment tax credit for farmers was equal to 4% of the cost of a capital asset that was directly involved in the production process for individuals, and 5% for corporate taxpayers. Some examples of this would include, but are not limited to, tractors, field equipment, livestock, and single-purpose ag structures (such as cow barns, greenhouses, etc.). For all property that is placed in service on or after April 1, 2022, the credit has increased from 4% to 20% of the cost of the asset. This credit is used dollar for dollar against the taxpayers New York State tax liability and is eligible to be carried forward for a period of 10 years. The credit is refundable for new businesses.

Farm Workforce Retention Tax Credit

Before the budget updates, the Farm Workforce Retention Credit was a refundable tax credit equal to $600 per farm employee who worked greater than 500 hours for the year. The credit was set to expire at the end of 2024. Now, for tax years beginning on or after January 1, 2022, the credit has doubled to $1,200 per farm employee who has worked greater than 500 hours for the year. Additionally, the credit has been extended by one year, and is now set to expire at the end of 2025.

Farm Employer Overtime Tax Credit

This credit has been created as a direct subsidy for farmers to help with the increased payroll costs when the new overtime rules go into effect on January 1, 2024. Governor Hochul and the NYS Commissioner of Labor have yet to officially act on the wage board recommendation to gradually lower the overtime threshold to 40 hours/week by 2032. Let’s assume that beginning January 1, 2024, the overtime threshold for farm workers in NYS will be lowered to 56 hours/week. Then, every two years after that, the threshold drops by four hours a week until it reaches 40 hours/week on January 1, 2032. The Farm Employer Overtime Credit creates a refundable tax credit that is equal to 118% of the eligible overtime costs, up to 60 hours/week. For example, if in 2024, when the overtime threshold drops to 56 hours/week, and an employee works 65 hours in a week, the overtime expenses for hours 57-60 would be eligible for this credit, but hours 61-65 would not. Claims for this credit can be made up to twice a year: once, after July 31, for overtime expenses incurred from January 1 – July 31, and again after December 31, for overtime expenses incurred from August 1 – December 31. Claims for this credit will be made with the NYS Department of Ag and Markets, not the Department of Tax and Finance. That application process is being developed now and further details will be forthcoming.

Historic Barn Rehabilitation Tax Credit

Starting January 1, 2022, NYS has reintroduced the Historic Barn Rehabilitation Tax Credit. While this credit previously existed under federal law, it was eliminated as a result of federal tax law changes in 2018. Now, it exists for NYS taxpayers under state tax law. In order to qualify for the credit, the barn must have been built before 1946, and the work must be approved by the Division for Historic Preservation. The credit is equal to 25% of the expenses associated with the barn rehabilitation. The credit can be used dollar for dollar against state tax liability and is eligible to be carried forward for up to 10 years. The credit is refundable for new businesses.

Suspension of Motor Fuel Taxes

Beginning June 1, 2022 and ending December 31, 2022, the state excise tax, prepaid sales tax, and state sales and use tax on motor fuel and on-road diesel motor fuel has been suspended. Counties and cities can elect a cents-per-gallon or percentage rate sales tax method on fuel. As a result of the suspension, local sales tax rates may change beginning June 1, 2022.

Agribusiness Accounting and Consulting Support

Freed Maxick’s Agribusiness Practice responds to the increasing need for specialized services for agricultural businesses and farm producers. From family farms to vineyards, food producers and processors, we are dedicated to providing sophisticated accounting, tax, business consulting and management advisory services. Our group’s agricultural expertise in New York State is committed to providing the highest quality professional services to closely-held agricultural businesses and family-owned farms. If you have any questions regarding the recent New York State tax updates for farmers, please feel free to contact us.

This article was also published in the June issue of the NEDPA June newsletter.

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