How to Claim the Farmland Preservation Credit

The farmland preservation credit is a state-level tax incentive designed to encourage landowners to keep their property in agricultural use. The specifics of these credits, including eligibility and calculation methods, vary between states. For the purpose of providing concrete examples, this article will reference details from Wisconsin’s program, a state with a long-standing and well-documented farmland preservation system. Readers should consult their own state’s department of revenue or agriculture for local regulations.

Eligibility for the Farmland Preservation Credit

To qualify for a farmland preservation credit, both the landowner and the property must meet specific criteria. For the landowner, this includes being a resident of the state for the entire tax year. Some states also impose household income limitations, though this is not a universal rule. A stipulation in many programs is that a landowner cannot claim the farmland preservation credit if they have already claimed other property tax relief credits, such as a homestead credit or a veterans and surviving spouses property tax credit, for the same year.

The property itself must also satisfy several conditions. A primary requirement is that the land must be zoned for exclusive agricultural use or be subject to a farmland preservation agreement. A farmland preservation agreement is a voluntary contract between the landowner and the state, where the owner agrees to restrict development on the property for a specified term. In Wisconsin, the minimum term for new agreements is 10 years.

Beyond zoning or agreements, there are often requirements related to the farm’s productivity and size. For instance, a farm may need to have produced a minimum amount of gross farm revenue, such as $6,000 in the previous year or a total of $18,000 over the preceding three years. There can also be minimum acreage requirements, and in some cases, the land must be part of a designated agricultural enterprise area to qualify for the highest credit amounts.

Finally, compliance with conservation standards is a common prerequisite. Landowners must adhere to state-mandated soil and water conservation plans to be eligible for the credit. Verification of compliance is often handled at the county level, requiring coordination with the local land conservation department.

Calculating the Credit Amount

In Wisconsin, the method for calculating the farmland preservation credit depends on the age of the farmland preservation agreement. For land in a farmland preservation zoning district or under an agreement signed after July 1, 2009, the credit is a straightforward per-acre amount. The rate is tiered based on participation, and a landowner with an agreement in an agricultural enterprise area may receive a higher credit. Rates can range from $5.00 to $12.50 per acre.

For landowners with agreements signed before July 1, 2009, who have not modified them, the credit is calculated using an income-based formula. This method determines the credit by subtracting a portion of the landowner’s household income from their eligible property taxes. The definition of “household income” for this purpose can be broad, often including not just adjusted gross income but also other non-taxable income sources. There is a maximum amount of property taxes that can be used in the calculation.

To illustrate a per-acre calculation, consider a farmer with 150 acres of land in a certified farmland preservation zoning district. If the state offers a credit of $10.00 per acre for such land, the calculation is 150 acres multiplied by $10.00 per acre for a total credit of $1,500. This amount is then claimed on the landowner’s state income tax return.

The Process for Claiming the Credit

Claiming the credit begins with gathering all necessary information. This includes the complete property tax bill for the claim year, which provides details like acreage and taxes levied, and your completed federal and state income tax returns. You will also need proof of eligibility, such as a zoning certificate, a copy of the farmland preservation agreement, or a certificate of compliance from the county’s land conservation department.

With the information gathered, the next step is to complete the required state tax schedule. In Wisconsin, landowners use Schedule FC-A for the per-acre credit or Schedule FC for the income-based calculation. The completed credit schedule must be attached to the landowner’s annual state income tax return, as the credit is claimed as part of this regular filing and must be submitted by the standard tax deadline.

Credit Recapture Rules

Landowners who claim the farmland preservation credit must be aware of provisions that apply if they cease to meet program requirements. For agreements entered into before July 1, 2009, a recapture is triggered if the landowner sells the land for non-agricultural use or violates the agreement’s terms. This requires repaying the credits claimed over the previous 10 years, plus interest.

For agreements entered into after July 1, 2009, the credit recapture requirement was replaced with a land conversion fee. This fee becomes due if the land is developed or used for non-agricultural purposes.