PA farmers could REAP tax benefits under conservation program
Legislation that would provide valuable new tax credits to Pennsylvania farmers who take conservation actions that improve water quality was the subject of hearings in both the state House and Senate during September.
The Resource Enhancement and Protection Act of Pennsylvania, or REAP, would provide tax credits of 25–75 percent for cleaning up barnyards, planting forested stream buffers, installing stream bank fencing or removing accumulated sediment in streams. The amount of the credit is based on the water quality value of the practice.
“This statewide legislation would be one of the most important state programs enacted in the history of the Chesapeake Bay restoration,” said Matthew Ehrhart, executive director of the Chesapeake Bay Foundation’s Pennsylvania Office, at the House hearing.
The legislation would make $450 million in tax credits available over five years to promote conservation efforts, which supporters say would help address a large chunk of the funding shortfall for the state’s tributary strategies, the cleanup plans aimed at meeting Bay nutrient and sediment reduction goals.
The state Department of Environmental Protection has estimated that approximately $215 million per year is needed in state and federal funds to implement those strategies. Current funding is at about $45 million, leaving a $170 million-per-year gap.
Rep. Jerry Stern, R-Blair, one of the House sponsors of the legislation, said most farmers “put a high priority on managing their farm operations in an environmentally friendly manner” but often lack financial assistance.
“I believe we can document that there is considerable unmet demand from agricultural producers for financial assistance to support the adoption of additional conservation practices,” he said.
Supporters say additional public support for farmers is essential as rising costs, coupled with weak commodity prices, limit the options available to producers to meet new environmental standards, such as stricter regulations governing the use of phosphorus on crop land.
Under the REAP program, applicants would be eligible for tax credits up to a total of $150,000 over the life of the program. To provide flexibility, tax credits under REAP may be sold by farmers who do not have a tax liability of their own to businesses or other taxpayers. Or, businesses may sponsor conservation practices in exchange for the credits, providing capital to farmers who may lack funds of their own to implement the practices.
Either approach allows farmers with minimal tax liability to participate in the program. Taxpayers can also roll tax credits forward to cover future tax liabilities for up to 15 years.
The legislation caps the number of tax credits that can be issued over the five-year life of the program. The first year, up to $50 million can be issued and $100 million in each of the successive four years.
On the Senate side, the proposal was introduced earlier this year by two members of the Chesapeake Bay Commission, Sen. Noah Wenge, R-Lancaster, and Sen. Mike Waugh, R-York. Since their introduction, both the House and Senate bills have drawn broad bipartisan support, although it’s unclear when final action on the measures could take place.
Both the Department of Revenue and the State Conservation Commission offered comments on the details of the bill and suggested that the legislation be considered during discussion of the state’s 2007-08 budget.
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