Farm Credit East Champions Tax Credits for Connecticut Farmers

Volume 19, Issue 7
July 2025

A cooperative is a team sport, with members and employees working together to achieve more than what could be accomplished individually. Connecticut’s latest budget is an example of the positive impact of the cooperative model on Northeast agriculture. Farm Credit East customers, including a board member, and our Chief Financial Services Officer worked together to get the investment tax credit (ITC) over the finish line.

Following this legislation, three Northeast states — Connecticut, New York and Maine — now offer refundable tax credit opportunities for eligible farmers.

New York Investment Tax Credit

Farm Credit East has a long history of helping New York State farmers navigate the investment tax credit. As we’ve previously written about, this incentive allows for a 20% refundable tax credit on eligible capital investments.

Connecticut Investment Tax Credit

Most recently, Connecticut signed into law a 20% refundable investment tax credit that functions very similar to New York.

Who Qualifies?

Eligible farmers who generally have at least two thirds of their federal gross income from farming.

What Qualifies?

Farm investment property defined as machinery and equipment, as well as building and structural components of buildings that:

• Are acquired, constructed, reconstructed or erected and placed in service on or after January 1, 2026
• Located in Connecticut
• Have a class life of more than four years
• Is not acquired from a related party
• Is not acquired to be leased, and is not leased during the 12 full months following the asset’s placement in service
• Held and used in Connecticut in the ordinary course of agricultural production for not less than five years following the date of acquisition

What is Agricultural Production?

According to subdivision (63) of section 12-412 of the CT general statute, “agricultural production includes raising and harvesting any agricultural or horticultural commodity as a trade or business.” Examples include:

• Boarding, caring for, feeding, raising, shearing, training or otherwise managing horses or other livestock owned by others;
• Breeding livestock (unless the livestock breeder is required for federal income tax purposes to treat his or her income from the sales of livestock as capital gains);
• Dairy farming;
• Forestry;
• Operating a fish farm or hatchery, including raising and harvesting fish, oysters, clams, mussels or other molluscan shellfish;
• Selling timber if the seller is engaged in farming or forestry management.

Agricultural production does not include selling agricultural products that were purchased for resale.

What to do Next?

Since the new law doesn’t take effect until January 1, there is ample time to begin planning for the implementation of the new Connecticut investment tax credit. This may include decision points on entity structure, leasing vs. purchasing assets, determining eligible transactions, and proper accounting for the capital expenditures. Farm Credit East has decades of experience with this credit in New York State and is ready to assist Connecticut’s farmers in ensuring they benefit from the new investment tax credit.

Maine Dirigo Business Incentive

Farm Credit east has previously written about the Maine Dirigo Business Incentive program, which is Maine’s “ITC.” Following is an article and webinar recording on how the program works in Maine. Of critical importance in Maine is that producers need to register with the state.

State Spotlight: Maine Dirigo Business Incentives

Maine Dirigo Business Incentives Tax Credit Webinar

Editor: Chris Laughton

Contributors: Chris Laughton and Dario Arezzo, Farm Credit East, Retail Financial Services Leader

View previous editions of the KEP

Farm Credit East Disclaimer: The information provided in this communication/newsletter is not intended to be investment, tax, or legal advice and should not be relied upon by recipients for such purposes. Farm Credit East does not make any representation or warranty regarding the content, and disclaims any responsibility for the information, materials, third-party opinions, and data included in this report. In no event will Farm Credit East be liable for any decision made or actions taken by any person or persons relying on the information contained in this report.