New York Governor Kathy Hochul approved the Fiscal Year 2023 budget, which included some key tax provisions for the state’s farmers. The budget enhanced both the Investment Tax Credit and Farm Workforce Retention Credit. Additionally, the budget provides some potential relief for increasing overtime costs with the creation of the Farm Employer Overtime Credit.
- Investment Tax Credit (ITC) Increase – The ITC amount will increase to 20% for capital expenditures used in farming. For example, a farmer who buys a $50,000 tractor and chooses not to take section 179 on it will receive a $10,000 ITC. Generally nonrefundable, this ITC will be used to offset New York State income tax.
- Farm Workforce Retention Credit (FWRC) Increase – The FWRC has doubled from $600 to $1,200 per eligible farm employee working at least 500 hours. The FWRC, unlike the ITC, is only for eligible farmers. Eligible farmers generally receive at least two-thirds of their gross income from farming.
- Farm Employer Overtime Credit (FEOC) – The FEOC, like the FWRC, is for eligible farmers only. This refundable credit will be for overtime wages paid up to 60 hours per week. Currently 60 hours is the overtime threshold, however in February the Farm Laborers Wage Board recommended to begin lowering the threshold to 40 hours over the next ten years, though that recommendation has not been adopted by the Governor. If the overtime threshold is lowered, the credit would be equal to 118% of the eligible overtime hours worked multiplied by the overtime rate less the employee’s regular rate. Once up and running, the FEOC will provide eligible farmers to receive a mid-year advancement on the tax credit for the first six months of the year. The credit advancement will help cash flow since tax credits usually are claimed when the taxpayer files their income tax return.
While the tax credits above are welcome news, there are many nuances regarding fully utilizing them on the farm. Reach out to your Farm Credit East tax professional for more information on how these credits will impact your business this year.