Labor costs remain a concern for agricultural producers in New York State. There are three tax credits that might provide some relief from the high cost of labor given the continued increases in the minimum wage and the Farm Laborers Wage Board’s recommendation to start reducing the overtime threshold over the next ten years Two of them are existing credits that could be enhanced, while the other would be a new credit.
Investment Tax Credit (ITC)
For non-corporate farmers, ITC provides a 4 percent tax credit on capital expenditures. For example, a $100,000 piece of equipment that a farmer doesn’t fully expense with section 179 would provide a $4,000 tax credit. Unless the taxpayer is new to farming, the credit is non-refundable. Governor Hochul has proposed increasing this credit to 20 percent and there are legislative proposals to make it refundable for all farmers.
Farm Workforce Retention Credit (FWRC)
The FWRC provides $600 per employee working 500 or more hours per year with limited exceptions so long as the farm is a qualified farmer. An important point, particularly with COVID-19, is that if an employee becomes unable to work because of a documented illness or disability, then the farmer can combine the hours of that sick or disabled individual with another who was brought in as a replacement during the year. In other words, both the sick worker and the replacement worker are treated as one employee. There are proposals by the Governor and in the legislature to extend this credit past 2024 and double the amount to $1,200 per eligible employee.
Overtime Tax Credit
In the Executive Budget, the Governor has also proposed a refundable credit for eligible farmers who pay overtime to workers up to a 60-hour threshold. The mechanics of how this would work have not been determined but in theory, if the overtime threshold was 56 hours in 2024 and a farmer paid 4 hours of overtime, they would receive a refundable credit based on the difference between overtime wage and the normal wage for those 4 hours.
Time will tell if any or all of these proposals will make its way across the legislative finish line. Farm Credit East will keep you up to date on these important issues for your business.
Contact Us to be connect with a Farm Credit East Tax Specialist.