PA Tax Credit Helps Farmers Get Started

We recently interviewed Darrin Youker with PA Farm Bureau on Pennsylvania’s Beginning Farmer Tax Credit, which provides an incentive to lease or sell land, buildings and/or equipment to beginning farmers. The application window for the Beginning Farmer Tax Credit recently opened and is available on a first-come, first-serve basis until funds are expended for the 2020 tax year.

Could you first explain to our listeners some of the key details about the Beginning Farmer Tax Credit including who qualifies and how the tax credits work? 
In terms of who qualifies, it actually is somebody who is defined as a beginning farmer. What is nice is there is no age defined for who is a beginning farmer. Instead, the legislation, or I should say the law, looks at somebody who has been in the business of farming for 10 years or less. That is ascertained by somebody who has not filed a Schedule F for more than 10 years. 

In order to be a qualified beginning farmer, you need to have an application that is filled out and reviewed by the Department of Agriculture and the Department of Community and Economic Development. Once that is finished, you can then start working with a landowner on either selling or leasing. Landowners are the ones who get the tax credit for working with the beginning farmer.

From the landowner side of things, if you lease or sell your land to a certified beginning farmer, you can get an income tax break, again, depending on the terms of those transactions that you can then apply to your state income taxes. This is a way to help incentivize landowners to work with beginning farmers - the thought being that a beginning farmer might not have the ability to outbid somebody for a piece of ground, either on a lease or a sale, but the benefit is by working with that certified beginning farmer, the landowner is going to get a tax credit on their income, so that's part of the incentivization. 

Again, the nice thing is there's no age attached to it, so if somebody is thinking of a mid-career change or has always wanted to work on a farm and is finally developed some of the capital to make that investment, even if they're 40 or 50 years old, they can take advantage of the Beginning Farmer Tax Credit.

How did the idea for the tax credit program come about, and what has been the response from the farm community and others about the program?
How it started was actually a challenge that was issued to Farm Bureau when we were discussing the state budget back in 2018. We have a deep concern for the preservation of farmland and always will advocate to make sure that farmland preservation is being done because it's the future of Pennsylvania agriculture. In that conversation that we had with a senior lawmaker in Harrisburg, he asked the question to our organization: "Well, preserving farmland is great, but what are you guys doing to preserve the next generation of farmers?" 

I have to admit, I kind of stumbled with an answer and didn't quite know how to respond, but we took that as a challenge: Okay, what can we do to help that next generation of farmers? Preserving farmland is one thing, but if there's not the next generation to come and farm that ground, it's a whole other story.

We started doing some research during the summer of 2018 and found that states like Minnesota, Iowa and Nebraska had a Beginning Farmer Tax Credit. We took what was Minnesota's legislation, made it applicable for Pennsylvania, and in 2019, started working with Senator Elder Vogel on introducing it as a piece of legislation. 

As in a lot of things in life, there’s happenstance and chance, and sometimes the stars align. As we were debuting our Beginning Farmer Tax Credit, the Department of Agriculture and the Wolf Administration was debuting its PA Farm Bill initiative. While they were two separate pieces of legislation, lawmakers saw both of those initiatives as a way to advance some good agriculture policy in the state. 

We're very proud of the fact that working with the Department and Senator Vogel and the leaders in the legislature, we were able to pass a tax credit bill unanimously through the House and Senate, and it is now law.

The response from the agriculture community has been great, a lot of folks asking questions about how to qualify, wanting to know how they can take advantage, either as a beginning farmer or as a landowner to work with this program and take advantage of the tax credit. 

We will know its impact later this year because DCED and the Department of Revenue will be starting to give the tax credits for folks that filed in 2020. Now is when we're going to start seeing the fruits of our labor and the labor of others within the General Assembly. This is a 10-year program that can sunset at the end of 10 years, if, let's say for sake of argument, that the program hasn't been widely utilized.

But it's our hope that as this program becomes widely known and widely used.

As we wrap up today’s podcast, could you tell us what makes you excited about the future of Pennsylvania agriculture, along with any other thoughts you would like to share with our listeners today?
This pandemic has been devastating, but one of the good things that we have seen come out of this time is folks having a deeper appreciation for the work that farmers do and a better understanding of how our supply chain operates. I think when folks started to see scarcity in the grocery store shelves, they started to see the complexity of what happens just trying to get food from farm to the table.

What we heard from our members was that those that had already an existing public-facing interaction, whether they sold bottled milk, had a CSA, had a small retail farm market or were processing their own meat, they started seeing a tremendous jump in consumer interest in their products and that's something that has been sustaining throughout this entire pandemic. 

Local foods were already popular in Pennsylvania, but we think one of the benefits of coming out of this pandemic is it's become more popular because people are looking for alternatives and ways to better secure their food supply, which is a great thing. It's a great thing for consumer education.

What makes us excited about the future of agriculture in Pennsylvania is when you look at our state and the diversity of the agriculture products that can grow here, as well as our proximity to so many major markets, and even small towns and small cities throughout Pennsylvania. Going forward, we can expect to see tremendous growth in farmers selling directly to the public, and I think that's just great for the overall strength of the agriculture economy within Pennsylvania.