Spotlight - Businesses and Individuals Can Benefit from Conservation Tax Credit

By: Lamonte Garber, Chesapeake Bay Foundation

By purchasing REAP tax credits, you can help the environment and family farmers while reducing your taxes. Pennsylvania's Resource Enhancement and Protection Program (REAP) helps farmers afford environmentally sound farming practices.

 

But that doesn't mean the program is just for farmers. Non-farm businesses and individuals can participate, too, and receive dollar-for-dollar, state tax credits for their contribution. This spring marks the first time that individuals and businesses can purchase REAP credits directly from a farmer or a broker.

 

Here's how it works: Through REAP, farmers can earn state tax credits to offset some of the costs of conservation projects. Many farm operations, however, do not have sufficient tax liability to make use of all their credits. In these cases, farmers can sell their REAP tax credits to any Pennsylvania taxpayer (either an individual or a business) seeking to reduce their tax liability. The sale price is determined by the buyer and seller, who may use a broker in the transaction.

 

Businesses can participate in the REAP program and receive state tax credits directly from the state, equal to the amount of money they contribute toward eligible farm-conservation projects. For example, as a REAP sponsor, a business could provide a portion of the financing a farmer needs to install cost-effective, water-quality improvements or purchase qualified equipment (up to $150,000 per eligible farm). In return, the business receives its entire investment back in the form of a state tax credit.

 

By sponsoring projects, a business can make a high-priority project happen that otherwise wouldn't because of the cash-flow limitations of the farmer.

 

Depending on the kind of project, a business can fund either 50 or 75 percent of total project expenses. Farmers provide the matching funds. All liabilities related to the project belong to the landowner, not the sponsor.

 

By purchasing REAP tax credits, you can help the environment and family farmers while reducing your taxes at no net cost. Remember that tax credits are different from tax deductions; tax credits reduce your taxes dollar for dollar, while deductions simply reduce your taxable income.

REAP applies to Pennsylvania state taxes only.

 

Learn more about buying and selling REAP credits at the REAP webpage, or contact the Chesapeake Bay Foundation's Lamonte Garber at 717-234-5550 or send email to: lgarber@cbf.org. Questions can also be directed to Mary Bender, REAP Administrator, at 717-787-8821.