Florida Agriculture and Consumer Services Commissioner Charles H. Bronson has announced that some state cost share payments for implementing Best Management Practices (BMPs) may be excluded from a producer’s adjusted gross income for 2006 federal income tax purposes.
Bronson requested and received from the U.S. Department of Agriculture, a determination that cost share payments made under a number of state conservation programs are made primarily for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing habitat for wildlife.
The following BMP programs are included:
• Program for Citrus, Cow/Calf, Dairies and Other Agriculture in the Lake Okeechobee Priority Basins;
• Program for Indian River Area Citrus Groves;
• Program for Interim Measures for Tri-County Agricultural Area Farms;
• Program for Interim Measures for Florida Producers of Container-Grown Plants;
• Program for Best Management Practices for Shadehouse Grown Leatherleaf Ferns;
• Nitrogen Best Management Practices Program for Florida Ridge Citrus;
• Nitrogen Interim Measures for Florida Citrus;
• Nitrogen Interim Measures for Bahiagrass and Bermuda Grass; and
• Florida Conservation Reserve Enhancement Program.
Under the Internal Revenue Service Code, cost-share payments made under these programs can be excluded from adjusted gross income if such payments are used for capital expenses and do not substantially increase the income derived from the property for which those payments are made. The IRS defines a “substantial increase” as 10 percent or $2.50 per acre, whichever is greater.
Bronson said he intends to request from the USDA an additional determination to provide the adjusted gross income exclusion for cost-share payments made under any Florida Department of Agriculture and Consumer Services’ conservation program. If successful, this change would allow for such exclusion for 2007 federal income tax purposes.