Agribusiness Law Alert: New 30% Tax Credit for Securing Agricultural Chemicals
By Gregory F. Jenner
12/10/2008
As part of the Farm Bill enacted in mid-2008, Congress included a new tax credit to help defray costs of providing security against theft and terrorism for agricultural chemicals and pesticides.
The income tax credit equals 30 percent of any "qualified chemical security expenditures" incurred by an eligible agricultural business (EAB). EABs are businesses that:
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1. |
Sell agricultural products, such as chemicals and pesticides, to farmers and ranchers at retail; or |
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2. |
Manufacture, formulate, distribute, or aerially apply such chemicals. |
The credit is limited to $100,000 per facility for any tax year (reduced by credits allowed in the preceding five years). The credit is also limited to $2 million per taxpayer per year.
Expenses that qualify for the credit include expenses incurred in connection with the following:
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Employee security training and background checks; |
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Limiting access to chemicals; |
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Tagging, locking tank valves, and additives (that render the chemical unfit for illegal use) to prevent theft; |
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Property perimeter protection; |
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Installation of security lighting, cameras, etc.; |
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6. |
Enhancing computer network security; |
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7. |
Security vulnerability assessments; |
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8. |
Implementing a site security plan; and |
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Others specified by the IRS. |
"Specified agricultural chemicals" (those that fit within the credit) are the fertilizers and pesticides most commonly used in agriculture, including those fertilizers:
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Listed as an "Extremely Hazardous Substance" (thus causing a facility to coordinate with state emergency planning commissions); |
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That are hazardous materials subject to ground transport regulations; and |
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Ammonium nitrate, ammonium nitrate fertilizers, fertilizer mixtures, nitro carbo nitrate, liquefied natural gas, or a petroleum oil; |
and virtually all pesticides, including:
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1. |
Plant regulators, defoliants, and desiccants; and |
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Any nitrogen stabilizer. |
The federal tax credit applies to qualified chemical security expenditures paid or incurred after May 22, 2008, and before January 1, 2013. Any deduction otherwise available for expenses that qualify for the credit must be reduced by the amount of the credit.
The Stoel Rives Agribusiness Group is available to answer any questions regarding eligibility for the credit.
For more information, please contact:
Greg Jenner at (612) 373-8857 or
gfjenner@stoel.com