Wrong tax form may cost farmers lost credits under new Farmland Preservation program

By using the wrong tax forms, many farmers are leaving potentially large farmland preservation tax credits on the table.

Statewide, those missed opportunities for farmland preservation tax credits could have cost state farmers from $2.5 to $3 million in underutilized credits.

That's what members of the citizen policy board at the Department of Agriculture, Trade and Consumer Protection heard in a report from staff during their board meeting in Madison Dec. 15.

Keith Foye, chief of the department's Land Management section, briefed the board on the state's Farmland Preservation program. Later, he told Wisconsin State Farmer that in seven counties - Dane, Rock, Iowa, Jefferson, Fond du Lac, Walworth and Brown - there were 2,600 claimants holding 460,000 acres who under-utilized their tax credits to the tune of $1.5 million.

"It's a big deal to us," he said. "If tax credits are available we want people to get them."

Foye said it's difficult for DATCP to know exactly how much the incorrect filings has cost farmers statewide because income tax returns are housed at the Department of Revenue. But based on data he has looked at, he estimates it could be as much as $3 million.

He encouraged farmers to make sure their tax preparers are using the right form to file for the tax credit. "The law has changed and we want to make sure people are paying attention to the form being used by their tax preparers.

"Many people will just use the same form they used last year," he said. But that may not be the right thing to do to gain the maximum allowable tax credit under the new law.

"It's been unnerving for us to see how many farmers were under-utilizing the tax credit," Foye told Wisconsin State Farmer. "We were hoping more of the tax preparers would pick up on it."

To correct that problem, agriculture officials recently participated in a session sponsored by University Extension that drew 450 people who prepare ag-related tax returns. They were trying to get the word out to them about the mistakes in filings that have cost farmers money under the program.

Dane County farmers were at the top of the list of those under-utilizing the tax credits, he said. There, more than 800 people used the wrong form and it cost them $475,000 in potentially available tax credits.

Schedule FCA

The new form, called schedule FCA, is part of the Working Lands Initiative that was enacted in 2009 and took effect last year. Under the old program farmers filed under schedule FC.

Landowners with land either within a certified farmland preservation zoning district or enrolled under a new or modified farmland preservation agreement file a schedule FCA - the new form.

Under this tax schedule, landowners can claim $5, $7.50 or $10 per acre based on whether their land is under a Farmland Preservation agreement, zoned for farmland preservation or within both.

Landowners who had land that was under an agreement established prior to the change in the law are required to file a schedule FC, Foye explained.

These landowners calculate their tax credit based on a formula that considers their income and the amount of property taxes paid. There are still 3,400 agreements on file under the old law, he said.

Statewide there were about $18 million in tax credit claims in 2010. Foye said that in return for that amount of money channeled into tax credits for farmers, taxpayers can expect to see improvements in water quality and soil conservation since farmers who get the credit are required to comply with certain conservation practices.

Foye said he understands there will be a learning curve with a new program but he hopes more farmers and their tax preparers will begin to understand how to maximize the available tax credits.

Last year was the first year that landowners were able to claim farmland preservation tax credits under the new law.



2010 Claims

In 2010 a total of 15,791 farmland preservation tax credit claims were filed. There were claims in 1,200 towns, cities of villages in 70 of the state's 72 counties.

Foye said the greatest number of claims were filed in the southern portions of the state. Claims were highest in areas with certified farmland preservation zoning districts.

There were 850 fewer claims last year than in 2009. That's a trend that has continued since the high point of the program in 1989 when 25,542 claims were made under the program.

In 2010 the total acreage reported as the base for the claims was 2.9 million acres of land. There were about 187 acres per claim on average. Claims were split almost evenly between the two forms available - FC and FCA.

According to the report Foye presented to the ag board, there are 13.7 million acres of agricultural land in Wisconsin. That means that those acres participating in the Farmland Preservation program represent about 21 percent of the state's farmland.