PRINTER'S NO. 3893
No. 2604 Session of 2008
INTRODUCED BY HERSHEY, HANNA, BROOKS, BASTIAN, BOBACK,
CALTAGIRONE, CARROLL, FLECK, GRUCELA, HICKERNELL, KAUFFMAN,
M. KELLER, MAHONEY, MILLARD, MYERS, PICKETT, PEIFER, SOLOBAY,
YOUNGBLOOD, BAKER, BOYD, CLYMER, CREIGHTON, CUTLER, DALLY,
EVERETT, FAIRCHILD, GEIST, GEORGE, GIBBONS, GINGRICH,
GOODMAN, HARHAI, HARHART, HESS, HUTCHINSON, KILLION, KOTIK,
KULA, LONGIETTI, MAJOR, MELIO, R. MILLER, MOYER, MURT,
PETRARCA, PYLE, READSHAW, ROCK, SAYLOR, SIPTROTH, STERN,
R. STEVENSON, SURRA, J. TAYLOR, THOMAS, WATSON AND J. WHITE,
JUNE 10, 2008
REFERRED TO COMMITTEE ON AGRICULTURE AND RURAL AFFAIRS,
JUNE 10, 2008
AN ACT
1 Establishing the Dairy-Max Tax Credit Program for the
2 modernization and expansion of dairy operations in this
3 Commonwealth; establishing a sponsorship program; authorizing
4 the transferability of tax credits; and imposing powers and
5 duties on the Department of Agriculture.
6 The General Assembly finds and declares as follows:
7 (1) The Commonwealth is home to the second largest
8 number of dairy farms of any state in the United States.
9 (2) Pennsylvania dairy farms produce the fifth largest
10 amount of milk of all states.
11 (3) Milk income generates 42% of the total agriculture
12 income in this Commonwealth.
13 (4) Encouraging modernization and expansion of dairy
14 operations in this Commonwealth will do all of the following:
15 (i) Position producers to adopt new technology and
1 increase efficiency, thereby increasing milk production
2 and sales revenue.
3 (ii) Encourage the next generation of farm families
4 to transition to dairy production.
5 (iii) Increase the overall economic health of this
6 Commonwealth.
7 (5) The Commonwealth has adopted tax credit programs to
8 encourage private funding of educational programs, research
9 and development efforts, film production and conservation
10 practices, which are critical to the future and economic
11 health of this Commonwealth.
12 (6) Providing tax credits for the modernization and
13 expansion of dairy farms is equally critical to the economic
14 future of this Commonwealth.
15 The General Assembly of the Commonwealth of Pennsylvania
16 hereby enacts as follows:
17 Section 1. Short Title.
18 This act shall be known and may be cited as the Dairy-Max Tax
19 Credit Program Act.
20 Section 2. Definitions.
21 The following words and phrases when used in this act shall
22 have the meanings given to them in this section unless the
23 context clearly indicates otherwise:
24 "Agricultural erosion and sediment control plan." A site-
25 specific plan that does all of the following:
26 (1) Meets the requirements of the act of June 22, 1937
27 (P.L.1987, No.394), known as The Clean Streams Law, and 25
28 Pa. Code Ch. 102 (relating to erosion and sediment control).
29 (2) Identifies best management practices to minimize
30 accelerated erosion and sediment from an agricultural
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1 operation.
2 "Agricultural operation." A normal agricultural operation as
3 defined under section 2 of the act of June 10, 1982 (P.L.454,
4 No.133), referred to as the Right-to-Farm Law.
5 "Business development plan." A comprehensive document that
6 summarizes the operational and financial objectives of a
7 business and contains the detailed plans and budgets showing how
8 the objectives are to be realized.
9 "Business firm." An entity authorized to do business in this
10 Commonwealth and subject to the taxes imposed under Article III,
11 IV, VI, VII, VIII, IX or XV of the act of March 4, 1971 (P.L.6,
12 No.2), known as the Tax Reform Code of 1971.
13 "Conservation plan." A plan, including a schedule for
14 implementation, that identifies site-specific conservation best
15 management practices on an agricultural operation.
16 "Dairy farm." An agricultural operation where the management
17 and use of farming resources is dedicated to the production of
18 milk.
19 "Dairy farm modernization or expansion." Any of the
20 following:
21 (1) The construction, improvement or acquisition of
22 buildings or facilities on a dairy farm if used exclusively
23 for dairy animals.
24 (2) The acquisition of equipment for dairy animal
25 housing, confinement, animal feeding, milk production
26 ventilation or animal comfort and well-being, if related
27 exclusively to dairy animals and if acquired and placed in
28 service in this Commonwealth.
29 "Department." The Department of Agriculture of the
30 Commonwealth.
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1 "Eligible applicant." A business firm or an individual who
2 is subject to taxation under Article III of the act of March 4,
3 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971.
4 "Individual." A natural person.
5 "Nutrient management plan." As the term is defined under 3
6 Pa.C.S. Ch. 5 (relating to nutrient management and odor
7 management).
8 "Pass-through entity." A partnership or Pennsylvania S
9 corporation as defined under section 301(n.0) and (s.2) of the
10 act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
11 of 1971.
12 "Program." The Dairy-Max Tax Credit Program.
13 "Project." All components of a dairy farm modernization or
14 expansion plan included in an application for tax credits under
15 this act.
16 "Qualified tax liability." The liability for taxes imposed
17 upon an eligible applicant under Article III, IV, VI, VII, VIII,
18 IX or XV of the act of March 4, 1971 (P.L.6, No.2), known as the
19 Tax Reform Code of 1971.
20 Section 3. Dairy-Max Tax Credit Program.
21 (a) Establishment.--The Dairy-Max Tax Credit Program is
22 established to encourage private investment in the modernization
23 of this Commonwealth's dairy industry.
24 (b) Limits.--The following limits shall apply:
25 (1) An eligible applicant may be granted a maximum of
26 $250,000 in tax credit under the program.
27 (2) No more than $250,000 in tax credits shall be
28 granted toward projects on a dairy farm under the program.
29 (3) An eligible applicant may submit an application for
30 a single project or multiple applications for multiple
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1 projects within the limits of this section.
2 (4) There shall be no limit on the amount of tax credits
3 that may be purchased or assigned from an eligible applicant.
4 (5) There shall be no limit on the amount of tax credits
5 granted to a sponsor under subsection (f).
6 (c) Carryover.--
7 (1) If an eligible applicant cannot use the entire
8 amount of the tax credit for the taxable year in which the
9 tax credit is first granted, the excess may be carried over
10 to succeeding taxable years and used as a credit against the
11 qualified tax liability of the eligible applicant for those
12 taxable years. Each time that the tax credit is carried over
13 to a succeeding taxable year, it is to be reduced by the
14 amount that was used as a credit during the immediately
15 preceding taxable year. The tax credit provided under this
16 act may be carried over and applied to succeeding taxable
17 years for no more than 15 taxable years following the first
18 taxable year for which the eligible applicant was entitled to
19 claim the credit.
20 (2) A tax credit granted by the Department of Revenue
21 shall be applied against the taxpayer's qualified tax
22 liability for the current taxable year as of the date on
23 which the credit was granted before the tax credit is applied
24 against any tax liability under paragraph (1).
25 (d) Assignment of credit.--
26 (1) An eligible applicant, upon application to and
27 approval by the Department of Revenue, may sell or assign, in
28 whole or in part, a tax credit granted to the eligible
29 applicant under this act if no claim for allowance of the
30 credit is filed within one year from the date the credit is
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1 granted by the Department of Revenue under this section. The
2 Department of Revenue shall establish guidelines for the
3 approval of applications under this subsection.
4 (2) The purchaser or assignee of a portion of a tax
5 credit under this subsection shall immediately claim the
6 credit in the taxable year in which the purchase or
7 assignment is made. The amount of the credit that a purchaser
8 or assignee may use against a qualified tax liability may not
9 exceed 75% of the qualified tax liability for the taxable
10 year. The purchaser or assignee may not carry over, carry
11 back, obtain a refund of or assign the tax credit. The
12 purchaser or assignee shall notify the Department of Revenue
13 of the seller or assignor of the tax credit in compliance
14 with procedures specified by the Department of Revenue.
15 (e) Sponsorship.--An eligible applicant may become a sponsor
16 by applying for a tax credit for a project authorized under
17 section 6 if a written agreement between the eligible applicant
18 and the owner of the dairy farm on which the project will be
19 completed is submitted to the Department of Revenue, certifying
20 that the owner of the dairy farm will comply with all of the
21 provisions of this act.
22 (f) Tax credits for pass-through entities.--
23 (1) If a pass-through entity has any unused tax credit,
24 it may elect in writing, according to procedures established
25 by the Department of Revenue, to transfer all or a portion of
26 the credit to shareholders, members or partners in proportion
27 to the share of its distributive income to which the
28 shareholder, member or partner is entitled.
29 (2) The credit provided under paragraph (1) is in
30 addition to any tax credit to which the shareholder, member
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1 or partner is otherwise entitled under this act.
2 (3) A pass-through entity and its partners or
3 shareholders may not claim a tax credit under this act for
4 the same project authorized under section 6.
5 Section 4. Tax credits.
6 (a) General eligibility.--Projects shall be eligible for a
7 tax credit as follows:
8 (1) Only eligible project costs incurred after the
9 effective date of this section shall be eligible for a tax
10 credit.
11 (2) A dairy operation shall have in place a current
12 conservation plan, a current agricultural erosion and
13 sediment control plan if engaged in plowing and tilling and a
14 current nutrient management plan if required, or the
15 development of such plans shall be included in the business
16 development plan submitted with the application.
17 (3) A project shall meet the design and construction
18 standards acceptable to the department.
19 (b) Amount of tax credit.--A tax credit equal to 25% of the
20 eligible costs under subsection (c) of a project authorized
21 under section 6 shall be granted.
22 (c) Eligible costs of a project.--
23 (1) All purchases of depreciable property related to
24 dairy farm modernization and expansion shall be considered
25 eligible costs of a project to which a tax credit may be
26 applied.
27 (2) In addition to the eligible costs under paragraph
28 (1), the following shall be considered eligible costs to
29 which a tax credit may be applied:
30 (i) Project design, engineering and associated
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1 planning.
2 (ii) Project management costs, including
3 contracting, document preparation and applications.
4 (iii) Project construction or installation.
5 (iv) Required postconstruction inspections.
6 (v) Interest payments on loans for project
7 implementation for up to one year prior to the award of
8 the tax credit.
9 (3) A tax credit shall not be applied to that portion of
10 a project cost under this section for which public funding
11 was received.
12 Section 5. Project maintenance.
13 (a) Time period.--A dairy farm receiving a tax credit under
14 this act shall maintain each component of a project receiving a
15 tax credit for the depreciable life of the component.
16 (b) Failure.--If the project is not maintained for the time
17 period required under subsection (a), the owner of the property
18 upon which the project exists shall return to the Department of
19 Revenue the amount of the tax credit originally granted. Any
20 amount paid to the Department of Revenue under this subsection
21 shall be deposited in the General Fund.
22 (c) Exception.--If the recipient of a tax credit provides
23 prior written notification to the department that the recipient
24 will be unable to maintain a dairy farm modernization or
25 expansion due to sale of the property, cessation of an
26 agricultural operation or other factors, the department may
27 direct the Department of Revenue to prorate the amount of the
28 tax credit that shall be returned based on the remaining
29 lifespan of the dairy farm modernization or expansion in
30 question.
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1 Section 6. Application, review and authorization by department.
2 (a) Application process.--An eligible applicant shall apply
3 to the department for authorization that a project is eligible
4 for a tax credit under the program. An application shall be
5 developed by the department and shall include all of the
6 following:
7 (1) A dairy business development plan and analysis
8 acceptable to the department.
9 (2) A description and total cost of the components of
10 the business development plan for which a tax credit is being
11 applied.
12 (3) Verification of eligibility under section 4(a).
13 (b) Review, notification and authorization.--The department
14 shall, within 30 days of receipt, review each application and
15 notify an eligible applicant whether or not the eligible
16 applicant meets the requirements and is authorized to receive a
17 tax credit under this act.
18 (c) Authorization of tax credit.--The department shall not
19 authorize tax credits that exceed the limits under sections 3(b)
20 and 9. The department shall authorize tax credits on a first-
21 come-first-serve basis.
22 (d) Completion of project.--Upon completion of a project
23 authorized under this section, an eligible applicant shall
24 submit to the department written notice of project completion.
25 The notice shall include all of the following:
26 (1) Documentation satisfactory to the department that
27 the project is complete.
28 (2) Documentation of the final eligible costs included
29 in the initial application.
30 (3) Any other documentation as may be required by the
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1 department.
2 (4) At its discretion, the department or a designated
3 agent may perform any site-specific inspections it deems
4 necessary to verify that the project meets the requirements
5 of this act.
6 (e) Notification to Department of Revenue.--Upon
7 determination that a project authorized under this section is
8 complete, the department shall provide notification to the
9 Department of Revenue of all of the following:
10 (1) That the eligible applicant has completed a project
11 which meets the criteria for a tax credit under this act.
12 (2) The amount of tax credit for the eligible applicant.
13 (f) Inspection.--Projects authorized under this section may
14 be subject to inspection by the department or an agent of the
15 department.
16 Section 7. Grant of tax credit.
17 The Department of Revenue shall grant a tax credit authorized
18 under section 6. The department shall, within 60 days of receipt
19 of the notice under section 6(e), issue a notice of grant of a
20 tax credit to the eligible applicant.
21 Section 8. Annual cap of tax credits.
22 Tax credits shall be granted to the extent that funds are
23 appropriated by the General Assembly. The total amount of tax
24 credits granted by the department shall not exceed the
25 following:
26 (1) For fiscal year 2008-2009, $50,000,000.
27 (2) For fiscal years 2009-2010, 2010-2011, 2011-2012 and
28 2012-2013, $50,000,000 per fiscal year.
29 Section 9. Report.
30 The department, in consultation with the Department of
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1 Revenue, shall annually report to the General Assembly on the
2 program as follows:
3 (1) The number of tax credits granted under the program.
4 (2) The types and locations of projects.
5 (3) The estimated benefits of the projects.
6 Section 30. Effective date.
7 This act shall take effect July 1, 2008, or immediately,
8 whichever is later.
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