Shapiro Administration Invests $13 Million in Tax Credits to Support Farmers Improving Water, Soil Quality

Agriculture Secretary Russell Redding today invited Pennsylvania farmers to apply for $13 million in tax credits available to support their efforts to improve soil health and water quality. Tax credits through Pennsylvania’s innovative conservation financing program, Resource Enhancement and Protection (REAP), can be combined with other state funding, including the Agriculture Conservation Assistance Program, and Conservation Excellence Grants, as well as federal funding to help pay for farm enhancements that protect the environment and boost farm sustainability.

“Pennsylvania farmers are investing heavily in cleaner water and productive soil to sustain us in the future,” Secretary Redding said. “Their investments, multiplied exponentially by support from Governor Josh Shapiro and the General Assembly, are paying dividends in the form of healthier waterways and a greener future for Pennsylvania farms and communities.”

Pennsylvania’s State Conservation Commission, a partnership of the PA Departments of Agriculture and Environmental Protection, is accepting applications for REAP tax credits from agricultural producers who implement best management practices or purchase equipment to reduce nutrient and sediment runoff, enhance soil health and improve water quality across the mid-Atlantic region.

Governor Shapiro’s 2024-25 budget also includes new investments in agriculture innovation and conservation to keep Pennsylvania a national leader. New investments include a $10 million Agriculture Innovation Fund, plus a new state investment of $35 million to continue Clean Streams Fund support for Agriculture Conservation Assistance Program (ACAP), and another $5 million for the Nutrient Management fund.

Roughly $85 million of the $154 million American Rescue Plan dollars Pennsylvania invested in ACAP are helping more than 1,200 farmers improve conservation on their farms since January 2023. New state investments will continue that momentum and be magnified further by current historic level of state and federal conservation investments.

Pennsylvania farms increased no-till acres by 2.3% since 2017 to nearly 1.65 million statewide, and cover crop acreage by 7.9%. No-till and cover crops are among the conservation practices improving waterways, building healthier soil, and building bottom lines by reducing input costs and improving yields. The impact of Pennsylvania’s conservation investments – by farmers and government – are evident in this month’s announcement of the best health report the Chesapeake Bay has had in more than two decades.

REAP, which is in its sixth year of increased funding under the PA Farm Bill, awards Farmers up to $250,000 credits in any seven-year period. Spouses filling jointly can also use REAP Tax Credits. 

Examples of funded projects include no-till and precision ag equipment, waste storage facilities, conservation plans, and Nutrient Management Plans. Also eligible for tax credits are measures that limit run-off from high animal-traffic areas, as well as cover crops and stream buffers that prevent erosion, keeping nutrients in the soil and out of the water.

Farmers may receive REAP tax credits of 50 to 75 percent of a project’s eligible out-of-pocket costs. Farmers whose operation is in a watershed with an EPA-mandated Total Maximum Daily Load (TMDL) can receive REAP tax credits of 90 percent of out-of-pocket costs for some projects.

REAP applications are reviewed on a first-come, first-served basis. Baseline eligibility includes compliance with the PA Clean Streams Law and the Pennsylvania Nutrient and Odor Management Law.

Private investors may act as project sponsors by providing capital in exchange for tax credits, which allows farmers to receive funds quicker and increases lenders’ confidence. Over 80 businesses have participated in REAP by sponsoring BMP projects on farms; or by buying REAP tax credits from farmers. Any individual or business subject to taxation by Pennsylvania through personal income tax, corporate net income tax, the bank shares tax or others is eligible to participate in REAP.

REAP has awarded over $155 million in PA income tax credits to farmers and businesses for more than 8,500 projects on 4,000 farms since the program began in 2007. These projects have kept 6.5 million pounds of nitrogen, 350,000 pounds of phosphorus, and 350,000 tons of sediment out of Pennsylvania streams and rivers and waterways they feed.