How vineyards can work around 2013 tax challenges

With the end of 2013 drawing near, businesses and government agencies are buzzing about the “fiscal cliff” we are facing. The term refers to the financial problem that the US government faces when the terms of the 2011 Budget Control Act go into effect. Among these are the end of certain tax cuts (payroll, for example) and tax breaks for businesses.

The fiscal cliff leaves many vineyards with financial uncertainty. Will tax burdens increase even more? In New York, we already face some of the nation’s highest taxes. While we wait to learn what Congress will do, it may be a good time to review some of the existing tax relief programs available for New York vineyards. Property taxes in New York are a substantial portion of a vineyard’s operating budget. There is some property tax relief for these agricultural operations under several programs. Vehicles, power utilities, equipment and machinery used primarily for farm production may qualify for exemption from sales and use tax (typically around 8%). The sales tax exemption also applies to services and building materials used for farm building construction, repair and maintenance. Contact the New York Sales and Use Tax Department for details.

If a vineyard is expanded or replanted, a tax exemption is available for up to four successive years to provide relief during the period before the first grapes can be harvested. (Generally, the replanted portion must be less than 20% of the average total.) To apply, contact the New York State Department of Taxation and Finance and the New York Office of Real Property Services (ORPS) or your local tax assessor.

The first step is to have the land assessed as agricultural land (at the use value rather than the full market value) if it meets the requirements: seven acres, farmed by a single operation having an average of $10,000 or more annual revenues that was used for at least two consecutive previous years for crop or livestock production. To apply for an agricultural assessment, visit the local county Soil and Water Conservation District Office. The agricultural assessment must be annually filed. Be aware that there are penalties (repayment of the unpaid taxes) for converting the land to nonagricultural use once it is placed in the land trust.

Certain structures that are located on agricultural land are exempt from taxation: silos, grains storage, bulk tanks, manure facilities and temporary greenhouses. The tax exemption does not extend to processing, retail or residential use structures.

School district property tax credit (not exemptions) are available for farmers who receive at least 2/3 of excess federal gross income from farming activities and have a New York adjusted gross income of less than $150,000. These credits can be combined with STAR exemptions on the residential structures. To apply for these school tax credits, contact the ORPS.

Owners of barn structures over 50 years old and in need of significant repair can receive funding for restoration and preservation including stabilization and repairs to roofs, foundations and walls. The owner must provide a matching share from 10-50% in the form of cash, labor or in-kind services. To apply, contact the New York Office of Parks, Recreation and Historic Preservation.

Contiguous forest land parcels over 50 acres can receive property tax assessment reduction in exchange for following NYDEC approved forest management plans. The land owner must annually commit to the program and will be required to comply for no less than 10 years. There are penalties for converting the land to non-forest uses. To apply, contact New York Department of Environmental Conservation Division of Land and Forests.