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  • July 20, 2017

    Keeping Farmland in Agricultural Use: Applying for Tax Credits with the Farmland Preservation Program

    Attorneys who represent rural landowners should be prepared to advise their clients on tax credits available via the farmland preservation law, especially for clients who are retired farmers renting their land for farming. Troy Schnieder talks about the law and what is required to claim tax credit.

    Troy R. Schneider

    Farmland preservation laws have existed in Wisconsin since 1981. Wisconsin's program, offered through the Department of Agriculture, Trade, and Consumer Protection, encourages farmland preservation by providing tax credits to eligible farmland owners.

    The laws pertaining to the program are fairly straight-forward as to how to claim the credit. However, few attorneys take the time to understand the program.

    Claiming a Tax Credit

    In order to claim the tax credit, a landowner must be eligible to claim the credit. To be eligible, a landowner must be a Wisconsin resident for the entire tax year, must have eligible farm land, and may not claim homestead credit or veterans and surviving spouses credit for the same filing year.

    Determining Eligibility

    Land is eligible if it:

    • is located in a certified farm preservation district, and/or
    • is covered by a farmland preservation agreement, and
    • produced at least $6,000 in gross farm revenue during the previous year or $18,000 during the previous three years.

    If the land is rented out, the value of what is produced by the farmer who rents the land can be used to meet the gross farm revenue requirement.

    Troy R. Schneider Troy R. Schneider, U.W. 1998, is a partner with Twohig, Rietbrock, Schneider & Halbach, SC,Chilton, where he concentrates his practice in representing farm families and agribusinesses.

    Finally, land is only eligible if it is compliant with applicable state soil and water conservation compliance requirements. This requires landowners to obtain a certificate of compliance from the county's land conservation department to show that the farm meets state soil and water conservation standards.

    Filing a Claim: Schedule FC-A versus Schedule FC

    A farmland preservation credit claim may be filed using Schedule FC-A, Schedule FC, or both. However, a credit may not be claimed on the same acreage using both Schedules.

    There are several important differences between Schedule FC and Schedule FC-A. The credit for Schedule FC is computed based on household income and property taxes on eligible land. Specifically, a lower income and higher property taxes means a higher credit.

    The credit for Schedule FC-A is a flat, per acre credit. Specifically, the credit is:

    • $5 per acre for land covered by a new or modified farmland preservation agreement,
    • $7.50 per acre for land located in a certified farmland preservation zoning district and
    • $10 per acre for land covered by a new or modified farmland preservation agreement and located in a certified district.

    The qualifications for Schedule FC and Schedule FC-A are different as well.

    • For Schedule FC, the claim must be based on at least 35 acres of farmland and subject to a farmland preservation agreement entered into before July 1, 2009.
    • For Schedule FC-A, the claim can be based on any acreage subject to a farmland preservation agreement entered into on or after July 1, 2009, or is located in a farmland preservation zoning district. In addition, land in the managed forest program may also be claimed on Schedule FC-A, whereas on Schedule FC it cannot.

    Many counties do not have any effective pre-2009 farmland preservation agreement remaining. Therefore, most claims now are prepared using Schedule FC-A.

    Removing Farmland from the Program

    It is possible to remove farmland from the farm land preservation program after you have received the credit.

    The payback portion of the program is handled by the Wisconsin Department of Agriculture Trade and Consumer Protection (DATCP). It is recommended that DATCP be contacted for assistance in calculating the payback.

    To summarize repayment for agreements entered into before July 1, 2009, the landowner must pay back the last 10 years of tax credits received by any owners of the land.

    For agreements applied for after July 1, 2009, the landowner must pay a conversion fee that is equal to three times the per acre value, times the number of acres being released, for the year in which the land is released. The value per acre is determined by taking the highest value category of tillable land in the city, village, or town the land is located in.

    Keeping Land in Agricultural Use

    Participation in the state's farmland preservation program gives eligible landowners the opportunity to claim a farmland preservation tax credit on their income tax return in exchange for keeping the land in agricultural use.

    Attorneys who represent rural landowners should be prepared to advise their clients of the program’s availability and requirements.

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    Solo/Small Firm & General Practice Blog is published by the Solo/Small Firm & General Practice Section and the State Bar of Wisconsin; blog posts are written by section members. To contribute to this blog, contact Nancy Trueblood and review Author Submission Guidelines. Learn more about the Solo/Small Firm & General Practice Section or become a member.

    Disclaimer: Views presented in blog posts are those of the blog post authors, not necessarily those of the Section or the State Bar of Wisconsin. Due to the rapidly changing nature of law and our reliance on information provided by outside sources, the State Bar of Wisconsin makes no warranty or guarantee concerning the accuracy or completeness of this content.

    © 2024 State Bar of Wisconsin, P.O. Box 7158, Madison, WI 53707-7158.

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