Farmers interested in remedying the uncertainty of Alabama rainfall by installing irrigation equipment could see a return on their investments when they file their 2012 taxes.
The Irrigation Incentives Bill, signed by Gov. Robert Bentley May 9, provides an income tax credit of 20 percent of the cost of the purchase and installation of irrigation systems, or the development of irrigation reservoirs and water wells. The incentive also extends to the conversion of fuel-powered systems to electric power.
The one-time credit, which shall not exceed $10,000 per taxpayer, must be taken in the year in which the equipment or reservoirs are placed in service. The Alabama Department of Revenue will oversee implementation of the credit and coordinate efforts with the Alabama State Soil and Water Conservation Committee.
State Rep. Chad Fincher, R-Semmes, and State Sen. Arthur Orr, R-Decatur, sponsored the irrigation incentives legislation.
Dr. Richard McNider, University of Alabama at Huntsville professor and chairman of the Alabama Universities Irrigation Initiative, said while the incentive is great for farmers, the entire state benefits from the new law.
“If we expand the amount of irrigated acres in this state, we will become profitable,” McNider said. “Our studies show if we irrigate, we can compete with Midwestern farmers.”
Dr. Sam Fowler, director of the Alabama Water Resources Research Institute at Auburn University, echoed McNider’s comments, adding that enhancing rural areas benefits the state’s budget and allows for job creation.
“We don’t know how many farmers will take advantage of this incentive and what crops they will grow, so we can’t calculate the exact impact of the legislation,” said Fowler. “But, we estimate that for every $1 of tax credit, this legislation will generate $70-$80 of direct economic income within the first 10 years.”
Irrigation could also lower Alabama’s reliance on imported grain, added Fowler. With irrigation, much of the corn and soybeans used in poultry feed could be profitably produced here, creating thousands of jobs.
Compared to Georgia and Mississippi’s irrigated acreage, Alabama has among the least amount of acreage irrigated nationally.
Georgia and Mississippi each boast 1.5 million acres of irrigated land, while Alabama has 130,000 acres. Though adding and utilizing irrigation systems on farms would be beneficial to most farmers’ bottom line, the up-front cost can be a deterrent.
“To irrigate 100 acres, it may cost you $150,000 to install the equipment,” said Lowndes County farmer Richard Holladay, who uses an irrigation system on his farm. He said he understands why farmers hesitate to make the investment, but noted that irrigation systems are effective in counteracting the risk of relying on rainfall.
“Between April and October last year, we got two inches of rain,” said Holladay. “It’s hard to grow a crop that depends on water if you’re not getting any in that time period. Irrigation has helped us tremendously.
The Department of Revenue is developing rules for implementation of this credit. For more information, contact the department at (334) 242-1170, or visit revenue.alabama.gov.