NY Tax Credits for Farm Employers, Including Overtime

The 2022-23 Budget Act for New York State contained a couple of important tax credits for New York farm employers. Let’s take the simpler one first:

Farm Workforce Retention Credit

Since 2017 the state has offered a tax credit to farm employers that they can receive for each farm worker employed. The amount started at $250 in 2017 and was up to $600 for 2021. The amount of this tax credit is now doubled to $1,200 per eligible farm employee who worked at least 500 hours. Find more details from the state’s Department of Taxation and Finance.

Farm Employer Overtime Tax Credit

Overtime for farm employees is a subject of intense political debate in New York. After years of hearings, campaigns, wage board votes, and other actions, we’re now waiting to hear exactly what policy the Governor and Commissioner of Labor will choose. The wage board voted, over the objections of its farm representative, to recommend lowering the overtime threshold gradually to 40 hours per week by 2032. With the recently passed budget, New York state government created a new tax credit that will essentially cover the cost of overtime for farm employers. Here are a few details about the tax credit:

1. Farm employers who are corporations (including a New York S corporation), sole proprietorships, LLCs and partnerships are eligible.
2. Only “farm laborers” as defined in NY labor law are eligible employees. This makes sense because these are the only types of employees for whom overtime is required; family members and certain executives, professionals, and administrative personnel are excluded.
3. Eligible overtime hours include those in any calendar week that exceed the overtime threshold set by the commissioner of labor, up to 60 hours in a week. This is important, only those hours between the threshold and 60 hours are reimbursable through the tax credits, any overtime hours worked above 60 will not be reimbursed to the employer.
4. Farm wineries and cideries who derive more than 50% of their income from beverage sales will need to follow some special rules. Only workers employed on qualified agricultural property will be eligible for the tax credit.
5. Only the overtime premium is reimbursable through the tax credit. For example, if the threshold is at 56 hours in 2024, and an employee whose regular pay is $18/hour works 58 hours in one week that year, then she will be eligible for two hours of overtime pay. Overtime is 150% of regular pay so she will earn $27 for each overtime hour worked. Only the overtime premium, the extra $9/hour over her regular rate, is eligible for reimbursement through the tax credit.
6. When pay goes up, marginal costs such as taxes and worker’s compensation premiums also go up. Recognizing this, the overtime tax credit will allow employers to take 118% of the eligible overtime compensation to cover those additional costs.
7. Advance payments of tax credits for overtime premiums paid from January 1st to July 31st are possible. To receive advance payments, employers will need to prepare their claim and submit it to the NYS Department of Agriculture and Markets.
8. NYS Ag and Markets will be involved in this process. They will develop an application process that employers will use to document their claim for the tax credit. Ag & Markets will then issue a certificate of tax credit to eligible employers. All of the details of this process will need to be worked out.

Obviously, there are many details to work out in the coming years. Farm employers need to pay careful attention to their employee payroll record systems. It is essential to have accurate and detailed records of employee hours worked and overtime paid in order to take advantage of this important and potentially large tax credit.