The Department has established a Dairy Farmer Tax Credit Program under which a dairy farmer who holds a Certificate of Registration may be allowed a refundable income tax credit based on the amount of milk produced and sold. The credit may be claimed against the taxes due pursuant to chapters 62 or 63 of the Massachusetts General Laws. The credit shall be based on the United States Federal Milk Marketing Order for the applicable market such that if the United States Federal Milk Marketing Order price drops below a Trigger Price anytime during the taxable year such taxpayer may receive the tax credit.

Dairy Tax Credit Calculations

The Dairy Farmer Tax Credit is calculated based on monthly figures such that if the United States Federal Milk Marketing Order price drops below a Trigger Price anytime during the taxable year, a dairy farmer who holds a Certificate of Registration will be allowed a refundable income tax credit based on the amount of milk produced and sold.  Below are how the Dairy Farmer Tax Credit and the Trigger Months are calculated.    

How the Tax Credit Rate and Individual Tax Credits are Calculated

Step

Tax Credit are Calculated

Example

1.

$4,000,000.00 Maximum Available Tax Credit per Year

$4,000,000.00 Total Available

2.

Every month that is triggered is added up. The total months triggered is divided by 12 months for the year to provide a percentage

9 months triggered out of 12 months
9÷12*100=75%

3.

$4,000,000.00 is then multiplied by this percentage to give that years Tax Credit amount.

$4,000,000 × 75%= $3,000,000 for Tax Credit

4.

Massachusetts Farmers report Pounds of Production (subject to verification) to the Massachusetts Department of Agricultural Resources.

200,000,000 lbs of production reported to DAR from eligible dairy farmers in Massachusetts

5.

The Tax Credit Rate is then calculated by dividing the Tax Credit for the year by the Total Pounds of Production.

$3,000,000 Tax Credit ÷ 200,000,000 lbs of production = $0.0015/lb * 100lbs/cwt = $1.50 cwt for Tax Credit Rate

6.

The Tax Credit Rate is then multiplied by each individual farms production to get their individual credit.

Farmer Reports 1,000,000 lbs production for individual farm
1,000,000 lbs * 1cwt/100lbs * $1.50/cwt = $15,000
$15,000 is the individual tax credit for Example Farmer

 

Step

Example

January

February

Trigger Months Calculations

1.

Total Operating Costs

$19.51

$19.65

 

2.

Hired Labor

$2.13

$2.13

 

3.

Unpaid Labor

$6.48

 

$6.49

 

Steps 1-3 come from UMass Cost of Production Numbers

4.

Trigger Price

$28.12

$28.27

Trigger Price is the addition of cost of production numbers in steps 1-3

5.

Farm Price

$22.93

$29.42

Farm Price comes from the Northeast Federal Milk Marketing Order

6.

Farm Price <Trigger

YES

NO

If the Farm Price is less than the Trigger Price then the month will be counted in the credit calculations for that year.