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
NumbersTax Credit are CalculatedExample
1.$4,000,000.00 Maximum Available Tax Credit per Year$4,000,000.00 Total Available
2.Every month that is triggered gets added up. The total months triggered is divided by 12 months for the year to provide a percentage9 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 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*100 = $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 * $1.50 cwt/100 = $15,000
$15,000 is the individual tax credit for Example Farmer

 

Trigger Months CalculationsNumbersExampleJanuaryFebruaryComments
 1.Total Operating Costs$14.66$15.35 
 2.Hired Labor$1.85$2.01 
Numbers 1-3 Come from USDA Cost of Production Numbers3.41.8% of Unpaid Labor$1.30
($3.15*41.8%)
$1.37
($3.28*41.8%)
 
Cost of Production 4.Trigger Price$17.81$18.73Trigger Price is the addition of number 1-3
Farm Price comes from the Milk Market Administrator5.Farm Price$14.14$21.94 
6.Farm Price <TriggerYESNOIf the Farm Price is less than the Trigger Price then the month will be counted in the credit calculations for that year.