Monday, April 15, 2013

Tax Credit for Guarding Agricultural Chemicals

The Internal Revenue Code provided a tax credit for certain companies to guard their agricultural chemicals, but this credit expired at the end of 2012.  It is too early to tell whether the failure of the sequester tax legislation to extend this credit will lead to a rash of disasters resulting from unsecured chemicals.

Specifically, the Heartland, Habitat, Harvest, and Horticulture (4-H) Act of 2008 created an "agricultural chemicals security credit" equal to 30% of the cost of certain security expenditures paid between May 22, 2008 and December 31, 2012.

The credit is allowed only to an "eligible agricultural business" engaged in selling agricultural products at retail to farmers and ranchers, or engaged in manufacturing, distributing, or aerially applying agricultural chemicals. It is not allowed to farmers and ranchers in general for securing their own agricultural chemicals. 

The eligible agricultural business is entitled to a tax credit equal to 30% of its expenditures to protect certain agricultural chemicals, including for employee security training and background checks, access controls, perimeter protection with security lighting and other equipment, and implementation of computer security measures.  The expenditures must be used to protect certain hazardous chemicals, pesticides, and fertilizers. 

The maximum credit allowed for each facility is $100,000 over every five years, but each taxpayer may claim up to $2 million of the credits each year for all of the taxpayer's facilities.

Section 45O Agricultural chemicals security credit.
(a) In general.  For purposes of section 38, in the case of an eligible agricultural business, the agricultural chemicals security credit determined under this section for the taxable year is 30 percent of the qualified security expenditures for the taxable year.
(b) Facility limitation. The amount of the credit determined under subsection (a) with respect to any facility for any taxable year shall not exceed—  (1) $100,000, reduced by (2) the aggregate amount of credits determined under subsection (a) with respect to such facility for the 5 prior taxable years.
(c) Annual limitation.  The amount of the credit determined under subsection (a) with respect to any taxpayer for any taxable year shall not exceed $2,000,000.
(d) Qualified chemical security expenditure.
For purposes of this section, the term “qualified chemical security expenditure” means, with respect to any eligible agricultural business for any taxable year, any amount paid or incurred by such business during such taxable year for—
(1) employee security training and background checks,
(2) limitation and prevention of access to controls of specified agricultural chemicals stored at the facility,
(3) tagging, locking tank valves, and chemical additives to prevent the theft of specified agricultural chemicals or to render such chemicals unfit for illegal use,
(4) protection of the perimeter of specified agricultural chemicals,
(5) installation of security lighting, cameras, recording equipment, and intrusion detection sensors,
(6) implementation of measures to increase computer or computer network security,
(7) conducting a security vulnerability assessment,
(8) implementing a site security plan, and
(9) such other measures for the protection of specified agricultural chemicals as the Secretary may identify in regulation.
Amounts described in the preceding sentence shall be taken into account only to the extent that such amounts are paid or incurred for the purpose of protecting specified agricultural chemicals.
(e) Eligible agricultural business.
For purposes of this section, the term “eligible agricultural business” means any person in the trade or business of—
(1) selling agricultural products, including specified agricultural chemicals, at retail predominantly to farmers and ranchers, or
(2) manufacturing, formulating, distributing, or aerially applying specified agricultural chemicals.
(f) Specified agricultural chemical.
For purposes of this section, the term “specified agricultural chemical” means—
(1) any fertilizer commonly used in agricultural operations which is listed under—
(A) section 302(a)(2) of the Emergency Planning and Community Right-to-Know Act of 1986,
(B) section 101 of part 172 of title 49, Code of Federal Regulations, or
(C) part 126, 127, or 154 of title 33, Code of Federal Regulations, and
(2) any pesticide (as defined in section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide Act), including all active and inert ingredients thereof, which is customarily used on crops grown for food, feed, or fiber.
(i) Termination.
This section shall not apply to any amount paid or incurred after December 31, 2012.

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