Substitute House Bill No. 7175 proposes the establishment of a Farm Investment Tax Credit and an increase in the property tax exemption for farm machinery. Effective January 1, 2026, the bill defines "eligible farmers" as those whose federal gross income from farming constitutes at least two-thirds of their excess federal gross income, which is defined as income exceeding $30,000. The bill introduces a refundable tax credit of 20% for eligible farmers on investments in farm machinery, equipment, and buildings acquired or constructed after January 1, 2026. Additionally, it amends Section 12-91 of the general statutes to increase the property tax exemption for farm machinery from $100,000 to $250,000, effective October 1, 2025. This exemption applies to all farm machinery, excluding motor vehicles, and includes horses or ponies used exclusively in farming.

The bill also includes provisions for credit recapture, requiring farmers to repay a portion of the tax credit if the property is not used for agricultural production within specified timeframes. Specifically, farmers must repay 100% of the credit if the property is disposed of within the first three years, or 50% if this occurs within the subsequent two years. The fiscal impact is projected to result in a General Fund revenue loss of approximately $2.5 million annually starting in FY 27, along with a one-time cost of up to $75,000 for system updates at the Department of Revenue Services. Municipalities may experience a cumulative grand list reduction of up to $144 million beginning in FY 27 due to the increased property tax exemption.

Statutes affected:
Raised Bill: 12-91
FIN Joint Favorable Substitute: 12-91
File No. 887: 12-91