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 legislation 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, the bill 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, while excluding motor vehicles and extending the exemption to 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, if the property is disposed of within three years, 100% of the credit must be repaid, and if disposed of within the next two years, 50% must be repaid. The fiscal impact is estimated 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 face 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