U.S. Senator Bennet Unveils Discussion Draft to Create New Tax Credit for Farmers and Ranchers to Capture Carbon in the Land Sector
Washington, D.C. — Colorado U.S. Senator Michael Bennet today released a discussion draft of legislation to establish a new tax credit for farmers and ranchers, state and local governments, and tribes, to sequester carbon in agriculture, forestry, rangelands, and wetlands.
“I’ve had countless conversations with farmers and ranchers across Colorado, and time and again I hear that the changing climate is making it harder for them to grow their business and make ends meet,” said Bennet. “The discussion draft we are releasing today is a first step in empowering farmers and ranchers to both improve their bottom line and be a part of the solution to a changing climate. And I believe this is an effort that both parties can unite around.”
In the most recent United Nations’ Intergovernmental Panel on Climate Change (IPCC) report, scientists estimated that the land sector can sequester 30 percent of global carbon emissions. In Colorado, many farmers and ranchers are already implementing innovative solutions to sequester carbon, but the cost of initial investments often presents a serious challenge.
The tax credit in Bennet’s proposal has two parts:
- Quantification Credit: Establishes a 30 percent tax credit for the cost of quantifying baseline and annual carbon sequestration levels for agriculture, rangeland, forest, and wetlands.
- Outcomes Credit: Creates a dollar per ton tax credit based on the amount of carbon sequestered. The amount of the credit is tied to the funding levels for carbon capture and storage in the 45Q tax credit for carbon sequestration and utilization from industrial sources.
The discussion draft also includes provisions to:
• Require the U.S. Department of Agriculture (USDA) to establish a reporting and verification accreditation system
• Outline a process to transfer the tax credit to other tax payers to account for businesses that do not have tax liability
• Promote long-term investments in carbon sequestration in the land sector
Bennet’s draft legislation is the result of conversations with producers and rural communities from all four corners of Colorado over the past two years. It builds on the existing 45Q tax credit for carbon sequestration from industrial emissions, which was created through a bipartisan initiative. The draft legislation also complements the USDA’s soil health-focused On-Farm Conservation Innovation Trials that Bennet secured in the bipartisan 2018 Farm Bill. The Colorado Conservation Tillage Association (CCTA) recently received a $1.6 million grant to implement a farmer-led initiative focused on soil health and regenerative management systems through the On-Farm Trials program.
To create a durable tax credit to both sequester carbon and raise farm incomes, Bennet has introduced this discussion draft prior to finalizing the legislation in order to incorporate input from a broad coalition of Americans.
The text of the discussion draft is available HERE.