Arkansas Natural Resources Commission (ANRC)

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Riparian Zone Restoration and Wetland Creation Tax Credit - Fact Sheet

CREATION & RESTORATION OF PRIVATE WETLAND & RIPARIAN ZONES TAX CREDIT PROGRAM

The following is general information on this Tax Credit Program. Anyone wishing to submit an application for a tax credit under this program should obtain a copy of Title XIII - Rules Governing the Tax Credit Program for the Creation and Restoration of Private Wetland and Riparian Zones from the Arkansas Soil and Water Conservation Commission.

What is the purpose of the program?

The purpose of this program is to encourage private landowners to restore and enhance existing wetlands and riparian zones, and when possible to create new wetlands and riparian zones. This is because the State continues to experience significant loss of wetlands, and because the majority of lands suitable for wetlands and riparian zones are held by private owners. Wetlands and riparian zones provide the State with significant benefits in the areas of flood control, water quality enhancement, fish and wildlife habitat, recreation, and recharging of groundwater. The program was created by the Arkansas Private Wetland and Riparian Zone Creation and Restoration Incentive Act of 1995" (Arkansas Code Annotated §26-51-1501 et seq. (Act 561 of 1995)," which allows a credit against the tax imposed by the Arkansas Income Tax Act (Arkansas Code Annotated §26-51-101 et seq.) for any taxpayer engaged in the development or restoration of wetlands and riparian zones.

Who is responsible for administering the program and carrying out the rules?

The Executive Director of the Arkansas Soil and Water Conservation Commission is delegated with the responsibility of administering the Wetland/Riparian Tax Credit program.

Is there a Fee Involved?

Yes. The fee for enrollment in the program is three percent (3%) of the total approved tax credit (minimum $100.00) to be paid to the Commission by the applicant when the application is filed. If a project is rejected the full application fee will be refunded.

When Can Tax Credits be Applied?

The tax credit provided under the Act may be applied to taxable years beginning on or after January 1, 1996, and all taxable years thereafter.

Are There any Restrictions to Collecting Tax Credits in this Program?

Yes. Taxpayers claiming a tax credit under this Act may not claim a credit under the Water Resources Conservation and Development Incentives Act of 1985 or any similar act for any costs related to the same project. Any portion of a project that is a mitigation activity required under state or federal law is not eligible for tax credit. Tax credits issued to partnerships or other corporate entities may pass through to their members, managers, partners, shareholders and/or beneficiaries, but are not transferable to other individuals or entities.

How Much Credit May a Taxpayer Use?

The amount of credit that may be used for a taxable year may not exceed the lesser of the amount of individual or corporate income tax otherwise due or five thousand dollars ($5,000) per taxpayer. Any unused credit may be carried over for nine years after the year the credit originated for a total tax credit of $50,000 per project.

Are there Specific Requirements Related to Project Development And Operation?

Yes. There are general requirements related to how long projects have to be completed, what type of records must be maintained by the taxpayer, notification of project completion, project maintenance, and inspection of projects. There are specific criteria indicating what costs are eligible for credit, such as procurement of professional services required for project development and maintenance, and for activities that are considered creation, restoration or improvement are eligible for tax credit. Criteria detail costs of activities in Riparian Zones and Wetlands, and include such things as site preparation, establishment of permanent vegetative cover, construction of exclosures, bank stabilization end erosion control, construction of berms, water control structures, and other activities.

Are There Any Design Standards Requirements?

Yes. Project activities have to meet or exceed the standards established in the program rules and regulations, and structural aspects of the project must be reviewed by a professional engineer prior to filing an application. General standards, such as minimizing soil erosion and water degradation during construction, utilization of Best Management Practices, and complying with all applicable federal, state and local laws have been established for all projects. In addition to the general standards required for all projects standards specific to projects in riparian zones and wetlands have been established.

What Happens if the Tax Payer Fails to Complete Installation?

If the taxpayer fails to complete the project as a result of conditions beyond his control, the project may be extended for one year. All credits received must be repaid if the tax payer fails to complete the project within the specified period under any other circumstances. Additionally, the project will no longer be authorized for tax credit purposes and further credits will not be allowed. Other conditions may apply for projects terminated prior to expiration of minimum life of the project, projects determined to have been terminated without receipt of written notice, or upon sale of the real estate involved in the project. Any failure of the taxpayer to comply with the filing and required repayment of taxes will result in an assessment by the Department according to the Tax Procedures Act.

APPLICATION PROCEDURES

Applicants must submit a written application on a form provided by the Executive Director, and shall include the following information (Additional pages should be added as necessary to provide all information requested):

1. APPLICANT INFORMATION

Applicant's name, address, Federal Employee Identification Number and/or Social Security Numbers (Fed EI No. and/or S.S. No.), telephone and facsimile numbers

2. OWNERSHIP INFORMATION

2a. Type of ownership (individual, corporation, partnership, Sub S, etc.) of taxpayer.

2b. List of officers, Subchapter S shareholders with percentage of ownership, partners with percentage of ownership, etc.

2c. Address; telephone and facsimile numbers of all participating taxpayers.

2d. Contact person's name, address, telephone and facsimile numbers.

2e. Current and historical ownership information, including whether adjacent land is owned by taxpayer.

3. SITE INFORMATION

3a. Location of project - include maps and description of site location (e.g., county, section, township, range, latitude, longitude, watershed, etc.).

3c. Name of water body(ies) affected by the proposed restoration project, if applicable.

3d. Description of current and historical land use of project site and of adjacent properties.

3e. Site characterization information in sufficient detail necessary to describe the proposed project. Include the following if applicable to the project: Soil type, Existing vegetation, Information describing the condition of site (e.g., site highly eroded or scoured, banks sloughing, heavily grazed or trampled vegetation, compacted soils, riprapped banks, etc.), Topography, Flood plain boundaries if available, and Pictures of the site, including aerial photographs if available.