Talking Taxes: Topics & Takeaways

It’s tax season for many of us right now – but the season has already wrapped up for most farmers, whose boots are typically deep in the muck from early January through the filing deadline of March 1st. And since farm businesses in Maine can be incorporated under a variety of business structures with different tax implications, the muck can be tricky to wade through without support.

Maine Farmland Trust organized a special tax workshop last fall to tackle a few of the tax topics we’ve been hearing farmers ask about, such as: how to maintain the farm as an asset in the long term (and prevent it being the only asset when looking to transfer); knowing when it makes sense to exchange ownership within a business; long-term tax planning and strategy; and understanding tax implications of things like depreciation and grant income, retirement, and more.

A group of farmers from around the state came together with MFT staff and a panel of tax experts (Accountant Becky Adams and Managing Partner Phil Doucette of Austin Associates, CPA & financial coach Allison Bishop, and Ameriprise financial advisor Michelle Maki) to learn and ask questions as they considered how certain decisions and tax implications play into their goals for the farm.

“We have a great, trusted relationship with our accountants, but we've never really incorporated tax planning into our long term business planning. We’re recognizing that there's probably questions and things that we're not thinking of that we should be starting to incorporate as we're starting to look further down the road, not just next year, but three, five, ten years. And this is a great place to do that,” said Ben Whalen, who attended the workshop and is a co-owner of Bumbleroot Organic Farm in Windham.

10 years into their organic vegetable and flower business, Ben shared that Bumbleroot is thinking about the future a lot as they work to increase the farm’s net profit (helped along by the dahlia tubers they had just finished digging – a bestseller that the farm ships nationally). The farm business files under a fairly unique designation, so there are a lot of nuances to consider as they figure out how to channel the farm’s profits to benefit the farm owners and workers individually and as a business. “It’s complicated, and there are still a lot of questions,” said Ben, “but we’re really looking at the tax realities and what we can do about it so that we can orient our business in a direction that's going to benefit everybody.”

Brady Hatch of Morning Dew Farm, an organic diversified vegetable farm in Damariscotta, also attended the workshop with the long view in mind. “We’re 20 years into farming, so when we look at the next 20 years, we're thinking about what sustainability means for us, and what a reasonable downshift and exit strategy is going to be, so we’re casting a broad net and trying to pick up whatever tools might come in handy.”

For Brady, learning about how to incorporate depreciation of farm infrastructure (like the wash-pack building they built with support from an MFT Implementation Grant, where they spent this winter dehydrating and processing a brand new product: paprika) into the farm’s tax strategy was a helpful takeaway. Another was getting some new ideas for thinking about wellness programs and other employee benefits with special tax implications.

Although there’s no one-size-fits-all when it comes to taxes, everyone walked away with something new to consider. “It’s interesting to interact with other farms of different sizes, scales and shapes and see how other farms are navigating it. And always, always good to have experts on the panel to bounce things off of and hear their perspectives too,” said Betsy Bullard of Brigeen Farms, a 10th generation dairy farm in Turner. (Read more from Betsy here and here.)

‍Are you a farmer? To find out about future workshops, sign up for The Dirt, our monthly farmer newsletter, and learn more about our farmer programs here.

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And if you’re interested in learning about farm-friendly tax strategies at the local level, such as current use tax programs and voluntary tax programs for protected farm properties, download our guide on Municipal Tax Programs (with more resources in the full guide here).