Natural Resources

Efficiently and responsibly managing and protecting our water and land resources for the sustainability, health, safety, and economic benefit of the State of Arkansas

Groundwater Conservation Tax Credit Program

Description of incentives

The purpose of this program is to encourage water users to invest in (1) the construction of impoundments to use available surface water, thereby reducing their dependence on groundwater; (2) the conversion from groundwater use to surface water use; and (3) land leveling to reduce agricultural irrigation water use. Tax credits may pass through an individual, fiduciary, partnership, limited liability company, or corporation.

Available tax credits

1. Impoundments
For the construction of impoundments of at least 20 acre-feet, an income tax credit of 50 percent of the project cost incurred in construction, installation, or restoration is available. The maximum credit in one taxable year is the lesser of the taxpayer's income tax due or $18,000. Unused credit may be carried over for a maximum of 15 years.

2. Conversion
A. For the conversion from groundwater use to surface water use outside a critical groundwater area, an income tax credit of 25 percent of the project cost is available. The maximum credit in one year is the lesser of the taxpayer's income tax due or $18,000. Unused credit may be carried over for 15 years. The maximum tax credit amount for conversion is $35,000. *

B. For the conversion from groundwater use to surface water use within a critical groundwater area, an income tax credit of 50 percent of the project cost is available. The maximum credit in one year is the lesser of the taxpayer's income tax due or $18,000 for agricultural and recreational uses and $200,000 for industrial and commercial uses. Unused credit may be carried over for a maximum of 15 years by agricultural and recreational users and for 4 years for industrial and commercial users. Maximum tax credit amount for conversion is $35,000. *

3. Leveling
For agricultural land leveling projects that conserve irrigation water, an income tax credit of 25 percent of the project cost is available. The maximum credit in one year is the lesser of the taxpayer's income tax due or $18,000. Unused credit may be carried over for a maximum of 15 years.

An application must be approved by your county conservation district, then submitted to the Commission and approved before a taxpayer may begin construction of a project and claim credits. All projects must be maintained for a minimum of 10 years following issuance of the Certificate of Completion, or benefits will be subject to recapture. An application fee of three percent of the total approved tax credit must be paid, and there is a minimum fee of $100 and a maximum fee of $1,500. Maximum tax credit amount for land leveling is $35,000.
Taxpayers may be eligible for a tax deduction in an amount equal to the difference between the project cost and the credit used.

To apply for tax credits, contact your local conservation district.

*Installation of devices on wells to indicate water use entitles a well owner to tax credit for conversion.

Forms
Groundwater Application Meter and Measure
Groundwater Application for Certificate of Completion
Groundwater Application for Certificate of Approval
Groundwater Conservation Tax Credits Fact Sheet

Christy Steward
Environmental Program Coordinator
Arkansas Department of Agriculture
Natural Resources Division
10421 W Markham St.
Little Rock, AR 72205
Phone (501) 682-1697
Email: christy.d.steward@agriculture.arkansas.gov
agriculture.arkansas.gov