The Inflation Reduction Act was signed into law Aug. 16 after more than a year of back-and-forth negotiations. The IRA is a budget reconciliation bill and includes revisions from both the House and Senate agricultural committees.
The bill comes with a $739 billion spending package. Of that $739 billion, $40 billion was allocated to agriculture, according to Mike Zahrt.
Zahrt is a business and estate planning lawyer in Grand Rapids, Michigan.
The main way dairy farmers can take advantage the IRA is to sign up for a conservation program.
Within the bill, $20 billion is allocated to existing conservation programs such as the Agricultural Conservation Easement Program, Conservation Stewardship Program, Environmental Quality Incentives Program and the Regional Conservation Partnership Program. The funds are intended to bolster incentive payments to encourage farmers to increase conservation practices
Another $19.5 billion went toward the U.S. Department of Agriculture Natural Resources Conservation Service.
The IRA allocated $14 billion to rural electric cooperatives to encourage renewable energy sources, such as on-farm wind turbines or solar panels. The IRA also set aside $500 million for the development of infrastructure to support higher blends of biofuels.
Drought relief was also included in the IRA at $4 billion, which is primarily designated toward southern and western states.
Debt relief and financial assistance programs were included for socially disadvantaged farms; that amount was $5 billion.
Along with the IRA comes tax implications.
A tax increase will affect corporations who have profits over $1 billion.
There are tax credits for farmers investing in renewable forms of energy including wind turbines, solar panels or buying electric vehicles. But there are certain stipulations, such as electric cars must be American made, and the household income cannot exceed $300,000.
Investment tax credit now includes the production of biogas, such as methane digesters. The biogas system must be set up no later than 2025. There are additional tax credits if the methane digester is built with U.S. steel and is located near an area where another energy source is produced.
Another focus of the IRA is health care. To increase negotiations between Medicare and pharmaceutical companies, $98 billion was set aside to lower the cost of prescription medications. The IRA also extended the Affordable Care Act to 2025 rather than expiring at year-end.
The IRA will run through the 2031 federal fiscal year, but many of the incentives mentioned in the bill will accept contracts through 2026. Additionally, there will be a new farm bill in 2023. It is not known how the two bills will affect one another.