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Wisconsin Offers Tax Credits for Dairy and Meat Processors

posted on February 27, 2009

MILWAUKEE (AP) - Wisconsin is looking to expand its dairy and meat processing industries with two new tax credit programs included in a state budget bill approved last week.

The programs offer tax credits to dairy cooperatives and meat processors who upgrade plants to increase production or efficiency. They are modeled on a similar tax credit for private, noncooperative dairy plants.

The state is aiming the tax credits at agriculture industries that are strong but have the potential for more growth, said Gary Radloff, director of policy and communications for the Wisconsin Department of Agriculture, Trade and Consumer Protection.

"We're proud of all Wisconsin agriculture," he said. "But we are particularly strong in specialty cheese manufacturing, small meat processing. ... It's kind of a combination of playing to your strong hand."

Dairy cooperatives and meat processors will be eligible for tax credits of up to 10 percent of the cost of improvements with a maximum of $200,000 per plant. The dairy cooperative program will give up to $600,000 in tax credits for work done in 2009, and the meat processing program will provide $300,000.

Cooperatives are owned by their member farmers, who share and pay taxes on their profits.

The state continues to offer tax credits for noncooperative dairy plants, with up to $700,000 for work done this year. The credits can be claimed next year on businesses' 2009 taxes.

The tax credits were included in a budget bill the Legislature approved last week to start reducing a shortfall projected to grow to $5.7 billion by mid-2011. The bill cut $700 million from that amount, with the rest to be made up in the state's next two-year budget.

While the tax credits deprive the state of some immediate income, agriculture officials said they will foster the state's food processing and agriculture industries and help create jobs, which is a priority amid the recession.

The dairy manufacturing facility tax credit for noncooperative plants cost the state $600,000 on $42 million in improvements done in 2007, according to the Wisconsin Cheese Makers Association. Those investments generated nearly 70 jobs, it said.

Radloff called those numbers "very strong," saying the plants' expansion also created more work on dairy farms and in related businesses that wasn't accounted for in the tax credit applications. Figures for 2008 are not yet available.

State officials decided to extend the tax credits to meat processors because they are ripe for expansion after a change in federal law last year allowed them to begin shipping meat across state lines, Radloff said. Wisconsin has about 340 licensed meat processing plants, most of which are small to medium in size. Their expansion could help create jobs in rural areas, he said.

John Haen, president of the Wisconsin Association of Meat Processors, said it's too soon to say how many of the small, mostly family owned companies his group represents would take advantage of the tax credit. But, he said, it provides an incentive to expand or upgrade equipment.

The state has nearly 400 licensed dairy processing plants, with about 30 run by cooperatives, according to DATCP. About 85 percent of Wisconsin milk is shipped through a cooperative, however, making them important points for expansion, Radloff said.

The 2007 upgrades at noncooperative dairy plants resulted in the production of an additional $55.6 million worth of products such as cheese, butter and whey, said John Umhoefer, executive director of the Wisconsin Cheese Makers Association. That's a small bump in Wisconsin's multibillion dollar dairy industry, but Umhoefer said any increase is good right now.

"In a down economy, we hope that (the tax credit) spurs growth that might not happen at all because people might be retracting and pulling back on their plants," he said. "We're hoping it's a stimulus to growth."

Agriculture secretary Rod Nilsestuen met Monday with members of the Chalet Cheese Cooperative in Monroe and Silver-Lewis Cheese Cooperative in Monticello. Don Silver, president of Silver-Lewis Cheese Cooperative, said "every little bit makes a difference" and the cooperative may apply for tax credits for floor repairs it plans to do this year. But the cooperative did an expansion last year and has no plans for another major expense.

"We're not going to take on a large project with the way the economy is now and with milk prices falling," Silver said. "We have to be careful not to over extend ourselves."

Chalet Cheese Cooperative manager Myron Olson said the tax credit could help with the planned purchase of cooling equipment and energy efficient lighting. The cooperative would likely spend the money anyway, he said.

But the tax credits help "because you can go for the better equipment, more efficient equipment," Olson said. "Instead of doing two projects, maybe you can do three projects."

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