Some farmers across New York are still looking for lawmakers to fix an issue that left them unable to receive a tax credit following the state’s new farmworker overtime law.

The law, which mandates farmers pay overtime rates to workers after a decreasing number of hours, doesn’t allow farms that operate through a management company or payroll company to receive a tax credit to help offset costs.

Keith Kimball, owner of La Casa de Leche in Groveland, has a business with multiple entities. Rather than having a payroll system for each entity, they run their payroll through one that oversees all of the others.

“It’s just an easy way to house that, and then you pay your taxes just once through that entity,” Kimball said. “The other thing it does is because the farms are close and the milk hauling is involved, if employees work for more than one of those entities, their hours get charged cumulatively.” 

Gov. Kathy Hochul vetoed a bill that aimed to fix the technicality because it “creates unintended restrictions that could prevent eligible farmers from claiming” the credit.

The issue for structures like Kimball’s is if an employee works 30 hours for one and 30 hours for the other, they’re then at 60 hours and qualify for the four hours of overtime, Kimball said.  

The current overtime tax credit law on the books would normally give Kimball a tax credit to offset four hours of pay for that worker, but because of his structure, he lost out on the credit.

Dave Stafford, a manager at RL Jeffres and Sons in Wyoming County, said they aren’t eligible either.

“One thing that makes us unique is we’re a lot more diversified than many other farm operations,” Stafford said.  

In addition to crop farming, they’ve developed several different businesses, including a trucking firm, selling products such as irrigation equipment, operating a wedding venue and repairing heavy trucks.  

“[Our CPA] recommended we set up a separate business entity that handled all of the payroll for the different businesses and for 12 years now, that's the structure we’ve been operating with,” Stafford said.  

But that set-up cost him thousands last year.

Without the tax credit, Stafford estimates that in 2024, they spent $50,000 more in payroll expenses and expected to recoup it with the credit. Farms that are ineligible for the overtime tax credit are also ineligible for another existing farm workforce retention credit that provides a $1,200 credit per employee. 

“We’re in a position where we’ve basically had to learn how to operate without those credits that our neighbors are able to receive, so that puts us at a competitive disadvantage,” Stafford said.  

Correcting this technicality for the overtime tax credit could serve as a blueprint for the workforce retention credit as well, Stafford said.  

“When it got vetoed, the rug was sort of pulled out from underneath of us,” Stafford said. “Hopefully, it can be straightened out going forward with the rest of the state leaders working on it.”

During a joint budget hearing this week, Commissioner of Agriculture Richard Ball said the biggest concern for New York farms is labor. Hochul tasked the Department of Agriculture and Markets and the Department of Taxation and Finance to work together on determining a way to correct the overtime tax credit.  

“We’ve been working on that pretty hot and heavy recently and hopefully we’re going to have something for you very shortly, just to fine tune that language and make it work for all farms,” Ball said during the hearing.