BY LAURA KELLAMS

Posted on Thursday, February 1, 2007

A legislative committee endorsed a bill Wednesday that would create tax incentives to encourage the removal of poultry litter from watersheds in Northwest Arkansas.

House Bill 1318 would establish a $ 15 per-ton credit to Arkansas taxpayers outside “nutrient surplus areas” who buy excess poultry litter. The litter is used as fertilizer on such crops as hay, corn and soybeans, but poultry growers say it’s expensive to get it to farmers in the Delta and elsewhere who want to use it.

“The problem has not been that there’s a use for it; the problem is it’s hard to transport it,” said House Speaker Benny Petrus, D-Stuttgart, a co-sponsor of HB 1318.

The poultry industry and the state have been trying to find ways to reduce litter runoff in rivers and streams, particularly those that flow out of Arkansas. The Oklahoma attorney general sued poultry companies in 2005 that his office accused of polluting the Illinois River watershed with poultry litter.

The House Agriculture, Forestry and Economic Development Committee recommended the bill with no dissenting votes.

Rep. Scott Sullivan, D-De Queen, the sponsor, said the tax credit will help the poultry industry.

“These folks are hardworking folks out there, and we need to encourage them to stay in business and help them any way we can,” Sullivan said.

Petrus said the reduction in state revenue is worth it.

“It would be minuscule [compared ] with what could happen to our poultry industry up there if it was shut down,” he said.

Rodney Baker, a lobbyist for the Arkansas Farm Bureau, told the committee that chicken litter has outstanding soil-conditioning qualities. But he said restrictions on application of litter have turned a valuable farm commodity into a liability.

The state-designated nutrient surplus areas for the most part include counties bordering on Oklahoma or Missouri, from Marion County in the east to Polk County in the south.

Poultry companies set up a nonprofit organization in 2003 to facilitate the hauling of poultry litter out of those watersheds. Sheri Herron, executive director of that group, called BMPs Inc., said in an interview that litter weighing more than 65, 000 tons was hauled out of the area in 2006.

That’s about 2, 600 truckloads, and is more than they had hoped, Herron said.

Much of that went to farms in Missouri and Oklahoma, she said.

So if it’s going so well, why offer a tax incentive ?

Herron said the group has been able to haul the litter only to markets within about 100 miles.

Farmers in east and southeast Arkansas can’t afford to buy it with the transportation costs factored in, she said.

“It helps us utilize this great resource in our own state,” she said.

She said a ton of poultry litter costs about $ 15 to $ 25, depending on where it’s sold.

Rick Stubblefield, a member of the Oklahoma Scenic Rivers Commission, has encouraged litter-hauling incentives in his state and in Arkansas.

He said in an interview that he hasn’t seen Sullivan’s bill but he favors such government subsidies of the agriculture industry.

“They in effect are broadening the geographic area where people can afford to deliver litter,” he said. “The litter is not a problem to transport. It’s simply the fuel costs to get it there.”

HB 1318 allows the credit to be used against taxes owed for up to five years after the year when the litter was bought. Any unused credit could be used against taxes owed in two previous years.

Department of Finance and Administration officials state in a report to lawmakers that the “carry-back” provision for the two previous years would allow the filing of amended tax returns.

That would result in interest payments on refunds and would be hard to monitor, according to the report.

The estimated reduction in state revenue amounts to $ 255, 000 in fiscal 2008 and $ 550, 000 in fiscal 2009.

The bill provides that if the credits reach $ 1 million, the law would expire.

Tim Leathers, state revenue commissioner, said the tax credit is not one planned for in Gov. Mike Beebe’s budget.

“The end result is you either cut back on the other tax exemptions or spending to stay within the balanced budget,” he said.