The Arkansas Groundwater Conservation Tax Credit Program helps reduce groundwater depletion by encouraging the use of sustainable surface water alternatives and more efficient irrigation practices.
The program provides state income tax credits to individuals and entities who invest in qualifying projects that reduce groundwater use:
- Construction of water impoundments
- Conversion from groundwater to surface water
- Agricultural land leveling to conserve water
Projects must be approved before construction begins and maintained for at least 10 years after completion to retain benefits.
Available Tax Credits
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.
Conversion to Surface Water Use
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.*
Land 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.
*Installation of devices on wells to indicate water use entitles a well owner to tax credit for conversion.
Application Process
Submit your application to your local Conservation District.
State Review: After Conservation District approval, the application is reviewed by the Arkansas Natural Resources Commission.
Fee Payment:
- 3% of the approved tax credit
- Minimum: $100
- Maximum: $1,500
You must not begin construction before final approval. Projects must be maintained for 10 years after the Certificate of Completion is issued. Otherwise, tax credits may be recaptured.
Tax Deduction Option: You may also be eligible for a tax deduction equal to the difference between your project cost and the credit claimed.
Forms and Resources
- Groundwater Application Meter and Measure
- Groundwater Application for Certificate of Completion
- Groundwater Application for Certificate of Approval
- Groundwater Conservation Tax Credits Fact Sheet
Program Contact: Christy Steward
Email: [email protected]
Phone: (501) 682-1697