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California farm groups are mounting a broad push this year for tax credits aimed at offsetting rising labor, equipment and regulatory costs, arguing agriculture should receive the same level of support the Legislature has extended to Hollywood and other industries.
That effort is playing out across multiple proposals moving through the Capitol, from credits tied to production costs and equipment purchases to incentives for overtime wages and for food bank donations. The push comes as lawmakers weigh a growing list of tax expenditures in a tight budget year and after approving last year’s expansion of the state’s film and television tax credit program to roughly $750 million annually.
Two of the proposals drew pointed debate in a policy committee hearing last week, highlighting both the urgency cited by farm groups and the skepticism from labor-aligned advocates. Yet the measure with the highest profile — Senate Bill 921 on an ag overtime tax credit — has yet get a hearing ahead of a crucial deadline next week.
Amber McDowell (Sacramento County Farm Bureau photo)Tax relief for farm production
Asm. David Tangipa, R-Fresno, is proposing to create a new income tax credit for agricultural producers.
Assembly Bill 2427 would allow a credit equal to 25% of qualified farming expenses — including labor, equipment and production costs — rising to 30% for low-emission equipment purchases or operations in high fire risk areas. It could cap the credit at $1 million per taxpayer and $250 million annually statewide, beginning in 2027.
Tangipa told lawmakers last week the measure is intended to counter mounting pressures on growers.
“Farmers today are asked to grow more food for more people in the history of the world with the least amount of land and the least amount of resources ever available to them,” he said. “Farmers are facing rising input costs, labor shortages, water uncertainty, regulatory challenges, and increasing competition from other states and countries that are actively investing in their agricultural sectors.”
Amber McDowell, executive director of the Sacramento County Farm Bureau, detailed those pressures with farm-level examples. She said one diversified grower spends about 40% of operating costs on labor, with additional expenses for fertilizer, diesel and electricity, limiting the ability to invest in new equipment.
“In these tight margins, if there is any [margin], it does not allow farmers to invest in newer, efficient or green technology,” said McDowell.
The California Farm Bureau also supports the bill, alongside egg farmers, pear and wheat growers, bean shippers and seed groups.
The credit would come with an increased hit to state revenues, as lawmakers grapple with a growing budget deficit. The Franchise Tax Board estimates AB 2427 would reduce revenues by $49 million next year, increasing to $130 million annually.
Danielle Kando-Kaiser, a lobbyist for the California Tax Reform Association, urged lawmakers to reject the bill, arguing it is “unclear why the state would provide such a large tax reduction for normal operations of agriculture” and that the credit would largely be used by profitable farms.
“Those farms who are suffering, can pay no taxes and then roll over their losses into future profits,” said Kando-Kaiser.
That drew a rebuke from Asm. Carl DeMaio, R-San Diego, who blasted the association for “staying silent” when lawmakers considered Hollywood tax credits last year.
“Is it labor because labor benefited from that?” asked DeMaio, while arguing Kando-Kaiser was not a credible witness, since CTRA was hiding its “true motive.”
The association is funded by a coalition of labor organizations, with the California Teachers Association the most prominent. It has supported higher taxes on corporations and high-wealth individuals, with its executive director helping to write a controversial union-backed ballot initiative to tax California’s billionaires.
A staff analysis by the Assembly Revenue and Taxation Committee aligned with the association’s concerns. The committee plans to vote on the measure next week. It is also considering a proposal by Asm. Jeff Gonzalez, R-Indio, to broaden an existing sales tax exemption on farm equipment.
Equipment tax break draws local government concerns
While AB 2427 centers on production costs, AB 2192 shifts the discussion to the cost of farm equipment — and the ripple effects on local government revenues.
Asm. Jeff Gonzalez, R-Indio, is presenting the bill as a way to extend existing tax relief on farm equipment purchases by eliminating the remaining local sales taxes applied at the city and county level. He framed the proposal as a targeted effort to reduce upfront capital costs for growers making investments in machinery needed for planting, harvesting and processing.
“Ensuring that agriculture remains viable in California is not just an economic issue,” Gonzalez told the same Assembly committee. “It is a food security issue. Yet today, farmers are facing unprecedented financial pressure.”
Testifying in support of the bill, Peter Ansel, a senior policy advocate at the California Farm Bureau, pointed to studies showing skyrocketing compliance costs for farmers and to USDA data showing the state has lost 7,000 small farms in recent years. Those costs are rising as “the state is asking farmers and ranchers to invest in new electric equipment; invest in equipment that meets air quality standards; that meets water quality standards; that decreases water use; that lowers the inputs on fertilizer, pesticides, herbicides; that addresses the impact to labor from an increasing climate that's having heating index impacts.”
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The California Tax Reform Association is again leading the opposition to the bill, arguing the current partial exemption is sufficient. The League of California Cities and the California State Association of Counties are also warning that it would reduce local revenues used for public safety and infrastructure.
Asm. Jeff Gonzalez, R-Indio (office photo)Overtime tax credit bill faces deadline pressure
The debates over the two measures have played out as a priority bill for farm groups is still awaiting its first hearing.
Senate Bill 921 would create a tax credit tied to agricultural overtime wages. Backing the bill, the California Farm Bureau and the California Association of Winegrape Growers argue the policy has sharply increased labor costs and, in some cases, led to reduced hours for workers as employers try to avoid overtime thresholds.
The bill mirrors a 2025 proposal for an overtime tax credit that stalled after the powerful California Federation of Labor Unions blamed employers for less take-home pay and reasoned the industry can afford the added costs.
Policy committees have until the end of next week to either advance bills or stall them for the year.
Food bank, housing credits expand ag tax debate
While Republican measures are facing labor backlash, Democratic proposals are finding no opposition and sailing through committee hearings.
SB 881 by Sen. Jerry McNerney, D-Pleasanton, would extend the state’s tax credit for donations of fresh fruits and vegetables to food banks through 2032 and extend the Emergency Food for Families voluntary tax contribution fund through 2037.
McNerney said the credit helps ensure surplus crops are redirected to families facing food insecurity rather than going to waste, calling the program a win-win for growers and food banks.
Franchise Tax Board data shows taxpayers reported about $12 million in donations in 2021, $11 million in 2022 and $8 million in 2023, with $4.2 million in credits claimed over that period.
The bill has the support of several agriculture associations, along with food banks and groups tackling food waste.
Meanwhile, Asm. Joaquin Arambula, D-Fresno, is proposing to modify how farmworker housing projects compete for low-income housing tax credits. His AB 2270 would require the California Tax Credit Allocation Committee to treat those projects as large family housing and apply rural scoring standards.
The measure builds on legislation extending back to 2008 to create a farmworker housing set-aside within the low-income housing tax credit program. Farmworker groups have lined up in support.
