Sometimes water issues for ranchers and farmers aren’t about having enough but being able to improve the delivery systems for the water they do have.
Colorado’s U.S. senators reached across the aisle this week to introduce a bill to make that easier. It would reform tax provisions that hinder investment in water infrastructure improvements.
Ditch and irrigation companies are organized as nonprofits. Under that designation, their ability to raise capital to maintain and develop water-storage and delivery systems has been limited by a tax provision that required them to receive 85 percent of their income from shareholder investment to maintain their nonprofit status.
When they need to incur a large expense, for example, such as replacing a dam in disrepair, the companies are severely limited in how they can collect the needed funding under that proviso.
The Water and Agriculture Tax Reform Act would allow them to receive other income as long as its use is restricted to operations and maintenance.
“In the face of persistent drought conditions, water is an even more precious resource for Colorado’s farmers and ranchers,” said Sen. Michael Bennet, D-Colo. “Producers face challenges when it comes to distributing water across their land to keep it productive for agricultural uses. This bill updates the tax code to help Colorado’s ditch and irrigation businesses keep this infrastructure in good working condition.”
Ditch and water companies date back to the late 1870s in La Plata County, when the Wommer Ditch was dug by hand for agriculturists in the Pine River Valley. Numerous other ditch and water companies exist in the county, including the Florida Canal Co., and Hermosa and Big Stick ditch companies. Many date back a century or more.
“Unfortunately, our outdated tax laws risk holding back the agriculture industry’s ability to innovate and make needed improvements,” said Sen. Cory Gardner, R-Colo. “Many in the agriculture industry, for example, are looking to make improvements to water efficiency.”
The bill was introduced one day after the U.S. Department of Agriculture issued a disaster designation for 21 counties in Colorado because of the extended drought, including La Plata, Montezuma and Archuleta counties.
Sen. Mike Crapo, R-Idaho, also sponsored the bill.
The act next goes to a committee for study.