New Tax benefits for Conservation Easement Donations: A victory for land conservation

The struggle of Land trusts to preserve open space has its highs and lows. Potential land donors weigh the costs and benefits of selling their land to a cash ready developer versus conserving the land by donating it to a Land Trust- a tough decision even for the most conservation minded landowner. Modest income landowners may wish to donate their land to be preserved as open space, but find it a financial strain. Tax laws that provide tax incentives for conservation donations can be the straw that tips the scale in favor of a donation.

According to the Land Trust Alliance, a national land trust organization, a little over a year ago they were working hard to defend against proposals by the Joint Committee on Taxation to end tax incentives for conservation donations. Fortunately, the tables turned, and this summer, there was a victory for conservation. On August 3, 2006, Congress approved an expansion of the Federal conservation tax incentive for land and conservation easement donations. The President signed it into law on August 17th. Conservation minded individuals and hundreds of land trusts around the country played a part in the achievement of this small, but critical victory for conservation.

Conservation easements are an important tool for land conservation. Landowners agree to give up any rights to future development, preserving the land as open space in perpetuity, while retaining ownership and management of the land. This can be a particularly relevant conservation tool for farms and ranches. Small farms are often a prime focus of developers due to their pastoral locations, and the offer of a financial windfall from a developer can put pressure on a family farmer. A farmer who works out a voluntary conservation easement with a local Land Trust, can continue to operate and profit from the the family farm, receive tax benefits, and still the land is protected from development.

The new law has three important components that ease the financial burden of the land donor. It increases the deduction a landowner can take for donating land or a conservation easement- from 30% of their income in any year, to 50%. ; allows qualifying farmers and ranchers to deduct up to 100% of their income; and extends the carry forward period for a donor to take tax deductions for a voluntary conservation easement from 5 to 15 years.

Think again about that small farmer who is deciding whether to sell to the developer or enter into a conservation easement agreement with a Land Trust. Under the old rules, a landowner earning $50,000 a year, who donated a 1 million dollar conservation easement could take a $15,000 deduction for the year of the donation and for an additonal 5 years- a total of $90,000 in tax deductions. The new rules allow that same landowner to deduct $25,000 for the year of the donation and then for an additional 15 years. That's $400,000 in deductions. If the landowner qualifies as a farmer or rancher, they can zero out their taxes. In that case, they could take a maximum of $800,000 in deductions for their million dollar gift. The math adds up to increased land donations, particularly by ranchers and farmers.

Still, the land conservation struggle continues. As it stands now, the law applies only to easements or land donated in 2006 and 2007. There is still more work to be done to make this change permanent. For more information about the changes in the law, about land donations, or the work of the New Fairfield Land Trust, call 746-0307.