Enhanced conservation incentive set to expire
Carol Ryan Dumas
An enhanced incentive for agricultural land owners who donate a conservation easement on their property is set to expire on Dec. 31. The tax deduction has made it possible for land-rich, cash-poor farmers and ranchers to donate the develoment rights on their land. Without congressional action the deduction will revert to the previous lower level and shorter deduction period.
The enhanced conservation easement incentive, allowing for a significant tax benefit to family farmers, ranchers and forest land owners for donating a conservation easement on their land, is set to expire on Dec. 31.
Initiated by Congress in 2006, the incentive has been a powerful tool for allowing land-rich, cash-poor ag operators to receive greater credit for donating a valuable conservation easement on property they own.
That incentive has helped increase the pace of conservation to over 1 million acres a year. Those easements protect natural resources, wildlife habitat, farmland, and scenic open spaces from development, according to the Land Trust Alliance, a national association representing 1,700 land trusts that currently oversee 47 million acres.
Loss of the incentive could send easement enrollments plummeting by 300,000 acres a year, according to Alliance estimates.
There’s plenty of support for making the incentive permanent, from legislation in the House and Senate to widespread bipartisan support from 65 national organizations and trade associations. But Congress isn’t moving on much of anything these days, said Bart James, conservation campaign director for the Alliance.
If the enhanced incentive is allowed to lapse, tax deductions will revert to the prior incentive, which was a much lower deduction over a period of fewer years and less effective at driving conservation easements, he said.
It’s a huge decision for landowners, for themselves and future generations, to donate valuable development rights. The enhanced incentive has made it possible for many of them, and the Alliance has worked to make it permanent, he said.
The point of conservation easements is to allow landowners to retire certain development rights, usually the building of structures and roads, to protect what is important to them and the public, said Russ Shay, the Alliance’s director of public policy.
Ag producers may have a modest income from ag, but the value of their land is worth a lot, particularly in the potential of subdividing it for residential purposes, he said.
Under the previous incentive, they didn’t receive much reward for donating development rights, only a tax deduction of 30 percent of their annual adjusted gross income for a period of six years.
The enhanced incentive allows a deduction of 100 percent of their income for a period of 16 years, he said.
For example, under the previous incentive, a rancher with $50,000 annual income with land worth $1 million would only be able to deduct $15,000 annually for a total of $90,000. Under the enhanced incentive, he could deduct $50,000 annually for a total of $800,000, he said.
“It makes a difference in their cash flow and better corresponds between what (tax benefit) they’re getting and someone writing a check to a church,” he said.
Donating development rights is a valuable gift, and the tax deduction is still less than the full value of that gift. But it’s meant to make conservation possible, he said.
“There are not a lot of farmers in America, but they’re the people that own the American landscape,” he said.
Seventy percent of land in the U.S. is privately owned, and the vast majority of owners are farmers and ranchers, he said.
It is expensive to donate a conservation easement, given attorney fees and substantial appraisal costs. In addition the land trust managing the easement asks for a donation from the landowner to help manage the easement over time and ensure the land trust is there in the future, he said.
The extra tax incentive makes it possible to donate an easement and take on that expense, he said.
Non-ag landowners get an enhanced deduction as well, up to 50 percent of their adjusted gross income for 16 years. That deduction would also revert to the general law for charitable donations of appreciable land and return to 30 percent of their income over six years.
Land Trust Alliance: www.landtrustalliance.org
Rural Heritage Conservation Extension Act, S. 526, 150 co-sponsors. Companion bill H.R. 2807, 14 cosponsors: http://thomas.loc.gov/cgi-bin/bdquery/z?d113:s.00526: