The value of land increases almost daily. Rising property taxes and estate taxes oftentimes place some unfortunate landowners in a struggle simply to keep their small family farms and pristine natural areas as they have been for generations. Fortunately, land trusts have many options to assist landowners in their goal of preserving these special places.
Conservation Tax Incentives:
- Federal Charitable Deduction
- State Income Deduction
- North Carolina Conservation Tax Credit
- Estate Reduction and Exclusion
- Property Tax Savings
The LandTrust recommends that you consult with your own legal and financial advisors as well in order to maximize your financial benefits and tailor them to your individual needs.
Important Tax Benefits Update
Significant New Federal Tax Incentives Approved for Conservation Easement Donations
On August 17, 2006 President Bush signed into law significant new tax incentives for conservation easement donations. The new law:
- Raises the deduction a landowner can take for donating a conservation agreement from 30% of their adjusted gross income in any year to 50%;
- Allows qualifying farmers and ranchers to deduct up to 100% of their adjusted gross income; and
- Increases the number of years over which a conservation easement donor can take those deductions from 6 to 16 years.
Clearly, this law provides substantial new tax incentives to landowners who wish to protect land. It is important to remember that every conservation agreement donation must meet the requirements of Section 170(h) of the tax code and every deduction must be based on a thorough, honest, realistic, and clear appraisal based on existing market conditions and a supportable analysis of land use possibilities.
The new tax incentives only apply to conservation agreement donations made in 2006 and 2007! Land trusts will urge Congress to extend these tax benefits, but if that doesn’t occur, these incentives will expire January 1, 2008.
The Land Trust Alliance has detailed information about the bill and the new tax incentives at www.lta.org. For more information on how these new tax benefits would apply to you when placing an easement on your property, please contact Kevin Redding or Michele D’Hemecourt.
North Carolina Tax Credit Information
North Carolina recognizes the importance of land preservation to its economy. It offers a generous tax credit program to promote private preservation.
The NC Conservation Tax Credit is equal to 25% of the fair market value of interest in real property donated for conservation purposes, per G.S. 105-151.12 for individuals and G.S. 105-130-34 for corporations.
- The credit is capped at $250,000 for individuals and $500,000 for corporations.
- Through December 31, 2005, the maximum dollar limit applicable to a partnership, applies separately to each partner.
- It is deductible to the extent of tax liability and may be carried forward for up to 5 years.
- The credit is non-transferable. Any unused portion is lost after the sixth year or at the death of the donor.
- Any portion of the fair market value of a donation that is not eligible or taken for credit may be considered as a charitable contribution under G.S. 105-130.
- Land dedicated under local government regulation or ordinance, or dedications made to increase building density levels are not eligible.
- Individuals may claim a deduction and credit. Corporations may not claim both.
Qualifying for federal deductions under Section 170(h) does not automatically qualify a donor for state credit. Submit applications to the NC Department of Environmental and Natural Resources:
NC Conservation Tax Credit Program
Telephone (919) 715-4191
The conservation purpose is slightly different for the NC tax credit. The donation must serve “A Public Benefit.” This can include:
- Public Beach Access and Use
- Public Access to Public Waters
- Public Access to Public Trails
- Fish & Wildlife Conservation
- Other Similar Land Conservation Purposes
Easements without public access often qualify under the Fish & Wildlife Conservation and “Similar Land Conservation Purposes” categories.
The qualifying recipient is defined more strictly for the NC tax credit program. Section 170(h) requires the easement holder to be a government entity or public charity with the ability to enforce the restrictions. NC requires the organization to be a qualified “holder,” NCGS 121-35(2). The organization’s purpose must be related to conservation or preservation as defined in the statute.