|January 28, 2013|
Previously published on January 2013
Conservation easements are an effective tool for tax and estate planning and there are significant tax benefits to implementing them in 2013.
What is the connection between a "fiscal cliff" and conservation easement tax incentives? On the surface, none, but in the world of federal tax legislation, politics reigns. There is no question that conservation easements are a very favored device in Congress. They have been authorized, reauthorized and enhanced over the more-than-20 years since they were first adopted into the Internal Revenue Code. They are also a very effective tool for tax and estate planning, family succession planning, and community and land development planning. Properly done they offer significant tax benefits and also real charitable benefits to a community or region.
With the looming expiration of the enhanced tax benefits, the land conservation community was waiting to see if Congress would extend those benefits (or even make them permanent) or allow them to return to a lesser, but still meaningful rate. We now have the answer, in the American Taxpayer Relief Act of 2012.
Donors of a Conservation Easement in 2012 and 2013 can deduct up to 50 percent of their Adjusted Gross Income (AGI) with carryforward of unused deduction amounts for a period of up to 15 years. Farmers with 50 percent or more of their income from agricultural activities can deduct up to 100 percent of their AGI. The recently enacted law also preserved the ability of Subchapter S corporations to deduct the full fair market value of Conservation Easement gifts. Conservation Easement tax deductions are determined by a qualified appraisal that states the value of the property before and after the Conservation Easement restrictions are imposed.
A Conservation Easement must meet one of the specified Conservation Purposes in the law, e.g., public scenic benefit, natural habitat, or support of a governmental conservation policy, and must be donated to a qualified conservation organization. It need not necessarily restrict an entire tract of land nor extinguish all development rights and uses of the land. It does not require subdivision or other local government permits.
If you are considering the benefits of private land conservation for your land, this could be a very good year to do so.