• Fiscal Cliff Deal Spawns Renewal of Conservation Easement Incentives
  • February 19, 2013 | Author: Jane M. Shields
  • Law Firm: MacElree Harvey, Ltd. - West Chester Office
  • Buried in the fiscal cliff legislation are important provisions for generous landowners. For one year only, 2013, conservation easement donors who meet certain requirements may deduct 50% to 100% of their adjusted gross income for the year, and continue deductions for up to 16 years.

    Congress renewed a 2006 incentive that enables family farmers, ranchers and other moderate-income landowners to get this significant tax benefit for donating a conservation easement on their lands. For example, under 2012 law, a landowner earning $50,000 a year who donated an easement worth $1 million could take a total of no more $90,000 in tax deduction. This year, that landowner can take as much as $800,000 in tax deductions over 16 years. While this is still less than the full value of the donation, it is a significant increase in the benefit to the landowner.

    There are limits to the ability to take advantage of these deductions, keyed to other itemized deductions for non-discretionary things like mortgage interest and state, local and real estate taxes.

    The land conservation community is working hard to make this incentive permanent, but in the current atmosphere in Washington, it is impossible to predict whether this incentive will continue after December 31, 2013. Conservation easements raise many issues for donating landowners, such as the nature and extent of restriction upon current or future use and construction on the property. Land trusts will push for the maximum restrictions that the landowner will tolerate, which may adversely impact the ability to sell the property or create problems with an expanding household or farm. It is important to consult with counsel before committing to any land conservation easement. If you are considering such a donation, it is time get the ball rolling so that the transaction may be completed this year.