The Farm Bill, which Congress enacted in May 2008 renews a powerful tax incentive which has helped conserve a million or more acres of farms, ranches and natural areas across the US. The incentive had expired January 1st, but is now retroactive to the beginning of the year and will last through 2009.
A broad coalition representing sportsmen, outdoors enthusiasts, farmers, ranchers and national conservation groups, embraced the measure. Rand Wentworth, president of the Land Trust Alliance, said “This renewed tax incentive for donations of conservation easements is one of the best things Congress could do this year to help landowners choose the conservation option over sprawl. Especially for family farmers and ranchers of modest income, this is a great way to help them keep productive agricultural land from being lost.”
Wentworth gave special credit to Senators Max Baucus (D-MT) and Charles Grassley (R-IA) and Representatives Mike Thompson (D-CA) and Dave Camp (R-MI), saying “They are all true conservation leaders who have worked tirelessly to save a conservation measure that has already had benefits in hundreds of communities across the country.” In conserving land, Wentworth added, “We also are protecting clean air, clean water, wildlife habitat, local food sources, historic landscapes and scenic beauty.”
Senator Baucus, who originated the incentive provision, said “Simply put—this is an incentive that works: for conservation, for farmers, for ranchers, and for all landowners who want a fair deal for their tremendous generosity in donating conservation easements. Many ranchers and other landowners in Montana and across the US have told me they could not afford to conserve their land without this measure.”
The incentive, which applies to a landowner’s federal income tax, will:
- Raise the deduction a donor can take for donating a voluntary conservation agreement from 30% of their income in any year to 50%.
- Allow farmers and ranchers to deduct up to 100% of their income.
- Increase the number of years over which a donor can take deductions from 6 to 16 years.
Landowner donations to conservation organizations known as land trusts have resulted in millions of acres of working lands and natural areas being conserved for the future. According to the Alliance, many conservation groups reported an annual doubling of the number of conservation agreements completed in 2007, in response to the same incentive that had expired in January. Land trusts in America have together saved more than 36 million acres from development, an area the size of New England.
The Alliance also credited the success of the measure to the entrepreneurial spirit of the private sector, which has taken the lead in conserving land in recent years. Said Wentworth, “The fact is that conservation in this country now depends greatly on the generosity of individuals. It is the individual rancher, farmer or forester, working the land in a way that is conservation-oriented, who will largely define our natural heritage in the future.’ Land Trust Alliance
What do you need to know about conservation easements?
Here are the facts:
- Conservation easements are voluntary legal agreements between a willing landowner and a nonprofit land trust or government agency. The conservation easement agreement permanently limits uses of the land in order to protect important conservation values. It allows a landowner to continue to own and use the land and to sell it or pass it on to heirs.
- When landowners enter into a conservation easement with a land trust, they give up some of the rights associated with the land. For example, they might give up the right to subdivide the land or build additional houses, while retaining the full right to grow crops or harvest timber. Future owners also will be bound by the agreement’s terms. The land trust is responsible for making sure the terms of the agreement are followed.
- Conservation easements vary widely. An agreement to protect rare wildlife habitat might prohibit any development there, for example, while one on a farm might allow continued farming and the building of additional agricultural structures. An agreement may apply to just a portion of the property and need not require public access.
- A conservation donation requires not only a willing donor, but a qualified conservation organization willing to accept the donation. That organization needs to be able to show that the donation closely fits its particular charitable mission. A land trust will not accept a donation that does not fit its mission and purposes.
- A conservation easement can help a landowner pass land on intact to the next generation. By limiting the land's development potential, the agreement lowers its market value, which in turn lowers the amount subject to estate tax. Whether the agreement is donated during life or by will, it can make a critical difference in the heirs' ability to keep the land intact or in the family.
- If a conservation easement benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements, it can qualify as an income tax-deductible charitable donation. The amount of the donation is the difference between the land’s value with the agreement and its value without the agreement.
- To qualify as a charitable donation, a conservation easement must be permanent. A landowner should get professional financial planning and legal advice before making such a major donation.