WASHINGTON, D.C. – May 8, 2014 – (RealEstateRama) — Supporters of an “enhanced” but expired federal tax deduction for landowners who donate property for conservation or preservation want Congress to reinstate it and make it permanent, CQ Roll Call reported May 2.
The tax break applies to landowners who grant a government agency or a nonprofit such as a land trust a conservation or preservation easement for a piece of property. With the easement, the owner gives up the right to develop the land in the future and in return receives a tax deduction for the lost market value of the land.
Backers of the tax break, including conservation, wildlife and agriculture groups, say that the tax deduction for conservation easements has protected rural land from suburban and city sprawl and provided habitat for wildlife.
“Having that tax provision,” Dale Moore, policy director for the American Farm Bureau Federation, told CQ Roll Call, “is basically an incentive for farmers and ranchers to invest in a conservation practice that is going to have the co-benefit of helping to improve production on the land in all the ways that conservation does and at the same time there is a public good to it.”
The tax break that is in permanent law allows those making a donation to deduct up to 30 percent of their adjusted gross income, spread over 15 years. The enhanced provision that has expired allowed landowners to deduct up to 50 percent of their adjusted gross income. Qualified farmers and ranchers could deduct 100 percent of their adjusted gross income spread over 16 years.
Proponents of reinstating the tax deduction have expressed concern about the loss of taxable income to the government compared to the measurable benefit to the public. In particular, they questioned the way some golf course owners allegedly have used the tax break to claim deductions greater than the value of the donated land, CQ Roll Call reported.
The Internal Revenue Service also has raised concerns about preservation easements in which owners win a tax deduction by promising not to make changes in a building, when the changes already are forbidden by local zoning laws or other restrictions.
The White House has recommended in its 2015 budget that the enhanced conservation easements be made permanent, but suggested eliminating the deduction for golf course owners and tightening requirements on historic preservation claims. The White House estimated that the modified deduction would cost $522 million between fiscal years 2015 and 2024, CQ Roll Call reported.
In 2013, Sen. Max Baucus, D-Mont., then chairman of the Senate Finance Committee, excluded golf course owners from a stand-alone bill (S 526) to make the conservation easement permanent. The committee’s ranking Republican, Sen. Orrin Hatch of Utah, co-sponsored the bill.
Baucus had been behind the revision that raised the deduction levels for farm and nonfarm land donors in 2006.
In the House, Ways and Means Committee members Jim Gerlach, R-Pa., and Mike Thompson, D-Calif., introduced a measure (HR 2807) similar to the Senate bill that has 186 co-sponsors, including Rep. John D. Dingell, D-Mich., who wrote the original conservation easement tax deduction nearly 40 years ago.
The Land Trust Alliance, the conservation organization leading the campaign to make the tax credit permanent, took no position on the golf course question and instead is promoting the tax deduction as an attractive financial planning tool for farmers and ranchers that also delivers environmental benefits.
Russ Shay, public policy director for the Land Trust Alliance, told CQ Roll Call that he remains optimistic about winning permanent status for the deduction, and noted that the higher deduction level is more important to property owners of modest income.
“Sen. Baucus was approached by people from his state who were involved in land conservation and working with the ranching community,” Shay told CQ Roll Call. “What they found was the ranching community there had relatively modest income. The development rights to their land was 10 or 20 times what their annual income was or maybe even more” because of developers interest in building homes for the well-to-do in scenic parts of Montana.