For now, tax laws favor conservation
Friday, February 22, 2013
There are many reasons why people donate conservation easements on their property to qualified charitable organizations. Most importantly, landowners want to preserve their property in its natural state to be enjoyed by future generations, preventing the development of pristine woods or open fields into housing developments or shopping malls. As we begin the preparation of our 2012 federal income tax returns, however, landowners might also be mindful of the income tax benefits of these donations for 2013.
Recognizing the importance of conservation property in the lives of citizens, Congress adopted tax laws which encourage taxpayers to donate either conservation easements or real property for conservation purposes. An “enhanced” federal income tax charitable deduction was available from 2005-11. The newly enacted American Taxpayer Relief Act of 2012 extended this deduction for two years, retroactively for 2012 and prospectively for 2013. Accordingly, landowners can protect the land which they cherish and potentially deduct the full value of the donation on their income tax returns. Who says you can’t have your cake and eat it, too?
A conservation easement is an agreement between the landowner and the holder of the easement (typically a land trust or government entity) to protect the land for conservation purposes forever. A landowner can donate an easement and retain ownership of the land, or donate the land subject to a perpetual easement that prevents the development of the property by any owner, now or in the future. A similar deduction is available for the gift portion of a “bargain sale” to a conservation organization for less than the fair market value of the property.
There are four principal purposes for a conservation easement, any one or more of which may be applicable for a particular piece of land. First, the easement can preserve land for recreation or education. Second, it can protect a relatively natural habitat for fish, wildlife or plants. Third, it can preserve open space for the public’s scenic enjoyment or public benefit. Finally, it can preserve a historically important land or structure. The Bedford Land Trust holds conservation easements for all of these purposes.
Sledding is popular at the Benedictine Park, and the Van Loan Preserve provides a lovely spot to snowshoe in the winter or to hike in the summer. The open fields at Joppa Hill provide scenic beauty and a natural habitat for wildlife. The Town Pound donated to the Land Trust in 2003 by Ann and Jack Middleton is a historically important structure. We can all enjoy the benefits of their generosity.
The landowner gets a charitable deduction for the appraised value of the conservation easement or real property donated for conservation purposes. For donations completed in 2012 and 2013, the charitable deduction can be up to 50 percent of the taxpayer’s adjusted gross income.
Even greater deductions are permitted for conservation gifts by qualifying farmers. To the extent that a charitable contribution exceeds the deduction in the year of the gift, the excess can be carried forward for up to 15 years.
Accordingly, the enhanced deduction for conservation gifts allows the landowner to reduce income taxes for up to 16 years, based on the value of the charitable donation as well as the income of the landowner in each of these years.
As a possible incentive to act quickly, deductions will be limited to 30 percent of the taxpayer’s adjusted gross income with a 5-year carry forward in future years, unless the law is extended again after 2013.
The Bedford Land Trust now protects 13 properties covering almost 370 acres of privately owned and town-owned land in Bedford to preserve our rural character and to protect our water resources and wildlife habitat for the benefit of the people of Bedford and the surrounding area. Both of the conservation easements donated last December will qualify for the enhanced charitable deduction.
Do you own land that you want to protect? The Bedford Land Trust will consider acceptance of conservation easements on suitable properties in Bedford or neighboring towns. Please contact us for more information at email@example.com.
Ruth Tolf Ansell
is chairwoman of the
Bedford Land Trust.