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New Conservation Tax Benefits for Landowners


These Benefits Are Set to Expire December 31, 2007


The recently enacted Pension Protection Act temporarily increases the tax benefit for private landowners who donate qualifying conservation easements.
 
For farmers, including forest landowners, who receive at least 51% of their income from farming
or timber harvesting on their land, these tax benefits can be even greater.

A donated conservation easement protects Wilkinson Brook, in Effingham

What Are The Changes?
 
The new tax law:
  • Raises the maximum deduction a landowner can take for donating a conservation easement from 30% of their adjusted gross income (AGI) to 50% of their AGI;
  • Allows farmers and forest landowners to deduct 100% of their AGI if the majority of their income comes from farming or forestry of their land; and
  • Increases the number of years a donor can carry over unused portions of deductions for a conservation easement donation from 5 to as long as 15 years.
The law still requires that all projects seeking tax deductions must meet the conservation purposes required under section 170 (h) of the tax code and only applies to easements donated in 2006-2007.
This new law also applies to at less than fair market value (bargain sales).
 
How Does It Work?
 
Example: Mr. Smith owns 400 acres of land with ecologically significant features and wants to protect it forever.  Mr. Smith does not get more than 50 percent of his income from farming of cutting timber on his land.  His adjusted gross income is $50,000 and the the value of the conservation easement he wishes to donate is $400,000.
 
Under the OLD law, Mr. Smith is allowed to deduct 30% of his AGI = $15,000 deduction for the first year of his gift.
Deduction for 5 years thereafter = $75,000.
Total Deduction = $90,000
Total Tax Deduction Lost = $310,000
 
Under the NEW law, Mr. Smith is allowed to deduct 50% of his AGI = $25,000 deduction for the first year of his gift.
Total Deduction for 15 years thereafter = $375,000 ($25,000 per year).
Total Deduction = $400,000
Total Tax Deduction Lost = $0
 
 
For more information, please contact:
 
Duane Hyde, Director of Protection
603.659.2678, extension 11
dhyde@tnc.org
 
David Moffat, Land Protection Specialist
603.224.5853, extension 18
dmoffat@tnc.org
 
The information provided is general in nature and is not a representation as to the actiual tax consequences of a particular conservation transaction with The Nature Conservancy.  The Conservancy strongly encourages landowners to consult with their own professional advisors on tax matters.