The Nature Conservancy in Wyoming - New Tax Law Adds Significant Financial Incentives

“I hope our example will cause other people around here to consider placing an easement on their property. It’s one way of helping this part of Wyoming retain its character.”

—Dick McGuire, Easement Donor

New Tax Law Highlights
• Raises the maximum federal income tax deduction for donating a conservation easement to 50 percent of adjusted gross income in any year – up from 30 percent.

• Allows working farmers and ranchers to deduct up to 100 percent of their adjusted gross income in any year.

• Increases the number of years over which a conservation easement donor can take federal income tax deductions from six to 16 years.

• In effect until the end of 2007.

Public Benefits
• Protects wildlife habitat
• Keeps good stewards on the land
• Preserves ranchland and area economy
• Requires less in public services than subdivisions

Landowner Benefits
• Keeps land in the family
• Provides estate tax and other financial benefits that can help the ranch operation
• Keeps ranchland intact
• Guarantees how the property will be managed in the future

Twin Creek Ranch

New Tax Law Adds Significant Financial Incentives

Landowners have until Dec. 31, 2007
...to take advantage of new conservation incentives

The new Pension Protection Act, signed into law in August 2006, raises the maximum federal income tax deduction for donating a conservation easement from 30 percent of the donor’s adjusted gross income in any year to 50 percent.

Full-time ranchers and farmers – whose income is 51 percent or more from agriculture – can take deductions for up to 100 percent of their adjusted gross income when they donate a conservation easement.

If the entire deduction can’t be used up in the first year, the law increases the number of years over which a conservation easement donor can take federal income tax deductions, from six to 16 years.

This benefit is also extended to farmers and ranchers with land held in c-corporations, overcoming a major hurdle for many landowners wanting to do easements when the deduction was limited to 10 percent.

Time is Running Out
Will there be a sunset on conservation opportunities for agricultural lands?

The Pension Protection Act is due to sunset on December 31, 2007. If passed, the Rural Heritage Conservation Extension Act of 2007 will make the law permanent.

Conservation Easement: A Voluntary Agreement
A conservation easement is a restriction landowners voluntarily place on specified uses of their property to protect natural, productive or cultural features. A conservation easement is recorded as a written legal agreement between the landowner and the qualified “holder” of the easement, which may be either a nonprofit conservation organization or government agency.

With a conservation easement, the landowner retains legal title to the property and, along with the easement holder, determines the types of land uses to continue and those to restrict. As part of the arrangement, the landowner grants the holder of the conservation easement the right to periodically assess the condition of the property to ensure that it is maintained according to the terms of the legal agreement.

Many rights come with owning property, including the rights to manage resources, change use, subdivide or develop. With a conservation easement, a landowner permanently limits one or more of these rights.

For example, a landowner donating a conservation easement could choose to limit the right to develop a property, but keep the rights to build a house, raise cattle and grow crops. The landowner may continue his or her current use of the property, provided the resources the conservation easement is intended to protect are sustained.

In Summary
Conservation easements can provide a creative means for families to deal with succession and estate issues that often plague operations and sometimes lead to land sales to satisfy estate taxes. Proceeds from the sale of, or savings from, the donation of an easement can also provide opportunities for expanding one’s land base.

This new tax law offers the potential for more families to continue farming and ranching and to keep our precious Wyoming landscape rural. As land prices continue to rise, the pressures on traditional farm and ranch families are not going to diminish.

With the new provisions in the tax code, a conservation easement may be just the tool you and your ranch have been looking for.

For more information:
Frequently Asked Questions about conservation easements.

Nature picture credits (top to bottom, left to right): Photos © Laurie Andrews (Absarokas); © chuck@digginsart.com (Red Canyon Ranch); © Joe Kiesecker (Twin Creek)