Tax Incentives Permanent for Conservation Easements on Agriculture Land

WASHINGTON D.C. - Agricultural landowners now have the opportunity to donate a conservation easement on their land that allows for permanent tax deductions for up to 15 years in trade for a permanent easement.

In addition to the wildlife benefits and preservation of open space, proponents of the legislation feel this allows landowners to take full advantage of the donation for the easement and is an opportunity for Montana landowners to keep the land within their family.

Conservation easements are available to private landowners through state and federal agencies as well as non-government and non-profit organizations. The terms of the easement can be as simple as paying for development rights and restricting subdivision. Additional degrees of restriction and management requirements may be added to the land depending on the terms of easement.

That value of the easement is calculated as the value of the land prior to the conservation easement minus the value of the land after the conservation easement against the landowner’s adjusted gross income. This is considered a “donation.”

Montana Land Reliance present and past managing directors Rock Ringling and Bill Long spearheaded the initiative nearly 17 years ago. They realized agricultural landowners who are typically cash-poor and land-rich did not have the same tax advantage with the conservation easements as wealthy landowners.

Prior to 2007, tax incentives allowed conservation easement donors to deduct 30 to 50 percent of the value against their income for up to six years. This allowed landowners with sizeable incomes to recover the value of the easement. Those with a lot of land, but low income, were never able to recoup the cost.

In 1999, Ringling and Long approached former Senators Max Baucus, D-Mont. and Charles Grassley, R-Iowa with their idea to help land-rich, cash-poor landowners recover their donation for the easement. The final bill presented offered landowners up to 100 percent deduction against their adjusted gross incomes and extended the period to 16 years. This allowed the land-rich, cash-poor landowners the ability to deduct enough income to match the value of the easement and gave them the flexibility to deduct more in economically down years.

After nearly eight years of attending hearings and lobbying, the original conservation tax incentive was passed in 2007. However, the incentives were not permanent. This deduction was among several that required yearly “extenders” treatment in order for the deduction to be available in each tax year, making the on-the-ground planning increasingly difficult.

The original tax incentives were directly responsible for securing more than two million acres in conservation easements across the country. However, Ringling knew that they needed to make them permanent since the original provisions expired at the end of 2014.

With support from the founding organizations for the original legislation, Montana’s delegation and bipartisan support in both the House and the Senate, the legislation was included as part of the larger “Protecting Americans from Tax Hikes Act of 2015” (PATH Act).

The tax reform package passed the House with a 318-109 vote and the Senate with a 65-33 vote. Montana Congressman Ryan Zinke-R voted for both the tax incentives and the budget measure (LWCF reauthorization) while Montana Senators Jon Tester-D and Steve Daines-R supported the enhanced conservation tax incentives and the LWCF program but voted against the omnibus spending package for other reasons. The President signed it into law Dec. 18 applying it retroactively to Jan. 1, 2015.

The legislation raises the maximum deduction an individual can take for donating a conservation easement from 30 percent of their adjusted gross income to 50 percent. It allows qualifying farmers and ranchers to deduct up to 100 percent of their income for the donation.

In addition, the bill extends the time when a landowner can carry the tax deductions for voluntary conservation agreements forward up to 15 years plus the year the project was completed. After 16 years, the benefits end and the conservation easement remains in perpetuity as a legally binding agreement, regardless of ownership changes.

“A lot of times estate taxes force the descendants to sell the land that they would otherwise inherit,” said the Montana Land Reliance Development and Outreach Coordinator Gusty Clarke. “Conservation easements are often used to help keep the land in the family and it keeps the agricultural heritage of Montana alive.”

Clarke continued, “Previously, conservation easements were not advantageous for agricultural landowners. They are now. This new legislation makes private conservation more available to everyone who wants to do it. There is really no financial limit to it anymore.”

Montana Land Reliance is a non-profit land trust organization based out of Helena that works throughout Montana partnering with private landowners to permanently protect agricultural lands, fish and wildlife habitat and open space. There are 11 additional non-profit land trusts throughout Montana.

Anyone interested in learning more about the tax incentives and conservation easements are encouraged to visit http://www.montanalandtrusts.org or contact a local state or federal agency.

 

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