Tax Incentives for Donations of Conservation Lands
1. Federal Income Tax Benefits for the Donation of Conservation Land:
Landowners who donate a conservation easement may be eligible for a Federal tax deduction. If the conservation agreement benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements, it may qualify as a tax-deductible charitable donation. The amount of the donation is the difference between the land’s value with the easement and its value without the easement. This value must be carefully determined by a competent, qualified appraiser following IRS guidelines. In addition, there may be federal estate tax implications associated with a donated easement as well.
How the tax deduction works
A donor who gives a qualified conservation easement to a qualified organization such as a land trust, may deduct the value of the easement up to 30% of their adjusted gross income, with a carry forward period of 5 years.
What easements qualify?
In order to qualify, the easement must meet the requirements of Section 170(h) of the tax code and must establish that it meets one of the four conservation purposes set forth in the statute. These are:
preservation of land areas for outdoor recreation by, or the education of, the general public; protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem; preservation of open space for the scenic enjoyment of the general public, or pursuant to a clearly delineated governmental policy, which will yield a significant public benefit; and preservation of an historically important land area or a certified historic structure.
Other requirements include:
- The easement must be a donation, and not a requirement for zoning or permit purposes.
- The easement must protect real conservation resources, as defined by federal statute.
- The conservation agreement must be permanent.
- The value of the easement must be determined by a qualified appraiser using a careful and realistic appraisal meeting federal requirements. The IRS is carefully reviewing these appraisals in order to ensure compliance.
Federal Estate Tax Benefit
A conservation easement may also have Federal estate tax implications. If the easement reduces the fair market value of the property, then the value of the landowner’s estate is reduced, thereby reducing possible estate taxes. In addition, if certain IRS conditions are met, then property subject to a conservation easement may have its value reduced up to 40% for purposes of computing estate taxes. The landowner’s advisors must determine if the easement qualifies for this additional reduction in value. A conservation easement may help avoid a forced sale of land to pay taxes and keep the property in family ownership and management.
2. State Income Tax Benefits for the Donation of Conservation Land:
The Georgia State tax credit, created in 2006, allows taxpayers to claim a credit against their income tax liability equal to 25% of the fair market value of donated conservation land (or permanent conservation easement), up to a maximum credit of $250,000 for individuals, $500,000 for corporations and $1,000,000 for partnerships. The allowed tax credit may not exceed the amount of tax owed that year, but any unused portion of the tax credit may be carried forward for the next ten years.
What qualifies as Conservation Land?
In order to be eligible for the tax credit, the donated land must be certified by the Georgia Department of Natural Resources as “conservation land”. Conservation land means permanently protected land in its natural state that provides a conservation purpose as defined by Georgia statue. Conservation land includes:
- Land with a substantial amount of 100 year floodplain or containing streams, rivers, springs, marshlands, or natural wetlands, at least 100 feet wide. No land disturbing activities can occur in this area.
- Land with slopes greater than 25%.
- Land that contains habitat for high priority plants, animals, and habitats as defined by Georgia’s Comprehensive Wildlife Conservation Strategy, as found at gadnr.org/cwcs.
- Prime farmland and forestry land (at least 10 acres in size) managed according to BMPs, and used for timber products, crops or livestock.
- Land that provides natural resource based outdoor recreation as described in Georgia’s Statewide Comprehensive Recreation Plan 2008-1013, found at gastateparks.org, This land must have substantial and regular use by the general public at little or no cost.
- Land that is contiguous with existing Conservation Land, or with local, state, federal lands managed primarily for natural habitat and open to the general public.
- Land with significant archaeological and/or historical sites
Other Key Points
- The donation must be permanent
- The organization receiving the donation must be a qualified land trust or a state or local government agency.
- The donated land and easement must be certified by DNR which requires filling out an application form, providing other supporting documents, and an affidavit from the land trust.
- The value of the conservation easement must be determined by a qualified appraisal.
The DNR website, gadnr.org, has information on the tax credit program and its requirements.
3. Property Tax Benefits:
Property taxes may also be reduced on conservation easement protected land. Landowners may present their local assessor with a copy of their appraisal in order to demonstrate a reduction in property value.
Please note: This summary is for general informational purposes only. Landowners must obtain professional financial planning and legal advice in order to determine if and how the federal deduction might apply to their specific situation.