Enhanced Tax Incentives Fall 2015

Enhanced tax incentives broaden the appeal of conservation easements by allowing landowners to more closely realize the value of their conservation easement.

“For an average family, the regular tax treatment does not provide enough incentive for them to complete a conservation easement donation,” said Texas Agricultural Land Trust CEO, Blair Fitzsimons. “Under the enhanced treatment, families may more closely realize the value of their gift, thus making a conservation easement a better business decision.”

According to the Land Trust Alliance, the enhanced tax incentives, which have been in place since 2006, have helped America’s 1,700 land trusts increase the pace of conservation by one-third. Thanks to the benefits, landowners have conserved more than one million acres per year of important wildlife habitat, farmland and scenic open space land across the country.

Until now, the enhanced benefits have been subject to Congressional renewal every two years. Currently, the House of Representatives has passed HR 641, the America Gives More Act of 2015, and the Senate companion bill S. 330 is gaining support. These measures will make the enhanced incentives permanent. The bill currently has 42 Senate sponsors, a strong statement of bipartisan support. A vote is likely around Thanksgiving.

“Making the enhanced incentives permanent will not only allow landowners to more fully appreciate the value of their conservation easements, it will give them the confidence to embark on long-term tax planning,” Fitzsimons said. “It demonstrates that our country has a long-term commitment to conservation.”

Call to Action

Contact your Senator today at 202-224-3121.

Don’t just leave a message at the front desk. Ask to speak with the staffer who handles tax issues. Ask for their support of S 330 that would make permanent tax incentives for donated conservation easements.

Visit http://www.landtrustalliance.org/issues-action/take-action/tax-incentives for additional Tax Incentive talking points.

Tax Implications

For more about how the Tax Incentives work please visit www.txaglandtrust.org/yadayadayad – this should lead to the content that is shown below.

Sidebar A

How the Enhanced Easement Incentive Works
* Raising the maximum deduction a donor can take for donating a conservation easement from 30 percent of the adjusted gross income (AGI) in any year to 50 percent;
*Allowing qualified farmers and ranchers to deduct up to 100 percent of their AGI;
* Increasing the number of years over which a donation can take deductions from 6 to 16 years.

Sidebar B
How the Enhanced Easement Incentive Works
By the Numbers

Scenario:
1,750 acre ranch in Central Texas
Average price per acre = $2,969*
Market value = $5,195,750
Value after conservation easement (30 percent reduction) = $3,637,025
Difference (Charitable contribution) = $1,558,725
*source: Texas A&M Real Estate Center, Rural Land Values, Texas Region 7: Austin, Waco, Hill Country

Tax Deduction: Regular Treatment
Assumption: Landowner’s annual adjusted gross income (AGI) is $200,000, which remains constant.

The deduction resulting from the easement is as follows:
(30 per cent of $200,000 = $60,000)

Year of Contribution                       $60,000
Carry-forward to Year 1                 $60,000
Carry-forward to Year 2                $60,000
Carry-forward to Years 3-5           $180,000
                                                           $360,000

Potential charitable deduction = $1,558,725

This scenario does not make financial sense for the landowner.

Tax Deduction: Enhanced Incentive
Assumption: Landowner’s annual adjusted gross income (AGI) is $200,000, which remains constant.

The deduction resulting from the easement is as follows:
(50 percent of $200,000)

Year of contribution                      $100,000
Carry-forward to Year 1                $100,000
Carry-forward to Year 2               $100,000
Carry-forward to Years 3–14       $1,300,000
                                                          $1,600,000

Potential charitable deduction = $1,558,725

The landowner is able to use the entire deduction, making it more financially beneficial and therefore appealing.

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