NC Conservation Tax Credit
In 1983, North Carolina became the first state to establish a state income tax credit for landowners who donated their land for conservation purposes. The program was a huge success. As of December 31, 2012, 238,000 acres had been protected using the tax credit, with an estimated donated land value of more than $1.3 billion. Unfortunately, the tax credit was terminated by the NC General Assembly in July 2013 as part of broader tax reform measures, effective December 31, 2013.
Federal Tax Deduction
A federal income tax deduction is available to landowners who donate a permanent conservation easement on their land. This is a powerful incentive that makes it easier for landowners to conserve the land they love. As of November 2014, Congress is considering renewing for two years (retroactive for 2014 and going forward for 2015) a set of expanded tax incentives for landowners who donate conservation easements. Congress could also make the enhanced incentives permanent. A bill to do just that passed the U.S. House of Representatives in July 2014 but the Senate has not acted on it. The incentives:
- Raise the deduction a landowner can take for donating an easement from 30 percent of adjusted gross income in any year to 50 percent,
- Allow qualifying farmers and ranchers to deduct up to 100 percent of adjusted gross income, and
- Increase the number of years over which a conservation easement donor can take those deductions from 5 years to 15 years (or until the eligible deduction had been used up).
(For example, a landowner who donates a permanent conservation agreement valued at $1 million and who has an annual adjusted gross income of $100,000 can deduct 50 percent of $100,000 ($50,000) in each year of years 1-15 for a total of $750,000 in deductions; the remaining $250,000 cannot not be carried over or used after year 15).
Visit the Land Trust Alliance website for the most recent information about federal tax deductions.
To qualify as a charitable contribution for federal tax purposes, a conservation agreement must be perpetual and must:
- preserve land for public outdoor recreation or education;
- protect relatively natural habitats of fish, wildlife, or plants;
- preserve open space including farm and forest land;
- preserve historically important land or buildings.
Federal Estate Tax
Conservation agreements can be ideal for landowners who want to protect their land permanently while reducing its taxable value by giving up certain development rights. This may help prevent the break-up of family farms or estates necessitated by otherwise heavy estate tax liability. If a landowner places a conservation agreement on his or her land, the “highest and best use” of the land is restricted by the terms of the agreement and estate taxes are assessed according to that lower value at the owner’s death. A landowner may also provide for a conservation agreement to be donated to a land trust in his or her will. If the land trust accepts, the donor’s estate may claim a charitable deduction for the value of the conservation easement.
We recommend that you consult an accountant or attorney to help you determine the tax advantages you may realize by donating land or a conservation easement.