Land Trusts Say Permanent Tax Incentives Will Spur Conservation
Congress last week approved a bill that makes tax incentives permanent for agreements that conserve land and preserve open space. Lands conservancies are calling it the most important legislation in decades for their movement.
Since 2006, landowners have been allowed to take tax deductions for donating land or granting conservation easements - promises not develop their land. That’s been an incentive for property owners to work with local lands conservancies, the non-profit groups that manage conservation deals.
Since the original law passed, more than 2 million acres of farm and forest land and other open space have been preserved nationwide, according to the Land Trust Alliance, a Washington, DC, group that represents more than 1,100 land trusts. But the law expired in 2013, and though it’s been renewed at year’s end for the past two years, the future has been uncertain. The vote last week in Congress ends that.
It’s “huge,” says Tom Okel, executive director of the six-county Catawba Lands Conservancy in Charlotte.
“Now this legislation makes it permanent. It allows people to work on projects that often take a lot of time, with certitude as to what the tax treatment would be. More importantly it just shows that our legislators in Washington, on a bipartisan basis, understand how important our lands are, and conservation,” Okel said.
Under the law, landowners can deduct part of the value of donated land or easements from their gross incomes. Previous rules were limited in a way that made them useful only for donors with high incomes. But that doesn’t describe many longtime land-owning families with lower incomes. Okel says the newly extended “enhanced” rules keep the “universe” of potential donors broad - and that could mean more land will be conserved. That’s critical as the pace of development speeds up, both in Charlotte and around the state.
“There are families there that have had land for generations that they would prefer to leave in its natural state, but sometimes they can’t afford to,” Okel said. “If a developer’s offering them a significant amount of money to turn that into a highly dense neighborhood, it’s hard to get everyone to agree to preserve it. This incentive can really make a difference.”
North Carolina has 24 land trusts. The Catawba Lands Conservancy manages about 15,000 acres of protected land in Mecklenburg and five surrounding counties. The group projects that 30 percent of the region’s remaining green space could be lost over the next 15 years.
Dec. 18, 2015, Land Trust Alliance Statement, http://www.landtrustalliance.org/
Dec. 18, 2015, Catawba Lands Conservancy announcement, http://catawbalands.org/
Q. Can you give us the background on this?
OKEL:This is huge. Basically, the IRS had had enhancements for conservation contributions in place since 1996, but those expired at the end of 2013. For the past two years, they’ve been retroactively to the beginning of the year put back in place. Now this legislation makes it permanent. It allows people to work on projects that often take a lot of time, with certitude as to what the tax treatment would be.
More importantly it just shows that our legislators in Washington, on a bipartisan basis, understand how important our lands are, and conservation. Very encouraging from that standpoint.
Q. From a practical standpoint, for your organization and other lands conservancies, what does it mean?
OKEL:It is huge. The standard treatment for a conservation gift, either a conservation easement or giving us land, would be that you could deduct 30 percent of your adjusted gross income for up to five years. This takes that to the … the enhanced treatment allows you to take 50% for up to 15 years, so what it means, it opens up dramatically the universe of donors that has enough income to really be able to justify making a conservation gift that they would like to make.
So if someone is donating an easement to our organization that has a theoretical value of 300,000, you have to make 200,000 dollars a year to be able to take full advantage of that from a tax standpoint.. You would be able to take 60 a year for 5 years to get up to 200,000 dollars of income. With this change, you now could do that with as little as 40,000 of income. So it really makes a huge difference. There’s so many folks in our area that have family land that may be owned by a group of relatives, and they have land that has great value, and they see great value in preserving it, but they don’t have income. And this allows them to still take advantage of the conservation treatment.
Q. And why is this critical in the Charlotte area at this time?
OKEL:Well, because we live in a great part of the country that is experiencing explosive growth. The urban core of Charlotte is now growing out and is expanding into surrounding counties, into Gaston and Cabarrus and York and to Union counties. And there are families there that have had land for generations that they would prefer to leave in its natural state, but sometimes they can’t afford to. If a developer’s offering them a significant amount of money to turn that into a highly dense neighborhood, it’s hard to get everyone to agree to preserve it. This incentive can really make a difference in getting everyone on the same page and helping families to make a decision to preserve land that has been in their family and in their natural state, obviously, forever.
Q. That’s great. One other question about this, just reading the announcement that you guys sent out. This will be retroactive to January 1st of this year, as had been done in previous years, but what’s different this year is that it’s actually extended it.
OKEL:Right. These projects take a long time to put together. As I said, often you’re dealing with a number of family members, and getting them all lined up on the same page can be complicated. So now we know, at the beginning of the year, that anything we do in 2016 will be treated with these enhanced incentives. Obviously, that helps. People don’t have to wait till the end of the year to see how their conservation project is going to be treated.
And for us here, it’s particularly important. Our organization is entering into our 25th year of working in this area, and the next 10 to 15 years are going to be crucial. With just the amount of growth that we’re experiencing, that’s going to forever define the mix of development versus natural space. The fact that we have this in place on a permanent basis, it’s going to make a huge difference for this work.
Q. And this is permanent now, no need to be updated or re-enacted?
OKEL:Right, it’s as permanent as I guess any law. ... It’s not in the Consitution, which I wish it was.