The Enhanced Conservation Easement Tax Incentive
Under the federal tax code (IRC Section 170), a taxpayer can generally deduct the value of a conservation easement donation up to 30% of the donor’s “contribution base,” or adjusted gross income, for the year with a 5 year carry-forward of any unused amount.
Since 2006 and the Pension Protection Act, Congress has voted to increase the incentives available to individuals that make qualified conservation contributions. While the enhanced benefits have been included in a wide range of legislation, the enhanced conservation tax incentive generally:
- Raises the deduction a donor can take for donating a conservation easement from 30% of their adjusted gross income in a year to 50%. Thus, qualified conservation contributions are exempt from the limitation applicable to contributions of capital gain property in Section 170(b)(1)(C).
- Second, it allows qualifying farmers and ranchers to deduct up to 100% of their adjusted gross income, so long as the conservation easement requires that the property be used for an agricultural purpose. A qualified farmer or rancher is a taxpayer whose gross income from the trade or business of agriculture is greater than 50% of the taxpayer’s gross income for the taxable year in which the conservation easement is donated. It includes both individuals and corporations.
- Third, it extends the carry-forward period for a donation from 5 to 15 years (in addition to the year of donation).
It is important to note that the enhanced tax incentive sunsets periodically, so make sure that Congress has passed the enhanced tax incentive for the year of your donation. In some cases the enhanced tax incentive is passed late in the year and is applied retroactively to donations.