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New Federal Law Gives Better Tax Break for Voluntary Conservation
Agreements
Congress recently passed a law to enhance the tax benefits of protecting your land
by donating a voluntary conservation agreement.
If you own land with important natural or historic resources, donating a
voluntary conservation agreement, also known as a conservation restriction in
Massachusetts, can be one of the smartest ways to conserve the land you love and protect
America’s natural heritage, while maintaining your private property rights and
possibly realizing significant federal tax benefits. These new incentives make it easier
for average Americans, including working family farmers and ranchers, to donate land. The
legislation allows:
- A conservation agreement donor to deduct up to 50% of their adjusted gross income
in any year;
- Qualifying farmers and ranchers to deduct up to 100% of their adjusted gross
income; and
- Donors to carry over deductions for their contribution for as many as 15 years.
These changes allow many modest income landowners to deduct much more than they
could under the old rules, bringing increased fairness to the tax code.
What do you need to know to enter into a voluntary conservation agreement? Here
are the facts:
- A voluntary conservation agreement, also known as a conservation easement, is a
legal agreement between a landowner and a nonprofit land trust or government agency that
permanently limits uses of the land in order to protect important conservation values. It
allows you to continue to own and use your land and to sell it or pass it on to heirs.
- When you enter into a voluntary conservation agreement with a land trust, you give
up some of the rights associated with the land. For example, you might give up the right
to subdivide your land or build additional houses, while retaining the full right to grow
crops. Future owners also will be bound by the agreement’s terms. The land trust is
responsible for making sure the terms of the agreement are followed.
- Voluntary conservation agreements vary widely. An agreement to protect rare
wildlife habitat might prohibit any development there, for example, while one on a farm
might allow continued farming and the building of additional agricultural structures. An
agreement may apply to just a portion of the property, and need not require public access.
- A conservation donation requires not only a willing donor, but a qualified
conservation organization to accept the donation. That organization needs to be able to
show that the donation closely fits its particular charitable mission. A land trust will
not accept a donation that does not fit its mission and purposes.
- A voluntary conservation agreement can help a landowner pass land on intact to the
next generation. By limiting the land's development potential, the agreement lowers its
market value, which in turn lowers estate tax. Whether the agreement is donated during
life or by will, it can make a critical difference in the heirs' ability to keep the land
intact.
- If a conservation agreement benefits the public by permanently protecting important
conservation resources and meets other federal tax code requirements, it can qualify as a
tax-deductible charitable donation. The amount of the donation is the difference between
the land's value with the agreement and its value without the agreement.
- To qualify as a charitable donation, a conservation agreement must be permanent. A
landowner should get professional financial planning and legal advice before making such a
major donation.
To learn more about protecting your land with a voluntary conservation agreement,
also known as a conservation restriction in Massachusetts, call Susan Mitchel-Hardt,
President of the Acton Conservation Trust at 978-369-9264 or contact the Trust by email at
info@actonconservationtrust.org .
The national Land Trust Alliance also has a lot of information about these new
changes: click here to read more.
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