Conservation Easements — Important New Law Likely to Be Signed Shortly

The following is through the courtesy of Thomas S. Hall, Senior Attorney, Braun & Associates, Dripping Springs, Texas.

Both the U.S. Senate and House of Representatives just approved a far-reaching expansion of the federal tax incentives for private landowners who donate conservation easements on their property.

President Bush is expected to sign the bill soon. The new law will create tremendous opportunities for landowners to conserve their property and realize significant federal income and estate tax savings.

The new law:

• Raises the deduction a landowner can take for donating a conservation easement from 30% of their adjusted gross income (AGI) in any year to 50% AGI;
• Allows qualifying farmers and ranchers with more than 50% of their gross income from agricultural activities to deduct up to 100% of their AGI; and
• Increases the number of years over which a donor can take those deductions from 6 years to 16 years.

The new legislation only applies to permanent conservation easements donated in 2006 and 2007. Rural landowners and conservation groups are attempting to make these changes permanent.

In the meantime, landowners are advised to begin immediately to explore the application of the new law to their specific tax and land ownership situations. An attorney experienced with conservation easements can quickly analyze the specific opportunity to use this new law for the client’s advantage and represent the client in all phases of this complex transaction.

A conservation easement is a way for landowners to donate some of the development rights to their land to a conservation charity such as a land trust in order to permanently protect important natural resources on the property. A conservation easement allows the landowner to continue to own, use and live on the property; to sell, gift or otherwise transfer the property subject to the terms of the conservation easement; to make it easier for rural families to leave land to their children by reducing or eliminating the burden of the federal estate tax; and to protect the natural areas, open space, water and rural character of the land.

Most landowners are inspired to protect their property and natural resources because they love their land. But donating a conservation easement is a financial decision also. The new tax incentives make this option much more attractive to all those who own rural land.