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articles & updates | article
The New Conservation Tax Incentives - Some Things We Know and
Some Things We Don't Know
by Stephen J. Small, Esq.
On August 17, the President signed into law the Pension Protection Act of 2006. The new law includes the first major new income tax incentives for land conservation since 1980.
There are some very important things we do know about the new law, and there are some things we do not know about the new rules. This article is not legal advice. It is commentary on the new incentives. Landowners contemplating conservation donations must consult with their own counsel on these issues.
First, some quick background to set the stage.
Background
Under the "old" law, an individual could deduct the value of a conservation easement donation generally up to 30% of the donor's "contribution base" for the year, with a five-year carryforward of any unused amount. "Contribution base" is a technical tax term that means adjusted gross income subject to certain adjustments (which adjustments are not relevant for most landowners). So for shorthand we simply say the deduction for individuals could be taken up to 30% of "adjusted gross income," or "AGI."
Also under the old law, a conservation easement donated by a corporation could be deducted only up to 10% of the corporation's taxable income for the year (that is, of course, taxable income before taking the deduction), again with a five-year carryforward. In particular, this very restrictive limitation on charitable contributions by corporate landowners has effectively "killed" countless potential conservation easement donations across the country.
Gifts by cash or check by individuals are deductible up to 50% of the donor's AGI. This provision has not been changed by the new incentives.
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