Wednesday, April 2, 2014
Potential tax deductions are one of the driving forces behind creation of conservation easements. The exact contours of the tax deduction (how much can you deduct and over how many years can you stretch your donation) has varied over the years. For the past several years, the deductions have been particularly generous.
Under standard law, individuals can deduct the value of the donated property up to 30 percent of their adjusted gross income, and any excess value can be carried forward for 5 years. But in 2006, Congress passed the enhanced landowner incentive. It allows deductions up 50 percent of donors’ adjusted gross income and over a 15-year carry-forward period. That incentive ended this past December. The consistent support of this tax deduction by Congress led many to people the enhanced version would be extended without struggle.
Perhaps not. The most recent tax-extension proposal from the Senate Finance Committee does not extend the enhanced tax deduction for conservation easements. Russ Shay at the Land Trust Alliance has hypothesized that the bill drafters may want to change the nature of the deduction, but are still likely to keep the enhanced deduction available to some extent. In particular, this might appear an attractive opportunity to remove deductions for conservation easements over golf courses, something both parties (and the IRS) have indicated their support for. Others suggest that a better approach would be to craft legislation making the enhanced deduction permanent so it does not require periodic extensions.