Wednesday, January 30, 2008

CRS Release Legal Analsysis of Proposed Conservation Easement Tax Credit

The Congressional Research Service has issued a legal analysis of the proposed Conservation Easement Tax Credit in the 2007 Farm Bill.  Download it here:  Download conservationeasements.rtf .  Deductions for the grant of a conservation easement are particularly attractive because the property owner gets the deduction under IRC 170(h) even though she may still own the property subject to the easement.  A credit, of course, is worth more than a deduction.  Notice 2004-41 gives more background on conservation easements and also explains a potentially abusive transaction.  Here is the CRS conclusion with regard to the proposed credit:

Section 12204 of the Food and Energy Security Act of 2007 (H.R. 2419, as passed by the Senate) would create a new tax credit for taxpayers who agreed to protect a qualified species for a specified amount of time under an approved plan. The intent of the proposed credit is that, in exchange for forfeiting the development right to property, the landowner will receive a tax benefit, the habitat of endangered or threatened species will be protected, and the public will have the benefit of conserved property and protected species. While environmentalists and landowners appear united in wanting a method of conserving property in exchange for a tax credit, some aspects of this proposed legislation could complicate the public benefit intended. Those factors include an uncertain enforcement scheme in which several agencies could be involved, difficulty in monitoring compliance due to the scope of the program and uncertain provisions allowing access to the property, and the temporary nature of some of the protections provided.


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