Preserving Tax Deductions for Conservation Easements in Perpetuity

By: Amos S. Eno
Posted on:07/31/2013 Updated:08/15/2013

House Representative Jim Gerlach, of Pennsylvania’s sixth district, last week referred the Conservation Easement Incentive Act of 2013 (H.R. 2807) to the House Ways and Means Committee, of which he is a member. The stated goal of the Bill is: “To amend the Internal Revenue Code of 1986 to make permanent the special rule for contributions of qualified conservation contributions.”

In laymen’s terms, Gerlach wants to make permanent the enhanced federal tax incentives for land conservation donations by individuals and corporations that are set to expire at the end of this year. And he is not alone; the bill has broad and unusually bipartisan support – of the 135 cosponsors, 77 are Democrats, including Rep. Mike Thompson who worked closely with Gerlach on the bill, and 58 Republicans.

While the text of the bill is simple – it’s only about four lines long; its implications for private land conservation are profound. The current incentive, set to expire at the end of the year, and which this bill seeks to make permanent, allows qualified farmers and ranchers to deduct up to 50 percent of their adjusted gross income (AGI) in any year, and up to 100 percent of that year’s AGI over the following 15 years.

This is a powerful financial incentive to conserve land, especially for those who are land rich but cash poor and would otherwise simply not be able to afford creating an easement on their land. Not that anyone creates a conservation easement purely for the financial benefits; they could get higher crop yields from more industrial, but less sustainable, methods of farming, or potentially make millions by selling the land to a developer.

Rather, the landowners who make use of these tax deductions are good stewards of their land who simply need some relief from the financial burden of creating a conservation easement so that they can successfully protect their land in perpetuity.

The bill is almost identical to the Rural Heritage Conservation Extension Act of 2013 (S. 526), which was referred to the Senate Finance Committee in March by Senators Baucus and Hatch, with the sole exception being that the Senate bill includes a section determining that conservation contributions “shall not include any contribution of an easement for use on, or intended for use on, a golf course.”

The latter is a controversial amendment, welcomed by in the conservation community who feel that, rather than achieving any conservation goals, golf courses dramatically alter the landscape for purely recreational purposes and consume valuable natural resources, particularly water. Most conservation easements serve the purposes of conserving natural resources and wildlife, cultural heritage sites and sustainably managed agricultural lands.

Others, even among the conservation community, feel otherwise. In their view, placing an easement on the land still limits future development and parts of some golf courses do provide wildlife habitat. For example, turtles and some amphibians live in golf course ponds.

Our recent blog on the Virginia Outdoors Foundation describes the effectiveness of similar conservation tax credits for private land conservation at the state level in Virginia.