Bill would make conservation tax credit permanent
DES MOINES, Iowa (AP)--More than 1 million acres of land have been protected from development each year under a temporary federal tax deduction, and land trusts nationwide are hoping Congress will now make permanent the credit, which includes a generous benefit for farmers and ranchers.
Sens. Charles Grassley (R-IA) and Max Baucus (D-MT) recently introduced a bill to do that. The Rural Heritage Conservation Extension Act of 2011 would allow landowners to deduct up to half of their income for 16 years in exchange for conservation easements, while farmers and ranchers could deduct all of theirs. Before the enhanced credit went into effect in 2006, landowners received only a 30 percent deduction for six years.
Since 2006, the number of acres protected each year has increased from about 750,000 to more than 1 million, according to the Washington D.C.-based Land Trust Alliance.
"We think the potential is much greater if we can make this permanent,'' said Russ Shay, director of public policy for the alliance.
Farmers and other landowners won't get the enhanced deduction for 2010 because Congress didn't extend it until December. The effect of that lapse nationally isn't clear, but Shay said the number of donations in Maryland and Virginia dropped by half last year.
Farmers and landowners who donate land for conservation retain ownership of the property but use of the land is restricted under the terms of the easement.
To qualify for the federal tax deduction, easements must meet guidelines set by the Internal Revenue Service and their state. Rules vary from state to state. In some states, farmers can keep farming land placed in conservation, while in others the land may be protected as a wetland or wildlife habitat. All conservation easements, however, bar future construction.
Doug Caulkins, 70, of Grinnell, donated 240 acres with prairie, oak savannah and meadow for conservation and, with 10 other families, he placed another property under a conservation easement.
"This is the sort of thing we need to preserve for Iowa's heritage in the future,'' Caulkins said. "Less than 1 percent of Iowa land is in the prairie or woods that were previously here. When you get that close to the margin, you need to provide an incentive to people to save those parts of the ecosystem.''
Caulkins said making tax deduction permanent will make it easier for people to donate land.
"If it becomes permanent, this is something people can think about and plan about as they acquire land and think about its use in the future,'' he said.
Grassley's office has estimated the enhanced deduction would cost the federal government $111 million over two years. His staff said they have not heard of any opposition to making the enhanced benefit permanent.
"Maybe someone could have made a case why it was temporary when we passed it in 2005 but we've seen that it's done a great deal of good and Sen. Baucus and I are convinced it has done more than we thought it would do,'' Grassley said. "The legislation from day one . shows the incentives have helped Americans increase the pace of conservation to more than one million acres a year.''
Dennis Nuxoll, director of federal policy for the Washington D.C.-based American Farmland Trust, said it's important to preserve open space and natural resources, even in places where development seems unlikely.
"I have seen over the last 20 to 30 years that we are developing agricultural and ranch land at a pretty staggering clip,'' he said. "Does it tend to be in urban and suburban areas, yes, but it doesn't mean you don't have areas where people are buying up farmland or a ranch and building vacation houses and you don't have land in production anymore.''
Land trusts are typically nonprofit groups that work to conserve land by helping acquire conservation easements. Along with accepting donations, some trusts may raise money to buy land or development rights. Shay said that before the enhanced tax deduction went into effect in 2006, there was little incentive for farmers to donate land.
"People will pay millions of dollars for a cattle ranch with a trout stream in Montana where a farmer might be netting $50,000 a year,'' he said. "If you donated a conservation easement and the development rights, the most they got under (the old) tax deductions is $90,000 for giving a gift worth a million dollars.''
With the change in law, the farmer would get tax deductions worth $800,000, while a non-farmer would receive $400,000 in deductions.
Pete Sepp, executive vice president of the National Taxpayers Union, an independent, nonpartisan agency that promotes tax reform and less wasteful government spending, said it's not opposed to the bill but the group thinks there are more important issues.
"A tax credit may be a less harmful way to make conservation policy than taking land through eminent domain or subsidizing purchases,'' Sepp said in an e-mail to the AP. "But landowners have much bigger problems to worry about, such as inheritance taxes, that Congress ought to focus on as well.''