New Law Expands Charitable Conservation Easement Tax Incentives

October 26, 2006

On August 17, 2006, President Bush signed into law the Pension Protection Act of 2006. This law changes several of the limitations on tax benefits available for donations of conservation easements. Commentators have described these changes as, "a tremendous expansion of the federal conservation tax incentive for conservation easement donations." Rand Wentworth, Land Trust Alliance, 9/26/06.

Under the former law, all charitable donations of capital gain property were subject to the same restrictions and carryover rules; namely a taxpayer was limited to a deduction of the property's fair market value up to 30% of the taxpayer's adjusted gross income, with a five year carryover period. The new law reduces these limitations for contributions of conservation easements on capital gain property. In particular, the new law:

• Raises the deduction a landowner can take for donating a conservation easement from 30% of their income in any year to 50%;
• Allows qualifying farmers and ranchers to take a deduction for contributions of conservation easements of up to 100% of their income; and
• Extends the carry-forward period for a donor to take tax deductions for a voluntary conservation agreement from five to 15 years.
• Note that these incentives only apply to donations of conservation easements made in 2006 and 2007. Although some conservation groups have pledged to lobby for an extension of this law, as it currently stands there is a two year window to take advantage of these incentives.

If you have any questions or would like additional information, please contact Art Harrington (414-287-9414 or aharrington@gklaw.com), Kevin Boyle (414-287-9428 or kboyle@gklaw.com), or any other member of Godfrey & Kahn's Environmental and Land Use Team.