Easement incentives expanded

President Bush signed a pension bill into law Thursday that includes expanded tax incentives for conservation easements -- an achievement hailed by members of the land trust community who just a year ago were under attack by a congressional committee that wanted to lower tax incentives.

"It’s been a phenomenal turnaround," said Molly Morrison, president of Natural Lands Trust.

The law, which Congress approved on Aug. 3, raises the deduction a landowner can take for donating a conservation easement from 30 percent of their income in any year to 50 percent. It also extends the carryover period for the donor to take the tax deduction from five to 15 years. This is particularly beneficial to farmers and ranchers, who may deduct up to 100 percent of their income if they qualify.

The new law is only in effect for two years -- 2006 and 2007.

A year and a half ago, the land trust community was reeling from a report released by the Congressional Joint Committee on Taxation recommending that the tax benefit be reduced for people donating conservation easements because of some instances of fraud.

At the time, U.S. Senator Rick Santorum, R-Pa., called the report a "potential disaster" for land trusts and open space. Without a significant tax benefit, few people would donate conservation easements, he said.

Santorum and the land trust community embarked on a campaign to educate members of Congress on the work they do and the public’s support for open space.

Some of the instances of fraud mentioned by the congressional committee related to overvaluation of land and donation of conservation easements on land of little value.

Santorum came to Chester County in May 2005 with U.S. Rep. James Gerlach, R-6th, of West Pikeland, U.S. Rep. Joseph Pitts, R-16th, of East Marlborough, and state Rep. Chris Ross, R-158th, of East Marlborough, to host a symposium on what could be done to counter the congressional report. Gerlach also formed a land trust caucus in Congress to follow developments and help educate fellow members.

The efforts paid off, and Morrison credited Santorum and Gerlach with getting the enhanced tax incentives in the pension bill.

William Sellers, executive director of the French and Pickering Creek Conservation Trust, marveled at the turnaround. "Considering where we were when the joint committee came out with their report, it’s phenomenal," he said. "We’ve gone from a reactive save-your-butt, to one where we’ve received positive results beyond our original thinking."

Sherri Evans-Stanton, director of Environmental Management Center with the Brandywine Conservancy, predicted that interest in donating conservation easements would increase now that the tax benefits have been expanded. "We have already gotten calls from people," she said.

A property owner can donate a conservation easement to a land trust or other organization and earn a tax deduction on the value of the easement.

For instance, if a property is worth $1 million including its development rights, but only $500,000 once the development rights have been forfeited by donating a conservation easement, the owner can take a deduction for $500,000. However, the deduction must offset income.

Currently, if this person who has donated a $500,000 conservation easement has an annual adjusted income of $100,000, he can deduct 30 percent of his income, or $30,000 a year. He can have this deduction for five years, plus the first year, for a total value of $180,000 of his $500,000-value conservation easement.

Under the new rules, he can deduct 50 percent of his income, or $50,000, and take the deduction for 15 years. In this case, he would use up the whole $500,000 in 10 years.

Farmers and ranchers who receive more than 50 percent of their income from farming or ranching can now deduct up to 100 percent of their adjusted gross income against the value of a donated conservation easement.

The new law is only in effect until Dec. 31, 2007, unless Congress decides to extend it before it expires.

"There is a short window of opportunity for property owners who want to donate a conservation easement, said Evans-Stanton.

"It also means that we have to keep beating the drums to make these changes permanent," said Morrison.

In a statement, Gerlach said he has personally been working on the conservation provisions in the Pension Reform Bill for some time. "Increasing the tax incentive in the next couple of years will create new opportunities for additional conservation and preservation of our region’s cherished open spaces, and I will continue to work to see that these temporary incentives are made permanent," he said.

Santorum also said in a statement that he was pleased that the pension bill included incentives for land donations. "Our loss of open space has been a growing concern with my constituents," he said. "I am pleased that the president has signed these new incentives into law."

To contact staff writer Anne Pickering, send an e-mail to apickering@dailylocal.com.

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