Federal Income Tax Benefits
Landowners can often receive an income tax deduction for the charitable contribution of a conservation easement or real estate under Internal Revenue Code §170(f)(3). A conservation easement must meet the qualifications of the Code and Treasury Regulations to qualify.
A conservation easement is a conveyance by deed of certain interests in real estate by the landowner to a "qualified" organization or agency that permanently restricts and proscribes commercial and industrial development and limits certain other uses of the land, including residential development, to protect open space and natural resources. Conservation, agricultural and historic preservation easements, or restrictions, are authorized by NH RSA 477: 45-47.
IRC §170(h) allows a charitable contribution deduction for the gift of a "qualified conservation contribution", which is defined as the gift of:
Treasury Department Regulations 1.170 A-14 define and describe each of these three requirements in detail. A "qualified real property interest" includes a conservation easement as allowed by and defined in RSA 477:45, granted in perpetuity.
"Conservation purpose" is specifically defined to include five categories of resources that may be protected by the easement:
While an easement must provide a public benefit, it need not require public access to the property to qualify. A "qualified organization" includes government agencies such as those identified above, as well as certain tax-exempt non-profit organizations that are dedicated to, and have the capability to provide long-term stewardship of the land.
The advantages of a conservation easement to a family can include:
The amount of the income tax deduction available to the landowner/taxpayer is limited. Because the gift of a conservation easement is a gift of capital property, the charitable contribution deduction is usually limited to 30 per cent of the taxpayer's adjusted gross income. Unused amounts may be carried over for a maximum of five years after the year of the gift. Therefore, the taxpayer has up to six years to take advantage of the value of the easement as a tax deduction.
Landowners can often receive an income tax deduction for the charitable contribution of a conservation easement or real estate under Internal Revenue Code §170(f)(3). A conservation easement must meet the qualifications of the Code and Treasury Regulations to qualify.
A conservation easement is a conveyance by deed of certain interests in real estate by the landowner to a "qualified" organization or agency that permanently restricts and proscribes commercial and industrial development and limits certain other uses of the land, including residential development, to protect open space and natural resources. Conservation, agricultural and historic preservation easements, or restrictions, are authorized by NH RSA 477: 45-47.
IRC §170(h) allows a charitable contribution deduction for the gift of a "qualified conservation contribution", which is defined as the gift of:
- "a qualified real property interest" to
- "a qualified organization", exclusively for
- "conservation purposes".
- The gift must be in perpetuity. IRC §170(h)(5)(A)
Treasury Department Regulations 1.170 A-14 define and describe each of these three requirements in detail. A "qualified real property interest" includes a conservation easement as allowed by and defined in RSA 477:45, granted in perpetuity.
"Conservation purpose" is specifically defined to include five categories of resources that may be protected by the easement:
- Public recreation and/or education
- Significant natural habitat
- Open space for scenic enjoyment
- Open space pursuant to local government policy
- Historic value
While an easement must provide a public benefit, it need not require public access to the property to qualify. A "qualified organization" includes government agencies such as those identified above, as well as certain tax-exempt non-profit organizations that are dedicated to, and have the capability to provide long-term stewardship of the land.
The advantages of a conservation easement to a family can include:
- It leaves the property in the ownership of the landowner, who may continue to live on it, sell it or pass it on to heirs, as well as to reap economic benefits through forestry and agricultural uses.
- It can significantly lower estate taxes-sometimes making the difference between heirs being able to keep land in the family and their needing to sell it.
- A conservation easement deed can be a flexible document, and can be written to meet the particular needs of the landowner's family while protecting the property's resources.
- It is permanent, and remains in force when the land changes hands.
- The donation of an easement may result in a federal income tax deduction.
The amount of the income tax deduction available to the landowner/taxpayer is limited. Because the gift of a conservation easement is a gift of capital property, the charitable contribution deduction is usually limited to 30 per cent of the taxpayer's adjusted gross income. Unused amounts may be carried over for a maximum of five years after the year of the gift. Therefore, the taxpayer has up to six years to take advantage of the value of the easement as a tax deduction.
