Watson Spence Attorney Bo Plowden on Conservation Easements
Wednesday, April 20th, 2016
A conservation easement is a binding agreement between a property owner and a qualified land trust or government entity that limits uses of that property forever. Conservation easements not only allow landowners to protect land for future generations but also provide financial benefits to the landowner as well. Land that has been put into this easement qualifies for enhanced tax incentives on both the Federal and State level. First, however, the property must qualify for the easement. In Georgia two of five conservational purposes must be served in order for the land to qualify. Those purposes are as follows:
- Water quality protection for wetlands, rivers, streams, or lakes;
- Protection of wildlife habitat consistent with state wildlife conservation policies;
- Protection of outdoor recreation consistent with state outdoor recreation policies;
- Protection of prime agricultural or forestry lands; or
- Protection of cultural sites, heritage corridors, or archeological and historic resources.
The easement, drafted by an attorney of the land owner's choosing, will create rights and responsibilities of both the landowner and the holder of the easement (government entity or qualified conservation organization such as Tall Timbers). Once the holder and landowner agree on the content of the easement the holder will accept the easement and it is recorded in the proper government office.
FEDERAL INCOME TAX BENEFITS
The amount of the deduction available to the landowner is 50% of his or her income. Qualifying farmers and ranchers get even better treatment that allows them to deduct up to 100% of their income. Finally, the carry-forward period is extended for a donor to take the deductions from 5 to 15 years.
GEORGIA TAX BENEFITS
The taxpayer is eligible to participate in the Georgia Conservation Tax Credit Program. A taxpayer can claim a credit against his or her state income tax of 25% of the fair market value of the donated property, up to a maximum of $250,000 per individual, $500,000 per corporation, and up to $1,000,000 for partnerships. However, the amount of the credit used in any one year may not exceed the amount of the state income tax due. Unused portions of the credit may be carried forward for ten consecutive years. In addition, the property qualifies for the lowest property tax assessment under Georgia's conservation use value assessment program. Donors may also sell tax credits received to another state income taxpayer.
In summary, landowners may wish to explore the options available associated with conservation easements. Land protection and tax benefits are attractive incentives that make this donation worth a consultation with Watson Spence about the finer details of the procedure and documentation.