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Colorado Tax Credit Information Colorado has enacted one of the nation's most generous tax incentive systems for donations of conservation easements. Colorado's Tax Credit Transfer Program is designed to encourage land conservation by helping donors take advantage of these tax benefits. State tax credits are available to donors of "qualified" conservation easements in Colorado. The maximum credit available has been raised in 2007 to $375,000 for the donation of a conservation easement valued at $750,000 or more. (The credit is calculated at 50% of the value of the easement up to a maximum of $375,000.) There are two options for a conservation easement donor with the Colorado state tax credit. The landowner can either use them against their personal state income tax liability, in which case they can be carried forward for up to 20 years OR they can be sold to other Colorado taxpayers at a discount. If the landowner chooses to sell these credits, there are several tax credit brokers around the state who specialize is matching conservation easement donors and tax credit buyers together. Typically, tax credit buyers purchase the credits at a discounted rate and the donor then receives approximately 80% of their tax credit value in cash. This means that if your conservation easement is valued at the full $750,000 you would receive approximately $300,000 in cash. ($375,000 x .80 - $300,000). The other $75,000 is used to provide the discount to the state tax credit buyer and to pay the tax credit broker fees.
Landowners considering Conservation Easements are strongly encouraged to obtain tax and legal advice. HIGHLIGHTS OF COLORADO CONSERVATION EASEMENT TAX BENEFITS •Colorado taxpayers are eligible for state income tax credits for the donation of a qualified conservation easement. |
Federal Tax Incentive Information In August of 2006, the government significantly expanded the federal tax incentive for conservation easements. Landowners can now deduct 50 percent of their income in any year (versus the previous 30 percent), and qualifying farmers and ranchers (who receive more than 50 percent of his or her income from "the trade or business of farming") can deduct up to 100 percent of their income. The new law also extends the period of time a person can carry forward tax deductions from 5 to 15 years. While there are those who are working to make this law permanent, this new incentive currently only applies to easements placed in 2006 and 2007. This new law also implements more stringent provisions to prevent abuse. The purpose of these provisions is to ensure that appraisals accurately reflect the value of a conservation easement. They've done this by redefining who can be a qualified appraiser and by rewriting definitions of misstatements of easement value. Now as in the past, a conservation easement only qualifies for a federal tax deduction if it's exclusively for conservation purposes, and no one can ever deduct more than the fair market value of their easement. Landowners considering conservation easements are strongly encouraged to obtain tax and legal advice. HIGHLIGHTS OF FEDERAL CONSERVATION EASEMENT TAX BENEFITS •A conservation easement donor can deduct 50 percent of his or her income for easements donated in 2006 or 2007. |
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