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Advocates Alert: Tax Policy Updates for Land Trusts

Date: February 17, 2006

In the last month there have been four important developments in tax policy directly affecting land trusts:

• Tax bill with new incentives for easement donations at critical juncture
• IRS changes Form 990
• Senator Isakson (R-GA) introduces legislation creating conservation easement tax credit
• New Bush budget includes penalties for land trusts who fail to enforce easements

Tax Bill

The House and Senate just appointed the members of the conference committee that will negotiate a final version of a tax reconciliation bill.  The Senate version of that bill expands tax deductions for conservation easement donors, and imposes reforms to prevent abusive appraisals and limit so-called "facade" easements. The House version of the bill includes none of this.  

The conferees are: Representatives Bill Thomas (R-CA), Jim McCrery (R-LA), Dave Camp (R-MI), Charles Rangel (D-NY), and Pete Stark (D-CA); and Senators Charles Grassley (R-IA), Jon Kyl (R-AZ), and Max Baucus (D-MT).

What You Can Do:   If you have a good relationship with your Senators and Representatives, please ask them to ask the conferees to include the conservation easement provisions in the final bill.  

Learn more.


IRS Issues Changes to Form 990

The IRS has made new changes to Forms 990 and 990-EZ , the tax returns filed by 501(c)(3) charities.  In 2005, the IRS added a question to the form 990, specifically asking if the charity receives donations pursuant to 26 USC 170(h) - in other words, does the charity hold conservation easements or take other qualifying conservation contributions of property.  In addition, in January 2006 the IRS made several additional changes aimed at preventing abuse.  We will provide more detail later, but most of the new questions are aimed at getting information on outside business relationships that may exist between the charity, its board members and its staff.  

See the new form and instructions.

Senator Isakson (R-GA) Introduces Legislation For Conservation Easement Tax Credits

In January, Senator Johnny Isakson (R-GA) introduced S. 2187, The Paul Coverdell Homestead Open Space Preservation and Conservation Act of 2006.   This bill would create between $4 and $6 billion per year of federal tax credits to support the acquisition of conservation easements by qualified conservation organizations.  The credit would be administered by the states and distributed to preservation organizations, who could then use them to garner support for their conservation work.  The bill is similar to legislation introduced by Mr. Isakson when he was in the House of Representatives.  No action is expected on the bill this year, but Georgia land trusts should join the Land Trust Alliance in thanking Senator Isakson for taking a bold stand for land conservation!


President's Budget Proposes Penalties for Charities that Do Not Enforce Easements

President Bush has just released his proposed budget for 2007.  The budget includes a provision, calling for financial penalties for charities that fail to enforce a conservation easement, or transfer the easement to a holder who does not enforce it.  The proposal is identical to the version that appeared in the President's Budget last year.  It is just a concept, with no real details on the amount of the penalties, how they would be assessed, when a charity would be determined not to be enforcing an easement, or how that determination would be made.  We will pass on more information as it becomes available, but do not expect major action on the proposal this year.

Regrettably, the capital gains tax reduction for landowners selling land or easements to conservation organizations, which has been in each of the President's previous budgets, was a victim of tightening budgets and was not included in this year's budget proposal.