Monday, October 22, 2007

Conservation Easement Tax Incentives Expire Soon

The Pension Protection Act of 2006 added temporary tax incentives for the donation of conservation easements. Ordinarily, the income tax charitable deduction allowable for the donation of a conservation easement is limited to 30% of the donor's contribution base (a modified adjusted gross income figure), and the excess value of the donation may be carried forward for only five years. The Pension Protection Act increased the percentage limitation for most taxpayers to 50%, and the carry forward limit to 15 years. However, these new incentives for conservation easement donations apply only to donations of conservation easements made between January 1, 2006 and December 31, 2007.

Because the donation of a conservation easement requires a survey, a specialized appraisal, and negotiation with the donee conservation organization, all of which can take several months, donors need to act now if they hope to take advantage of the tax incentives offered by the Pension Protection Act. Proposed legislation has been introduced to extend the incentives, but that legislation is likely to languish because tax incentives for conservation easements are somewhat controversial. Past abuses in the valuation of conservation easements have caught the attention of the IRS and Congress, which has lead to wrangling over the content of further legislation.

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