Iowa Natural Heritage Foundation: New Tax Law Rewards Conservation Donors

Iowa landowners who are contemplating voluntary conservation agreements on their land just received a huge incentive to act sooner rather than later.

On Aug. 17, President George W. Bush signed federal legislation (the Pension Protection Act of 2006) that significantly expands the tax incentives for donations of conservation easements to conservation organizations.

Specifically, the new legislation:

raises the charitable deduction landowners can take for donating conservation easements from 30% to 50% of their adjusted gross income in any year;
increases the deduction limit to 100% of income if the donor is a farmer or rancher;
allows a conservation easement donor to carry forward the charitable deduction for up to 15 years; and
limits these expanded incentives to only those donations completed by Dec. 31, 2007.

“The new law is a great opportunity for owners who have special land and are willing to place meaningful restrictions to protect it,” said Mark Ackelson, president of the Iowa Natural Heritage Foundation (INHF).

INHF is a nonprofit conservation organization that is an approved recipient of such easements. Other private and public conservation groups that can accept easements include The Nature Conservancy, Johnson County Heritage Trust, county conservation boards, soil and water conservation districts, the Iowa Department of Natural Resources and others.

Iowa’s Senator Chuck Grassley, chair of the Committee on Finance, played a large role in the legislation’s content and passage. His committee has been involved in a multi-year effort to find and punish people who seek worthless or inflated values of conservation easement donations purely as a tax dodge, while providing extra rewards to those whose donations have significant conservation value.

Ackelson explains how the new tax laws work: “Let’s say that Joe and Mary Landowner own 200 acres of scenic woodland in a highly developable area. They decide to donate a permanent conservation easement that, for example, removes development and limits future timber harvests according to a woodland management plan. A qualified appraiser values those donated rights at $1 million. If the couple earns most of their income—say $50,000 per year—from farming or ranching, they can now deduct that entire $50,000 from their income tax forms during the donation year and the next 15 years to come.”

According to Ackelson, most land protected by conservation easements remains in private ownership and is not open to public access.

“Though these sites remain in private ownership, their owners have established permanent restrictions that protect real public benefits: scenic views, wildlife habitat, water quality and more,” notes Ackelson.

Ackelson adds that not all land and not all landowner goals fit this program, and his organization receives many more requests to take easements than it accepts.

“INHF is focused on protecting natural resources, so if a site doesn’t contain natural resources—like a prairie, woodland, scenic bluff, undeveloped river corridor, important open space or buffer to other protected land—we may not be interested,” he explains. “Similarly, if the prospective donor is willing to set only token restrictions—like reducing development from ten houses to five—this may not produce significant public conservation values and, if not, would be of no interest to INHF.”

For more information about conservation easements, contact INHF at www.inhf.org or 800-475-1846—or any of the other qualified easement recipients listed above. Potential donors should also consult with their attorneys, financial advisors and affected family members. Many more details about the new tax policy are available at www.lta.org/publicpolicy/. The Pension Protection Act of 2006 also provides new/better ways for people to donate IRAs to the Iowa Natural Heritage Foundation or other nonprofit groups.

For more information, e-mail Cathy Engstrom, Director of Communications, or call (515) 288-1846.