Colorado Open Lands
Tax Credits
Latest Development in Tax Incentives for Conservation Easements
State: On May 1st, 2006, Governor Owens signed into law House Bill 06-1354. Sponsored by Representative Alice Madden and Senator Ron Teck, this important piece of conservation legislation received near unanimous support as it made its way thorugh both chambers of the State Capitol. CCLT has created a PDF with summarized information on the changes.
Federal: On August 17th, 2006, the President signed into law new conservation tax incentives under the 2006 Tax Act. The changes apply to all 'qualified conservation contributions' under section 170(h) of the tax code. For more information, read the summary by Stephen J. Small (PDF).
A Colorado Conservation Easement Income Tax Credit is available to qualified donors of conservation easements. Colorado law (H.B. 99-1155; C.R.S. §39-22-522(4)(a)), established a Colorado income tax credit of up to $260,000 for the donation of a conservation easement. The law further provides that this Credit may by used by the donor to:
- Offset the donor’s Colorado State income tax obligation,
- Transfer to another Colorado taxpayer for credit against their income tax obligation, or,
- Entitle them to a cash refund from the State in years of a budget surplus.
An easement donor may qualify for only one conservation easement tax credit per year, and may not claim a second credit until the first credit has been used or waived.
In 2006, the credit is calculated at a 1:1 rate on the first $100,000 in easement value, and at 40% of the easement value up to a maximum $500,000 in donated value. Therefore, the donor of an easement with a value of $500,000 can claim a Colorado income tax credit of $260,000:
$100,000 + (40% of $400,000) = $260,000
Beginning in January, 2007, the tax credit rate will change to 50% of the donated easement value, up to $750,000 of easement value. This will yield a maximum credit amount of $375,000.
Tax Credit Buyers - Saving land while saving money
Colorado income taxpayers have a unique opportunity to save money while they help save our State’s rich natural heritage. A qualified Colorado taxpayer may purchase a Gross Conservation Easement Credit at a discounted value, and use the full value to offset the taxpayer’s Colorado income tax obligation, typically saving 10 – 15% in tax payments. This credit is a one-for-one reduction in the taxpayers Colorado income tax liability. For example, a taxpayer may pay $221,000 for a credit (15% discount), and offset $260,000 in Colorado income tax liability.
Colorado law (Sec. 39-22-522 C.R.S.) provides these credits to landowners who preserve their property in perpetuity by donating a qualified conservation easement. As an incentive for landowners, the law allows for the transfer of these credits to other taxpayers. Hence, the opportunity for Colorado residents to help protect these important conservation lands, and save on their income taxes, by purchasing the credits.
Each year we work with owners of many important conservation properties. These landowners often wish to sell the tax credits they receive when they donate conservation easements. We foster these transactions by matching conservation easement donors with tax credit purchasers. We have a limited number of conservation easement donors able to sell these credits to high-income taxpayers.
For more information about purchasing credits, contact us at 303-988-2373, or info@coloradoopenlands.org.
For more information on Tax Credits visit:
Issacson Rosenbaum P.C. has an area on their website devoted to listing the latest news in conservation tax laws (the information is listed as downloadable PDF files).
Colorado Coalition of Land Trusts has information on the latest legislation in a PDF file. They also have an article on the Best Practices for Colorado Tax Credit in another PDF file.
Colorado Department of Revenue - updated information on Gross Conservation Easement Credit.
For a listing of Tax Credit Brokers, click here.