Colorado Open Lands
Tax Credits
Latest Development in Tax Incentives for Conservation Easements
Federal Incentives: Congress recently extended, through December 31, 2009, the expanded tax benefits for qualified contributions of conservation easements from the Pension Act of 2006.
These expanded benefits:
- Allow a donor to deduct 50% of his or her Adjusted Gross Income in a year, with a carry-forward period of 15 years
- Allow qualified farmers and ranchers to deduct 100% of their Adjusted Gross Income, with a carry-forward period of 15 years
To learn more, please visit the Land Trust Alliance’s comprehensive page on federal tax incentives.
State Incentives for Colorado Taxpayers: Colorado has been one of the most progressive states in the nation in creating state tax incentives for donors of qualified conservation easement contributions. Colorado Law (C.R.S. §39-22-522(4)(a)) enables the creation of a Colorado income tax credit for 50% of the value of the conservation contribution, up to a maximum credit of $375,000.
The donor has the option to:
- Apply the credit to offset his or her state income tax obligation, with a carry-forward period of 20 years
-OR-
- To transfer their credit to another Colorado taxpayers through a tax broker, for cash
-OR-
- To receive a cash refund from the State in years of surplus
The Colorado Department of Revenue has created a full explanation of the tax credit.
Colorado Tax Credit Program Oversight and Reform
On June 5th, 2008, Governor Bill Ritter signed into law HB 1353, which will increase the transparency and accountability of the conservation tax credit program. Colorado Open Lands welcomes these reforms as a way to crack down on abuses of this program, while keeping it available for landowners of Colorado who wish to protect their land through qualified conservation easement contributions. If you wish to learn more about this law and its implications, please visit this page, put together by the Colorado Coalition of Land Trusts (CCLT) for a summary of the law.
Nuts and Bolts of Transferring Colorado Tax Credit
Sellers (conservation easement donor): The value of your contribution is established by a qualified appraisal. The value of the credit is 50% of your contribution value (up to $375,000). You can work with a credit broker to match your credit with a buyer. You will receive cash at the time of the credit sale for the going market rate (typically this is expressed as a percentage).
Example: Conservation contribution is appraised at $500,000
Value of credit ($500,000 x .5) = $250,000
Going market rate 80%
Income from credit transfer ($250,000 x .8) = $200,000
Buyers: Save land while saving money! You may purchase a Gross Conservation Easement Credit at a discounted value, and use the full value to offset your state income tax obligation, typically saving 10-15% in tax payments. For example, you may pay $212,250 for a credit (15% discount), and offset $250,000 in Colorado income liability. At the same time, you are supporting the protection of Colorado’s scenic and biologically significant lands for generations to come!
Please note: Although Colorado Open Lands staff will work with you, as a landowner, to fill out the necessary paperwork to establish your federal and state tax incentives; we strongly recommend that you seek professional tax advice throughout this process.
For more information on Conservation Tax Incentives…
Colorado Coalition of Land Trusts (CCLT) has a section of their website dedicated to Colorado tax policy and federal tax policy with regard to conservation easements.
Issacson Rosenbaum P.C. has an area on their website devoted to the latest news on conservation tax laws.