Want to know how you can support conservation tax incentive legislation?

Estate Taxes and Land Conservation

Estate taxes can lead to the break-up, sale and development of family-owned farm, ranch and forest lands, even when landowners would prefer to keep these lands intact.

Thanks to the Land Trust Alliance's advocacy with Congress, the tax bill signed into law by President Bush in June 1998 expanded an important conservation tax incentive. (Download Conservation Options for Heirs to Land (Word; 40KB) for more detailed information on the law.) Section 551 of the law removes the geographic limits from IRC 2031(c), the American Farm and Ranch Protection Act. Now, a conservation easement donor is eligible for an additional exclusion from estate tax of up to $500,000, beyond the the value of the easement itself - regardless of where the land is situated. Previously, the exclusion was limited to land within 25 miles of a metropolitan statistical area, a national park, or a federal wilderness.

The law is of greatest benefit to those who inherit valuable land during the next nine years, when estate taxes will continue. Those individuals can use 2031(c) to make a post-mortem election to donate a conservation easement, which could save them considerable estate taxes.

Will there be an Estate Tax in the Future?

The 1998 tax bill phases down estate taxes by moving the unified credit (amount of an estate that is not subject to tax) from the current $675,000 to $1 million for 2002; to $1.5 million in 2004-2005; to $2 million in 2006-2008; and to $3.5 million in 2009. For tax year 2010, there is no estate tax at all (although there continues to be a gift tax).

However, if Congress fails to enact a change between now and 2010, the 1998 tax law provides that in 2011, the estate tax will be reinstated with a $1 million unified credit and 1997 tax rates (up to 55 percent).

There are many reasons why Congress should address this issue before 2011. But there is no guarantee what they will do -- remove all estate tax, keep a tax with different unified credit level, or do something entirely different. Obviously, this makes estate planning a matter of speculation.

What we can say is, that if a person wants to conserve their family's land, they should donate a conservation easement on it, and do it while they are alive. They can receive a substantial income tax deduction (which you do not get if it is donated in a will or post-mortem); they will have done the right thing; and if there is an estate tax due when they die, their heirs will be glad they did.

What About Other Conservation Tax Incentives?

Land Trust Alliance is working hard on new tax incentives for land conservation, and we are making headway! Early in 2003, the US Senate voted 95-5 in favor of a Charities bill that would greatly increase the income tax deductions many taxpayers could take for donating a conservation easement on their land; cut capital gains taxes when a landowner sells land or an easement for conservation; and create a new tax-exempt bonding mechanism for the conservation of forest lands.

The Land Trust alliance continues to work with the Congress and with the Administration to enact these new incentives into law. For more information, see our Tax Benefits for Conservation page.

(posted 6/15/01, updated 5/21/04)