New State Tax Credit for Land Conservation

(prepared January 2012 by Mark H. Robinson, Executive Director of The Compact of Cape Cod Conservation Trusts, Inc. and Board of Directors of the Massachusetts Land Trust Coalition.)

Starting in 2011, for the first time ever, landowners who engage in conservation transactions with the Wildlands Trust or other land trusts or agencies may be eligible for a powerful new tax advantage—a State income tax credit worth up to $50,000. This is exciting news for the land trust and the landowners we are working with. While there have always been income tax deductions available for land gifts on donor’s federal returns, we have never been able to offer any incentives on the State tax side. Now we can.

The Commonwealth has provided guidelines on how the program will work. The type of transaction (land gift, conservation restriction, bargain sale, reserved life estate) is less important than the characteristics of the land itself, so long as the land is permanently protected. The Secretary of Energy and Environmental Affairs must certify that the land preserved is significant to protect drinking water supplies, rare species and other wildlife habitats, agriculture or forestry, recreational opportunities and scenic or cultural values of state or regional importance.

The landowner must have the land pre-certified by the State (we can help do the paperwork) before the gift or bargain sale is completed. An appraisal is needed to justify that the land’s market value and establish the credit amount. The State will refund any unused credit in the first year of the gift. That means that not only would your State income tax be wiped out for that year, but the State will issue you a check for the difference between that year’s tax and $50,000 or the appraised value, whichever is less. For example, if you donated a parcel worth $30,000 and your Mass. income tax is $5,000, you would pay no state tax and get a tax refund for the remaining $25,000. If you donate a conservation restriction appraised at $120,000 and your Mass. income tax is $10,000, you would pay no state tax and get a check for the $40,000 difference. (The total of tax credit and refund check cannot exceed $50,000.) You do not need to reside in Massachusetts or even pay taxes here; so long as you own the land, and the land qualifies, you qualify. A full $2 million is available statewide in 2012.

Remember that this new tax credit is in addition to the regular federal income tax incentives for charitable contributions of land or interests therein. Contact Wildlands Trust or your local land trust for more details or a free, confidential consultation.