The following applies to: Donations of Conservation Easements, Gifts of Land, and Bargain Sales of land to 501 C3 conservation organizations such as the North Shore Land Alliance.

Exciting New Law Increases the Tax Benefits for Gifts of Conservation Easements.

Congress has recently enacted, and the President has signed into law, legislation that significantly improves the tax benefits for landowners who grant conservation easements to preserve land in their communities. Similar benefits are available for other gifts of land for conservation purposes. In brief, here are the principal changes:

1. Grantors of conservation easements may take a charitable deduction of up to 50% of their adjusted gross income (AGI) in the year of the gift. The previous limit was 30%.

2. If the appraised value of the conservation easement is greater than the 50% (or 100%) AGI limit in the year the gift is made, the grantor may carry over the unused balance for up to 15 years. The previous law allowed only a five-year carryover.

These exciting new changes only apply to easements granted in 2006 and 2007.

Because the value of a conservation easement is often many times higher than a landowner's annual income, here is why the change can make such a difference: Consider the situation of a retired couple that has an AGI of $60,000 per year. The couple grants a conservation easement with an appraised value of $480,000.

Under the old law, they would be entitled to deduct $18,000 (30% x $60,000) in the year of the gift. Assuming their income remains unchanged, they could also deduct $18,000 In each of the following five years. The total allowable deductions over the six years would be $108,000. The balance of the easement value, which is $372,000, would be lost for income tax deduction purposes.

Under the new law, the outcome is considerably better. The landowners would be able to deduct $30,000 (50% x $60,000) in the year of the gift and (assuming no change in their income) in each of the next fifteen years. Over the total sixteen-year period, they would be able to use the entire $480,000 deduction. In this case, then, the landowner would benefit from an additional $372,000 of federal income tax deductions. A $480,000 tax deduction for a taxpayer in the 28% tax bracket equates to $134,400 ($480,000 x 28%)in actual dollars saved!

It is essential that landowners consult with their own legal and financial advisors to determine how the new law affects their individual situation.