Background of the Virginia Land Preservation Program

In January 1999, the Virginia General Assembly enacted the “Virginia Land Conservation Incentives Act of 1999.” The Act created state income tax credits for conservation easement donors. The state income tax credit applies to Virginia landowners who donate an easement on or after January 1, 2000. The provision allows for easement donors to receive a credit against their Virginia state income tax liability of 40% of the fair market value of the donated easement. The FMV of the easement is determined by a qualified appraiser. The amount of the credit claimed in any one year may not exceed $50,000 per taxpayer ($100,000 married filing joint) and the amount of the credit used may not exceed the amount of state income tax otherwise due. Any portion of the credit that is not used in the year the easement is donated can be carried over for an additional 12 years from the year the easement was donated.

In addition, landowners who donate conservation easements on their property on or after January 1, 2002, can sell unused credits to other Virginia taxpayers. Tax credit transfers must occur in the year in which the tax credit is to be applied. In other words, if you wish to buy credits to offset 2009 taxes, you must do so before December 31, 2009. Typically, December is a very busy month for tax credit transfers. To ensure credit availability, purchasers are encouraged to pursue tax credits early in the year. In years past, the supply of credits has decreased at year end and pricing has increased.

Tax credit donations and tax credit transfers must be registered with the Virginia Department of Taxation. VCCE completes the necessary forms required for the acknowledgement of a donation or transfer with the Department of Taxation.

The law changed again for any easements donated after December 31, 2008.  The more significant changes are as follows:

• The value of the Credit claimed may not exceed $50,000 per taxpayer ($100,000 married filing joint) for 2009 and 2010, after that $100,000 per taxpayer or $200,000 married filing joint.
• The carryforward period has been extended from 10 years to 12 years, for 2009 and 2010, then 10 years thereafter.
• Statewide tax credit registration will be capped at $106,647,000 for 2009. Credits will be registered first come, first served when a completed tax credit registration application is received by the Department of Taxation. Registrations in excess of the annual cap will be rolled over to subsequent years. The cap is indexed to the Consumer Price Index and will increase each year.