Easement Incentive to Expire Despite 290 Co-sponsors, LWCF Funding Increased
While Congress continues to debate a payroll tax cut extension, it appears that the enhanced easement incentive will expire at the end of this year. Landowners and land trusts for whom the enhanced deduction is essential should do whatever they can to ensure their easements are recorded by December 31.
290 Co-sponsors, Opportunities for Retroactive Renewal Early Next Year
This expiration comes despite a remarkable year-end push that secured an additional 24 co-sponsors for H.R. 1964, our bill to make the incentive permanent. That brings our support to a record 290 co-sponsors, including 32 out of 37 members of the House Ways & Means Committee. See the full list or scroll down for recent additions.
A surge of new letters and constituent action created genuine buzz on the Hill regarding the incentive, and an extension was still on the table as recently as Friday. Unfortunately, none of the traditional "extenders" were included in the Senate's 2-month extension package on Saturday and even that bill's survival is now in serious doubt.
The silver lining of Congressional inaction in 2011 is that a number of tax items will require action early in 2012 -- any one of which could become a vehicle for renewing the easement incentive or making it permanent. Your Senators and Representatives will be back home soon, and now is a great time to wish them happy holidays at events around the district. Thank them for co-sponsoring H.R. 1964 or S. 339, or for anything they've done to help your land trust! After a bruising year of partisan head-butting, a kind word will be appreciated. Don't forget to let them know that the incentive expiring -- even if only for a few months -- is a problem for the landowners you work with.
What Will Expire -- and What Won't
To be crystal clear, conservation easements donated in 2011 will continue to benefit from the enhanced incentive. Easements donated in 2012 will still be tax deductible and will be treated just like any other non-cash charitable donation -- deductible up to 30% of a donor's income for up to six years. The reforms enacted in the 2006 Pension Protection Act also do not expire.
What is expiring is the enhanced incentive that helps modest income donors, particularly agricultural landowners, deduct a larger share of their generous gift. Do run the numbers -- some donors, particularly those with larger incomes, will find that the incentive's expiration makes little difference. But for most farmers and ranchers, this expiration and the accompanying uncertainty are extremely frustrating, potentially reducing the tax benefit of an easement donation by 88%. That's why we've been working so hard to make the incentive permanent! We've updated our Frequently Asked Questions and Conservation Donation Rules pages to reflect how the law is changing.
The S-corporation donation incentive and IRA Charitable Rollover are also set to expire at the end of this year:
- Charitable deductions by S-corporation shareholders will, again, be limited to their basis in the donated property. Given the long holding periods of many farm properties, this change could severely limit the ability for S-corporation shareholders to deduct the full value of donated land or easements.
- This month could also be the last chance for individuals aged 70 1/2 and older to donate up to $100,000 from their Individual Retirement Accounts (IRAs) to public charities without having to count the distributions as taxable income.
It's possible that all these provisions could be renewed retroactively, as they were in October 2008 and December 2010, but it's far from certain, and a good reason to solicit such donations before December 31. If you (or a family member) have appreciated assets in an IRA, we hope you will also consider making a year-end contribution to the Land Trust Alliance.
