Virginia s Land Preservation Tax Credit Program Suzan Bulbulkaya Land Conservation Analyst (804) 371-5218 suzan.bulbulkaya@dcr.virginia.gov
Land Preservation Tax Credit Enacted in 1999, the Virginia Land Conservation Incentives Act allows a state tax credit (LPTC) to landowners who permanently preserve their land. This is a credit, not a deduction. Credit can be claimed in the year of donation, with a 10-year carry forward (up to $100,000/year). A 2002 amendment to the Act allows unused tax credits to be sold on the open market. 2% fee on the transfer of tax credits.
Land Preservation Tax Credit In 2007, the tax credit program was capped at $100 M per year, adjusted annually by the CPI. Credits are awarded on a first-come, firstserved basis by the VA Dept. of Taxation. The program has spurred a dramatic increase in the total number of easements and acreage recorded across the Commonwealth.
Tax Year Donation History Data Number of Credits Number of Acres Credit Allocated 2000-01 222 31,161 $52,969,772 2002 217 35,256 $62,770,663 2003 140 28,151 $75,306,207 2004 238 50,049 $142,134,720 2005 280 56,171 $155,872,625 2006 460 94,271 $247,783,994 2007 254 59,323 $100,000,000 2008 224 60,199 $102,287,084 2009 228 63,447 $106,647,000 2010 144 38,545 $106,845,000 2011 367 75,028 $108,424,000 Totals 2,774 591,612 $1,261,041,065 Data from Virginia Department of Taxation as of April 2012
LPTC is available for both fee simple and conservation easement donations. Vast majority of donations are conservation easements.
Basic Mechanics of LPTC Tax credit = 40% of the Fair Market Value (FMV) of a donation. The FMV of a conservation easement is the value of the land before the easement minus the value of the land after the easement. For example: Value of land before CE = $500,000 Value of land after CE = $300,000 Value of CE = $200,000 LPTC = 40% ($200,000) = $80,000
History of LPTC 1999 LPTC enacted 2002 Made transferable 2007 DCR Review Begins 2000 Goes into effect 2006 Several Legislative Changes
2006 Legislative Reforms $100 Million annual cap (adjusted by the CPI). Increased Dept. of Taxation scrutiny over appraisals. Established DCR oversight role.
DCR Oversight Role Includes: Verify the Conservation Value of land donations where credit of $1M or more is claimed (requires $2.5M FMV of a donation). Follow Virginia Land Conservation Foundation (VLCF) criteria for review, identified water quality improvements and forest stewardship as areas of focus. Annual Report on all LPTC transactions.
VLCF Verification Criteria VLCF Criteria are based on IRS Code 170(h) and contain specific requirements that reflect state policy. The criteria comprise three factors that together are considered the Conservation Value of donated land: 1. Conservation Purpose 2. Public Benefit 3. Water Quality and Forest Management
DCR Pre-Filing Review Potential applicants are encouraged to request an optional pre-filing review. Offers opportunity to address any concerns before the easement or deed is recorded. State review is predictable, prompt, and based on specific criteria.
DCR Pre-Filing Review Main Components of DCR review include: A site visit Research local, state, & federal databases/maps Review deed and other submitted documentation Discuss any issues with applicant/representative Present application to Director Send pre-filing comment or final verification letter
Benefits of DCR Review Ensures consistency in the conservation value of the land transactions claiming over $1M in state tax credit. Provides a check on the quality of the largest easements and land donations. Enhances the value of Virginia tax dollars by adding water quality and forest stewardship protections. Expectation is for $1M or more, landowner will conserve their land and provide basic protections for conservation values.
Land Preservation Tax Credit LPTC is the most dynamic and cost-effective conservation program in Virginia. Over 591,000 acres conserved since 2000. Conservation costs are a fraction of the true cost of land. LPTC reforms of 2006 provide accountability and budget stability. Annual cap of $100 million on LPTC creates stability. Increased scrutiny of appraisals by TAX creates accountability. Review of easement terms by DCR ensures conservation value of donations.
Suzan Bulbulkaya (804) 371-5218 suzan.bulbulkaya@dcr.virginia.gov