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New State Tax Credit For Land Conservation

Starting in 2011, landowners who engage in conservation transactions with the OCT 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 OCT 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 transac-tion (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. While those land attributes are fairly broad, you can see how a gift of a vacant lot in a subdi-vision might not qualify. Still, many resource protection parcels have not yet been developed or preserved that could qualify.

The landowner must have the land pre-certified by the State (we can help with the paperwork) before the gift or bargain sale is completed. An appraisal is needed to justify the land’s market value and establish the credit amount. The State will refund any unused credit in the first year of the gift. Not only would your State income tax be eliminated for that year, but the State will issue you a check for the difference between that year’s tax and $50,000 or 50 percent of the appraised value, whichever is less. Two examples follow. If you donated a parcel worth $30,000, your tax credit would be $15,000. If your MA income tax is $5,000, you would pay no state tax and receive a tax refund for the remaining $10,000. If you donate a conservation restriction appraised at $120,000, your tax credit would be the maximum $50,000. If your MA 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; as long as you own the land, and the land qualifies, you qualify. The State approved the first 22 applications in December 2011, returning $976,000 in credits to landowners. Two 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 OCT for more details or a free, confidential consultation.

(Prepared February 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.)

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