Landowner Stewardship Summer 2001

New State Income Tax Credit for Easements

Governor Paris Glendening has signed into law a new state income tax credit for donations of conservation easements. The law went into effect July 1st of this year. This tax credit legislation gives landowners another incentive to protect land. Using the new tax credit, a property owner may save up to 70 percent of the value of the donation. This new tax incentive is in addition to the federal income tax deduction, the Maryland property tax credit, the County property tax benefit, and the significant estate tax savings that are available to easement donors.

In announcing the new legislation Governor Glendening recognized that, "A donated conservation easement is the most cost-effective method of preserving land and an integral part of our land preservation toolbox." Conservation easements are permanent deed restrictions that prevent harmful land uses. A conservation easement allows landowners to permanently protect their land from development and to receive substantial tax benefits while retaining all other rights of ownership.

Here are some important facts regarding the new state income tax credit:

• The easement must be perpetual and conveyed to the Maryland Environmental Trust (MET is a frequent co-holder of Severn River Land Trust easements and SRLT has a cooperative agreement with MET for this purpose) or to the Maryland Agricultural Land Preservation Foundation (MALPF).
• The fair market value of the easement must be substantiated by an appraisal. If the easement is purchased rather than donated, the tax credit is reduced by the amount of payment received for the easement.
• The credit is capped at $5,000 per year starting with the year in which you donate the easement. You may continue to take the credit for an additional 15 years (for a total of 16 years) up to $80,000 per individual, but not exceeding the value of the easement.
• You may not claim both a state income tax credit and a state income tax deduction for the same conservation easement donation.
• Easements donated prior to July 1, 2001 do not qualify for this credit. Past easement donors may elect to further restrict their property and receive a tax credit equal to the value of the additional restrictions.

In addition to the state income tax credit, the gift of an easement to the Severn River Land Trust is a charitable donation that my be deducted from your Federal income taxes. The value of the donation is determined by subtracting the value of the land with an easement from the value of the land at its fair market maximum development potential. Moreover, a landowner will pay no property tax on land that is subject to a Trust easement for 15 years from the date of donation.

For more information on tax benefits for conservation easement donations or purchasing programs for conservation easements, contact the Severn River Land Trust at 410-424-4000 or by email at Exec@SRLT.org. Excellent information, including specific case examples, is also available on the MET web site at: www.dnr.state.md.us/met/>