The Piedmont Environmental Council is providing this summary for informational purposes only. Please consult your attorney and/or accountant for professional advice.

The following applies to conservation easements donated on or after January 1, 2007. In addition to the Federal, Estate, and Property tax benefits of donating a conservation easement, easement donors in Virginia have a significant state income tax benefit in the form of a state income tax credit. Moreover, easement donors who have more credit than they can use may sell their tax credits to other taxpayers. This represents a significant incentive for land conservation in Virginia.

The Legislation

The "Virginia Land Conservation Incentives Act of 1999," as amended, allows Virginia taxpayers who donate a conservation easement to claim a credit against their Virginia state income tax liability of 40% of the value of the donated easement.

For example, if your easement is valued at $500,000, the credit is $200,000. 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 up in the year the easement is donated can be carried over for an additional 10 years.

If you owe $10,000 in state income tax the year you make the easement donation, the amount of credit you can use is limited to $10,000. If you have additional credit left over, you may continue to apply the credit against taxes due for 10 additional years.The amount of the credit claimed by a taxpayer in any one year may not exceed $100,000. If you pay more than $100,000 in state income tax per year, you can only claim $100,000 of credit each year.

A taxpayer entitled to a land preservation tax credit is allowed to transfer unused but otherwise allowable credit to another taxpayer. If you have $250,000 in credits, but can use only $10,000 per year for 11 years to offset taxes due, you may sell the remaining $90,000 of credits to another taxpayer, subject to a 2% or $10,000 transfer fee.