December 15, 2001

Tax ReliefOne of the most appealing and widely available incentives for conservation comes as tax-related benefits. These exist at most every level of taxation for a variety of management practices.

A.Federal TaxesForest Management and Regeneration
1.Reforestation Tax Credit and Amortization (RTCA)-Landowners performing qualified reforestation projects may be eligible for tax credits in the year(s) that the projects are performed and amortized deductions for a total of seven years. Ask the IRS for forms 3468 (tax credit) and 4562 (amortization deduction)

2.Cost-Share Payments Exclusion- Payments received for conservation practices (e.g., Stewardship Incentive Program or Forest Practices Program) can often be excluded from landowner’s gross income for federal tax purposes.

3.Capital Gains Reductions- Since the management of timberlands is a long-term investment, landowners can take advantage of lowered tax rates for gains on investments of more than five years.

4.Estate Tax Exemptions and Deferments-Qualifying estates, such as forestlands that are family businesses, can receive an estate tax exemption for between $625,000 and $1,000,000. Also, some estates may be eligible to defer estate tax payments for up to 15 years at low interest rates.

B.County Taxes
1. Timberland Production Zone (TPZ)-
Landowners with property zoned for timber production, as opposed to other forms of development, may be eligible for tax credits based on the value of the timberland.

II. Long-term programsThese possibilities work well for landowners who are either beginning to think about long-term preservation or are interested in involving some established conservation groups with work on their land.

A.Conservation Easement-
Conservation easements appeal to many landowners because they provide a set of guidelines for protecting the land, while ownership remains with the initiating landowner. At the heart of a conservation easement is an agreement between the landowner and a land trust, which outlines the steps necessary for protecting the land. Agreements are flexible enough to allow continued use of the land in ways that do not compromise the conservation goals. Landowners benefit from reduced property and estate taxes based on the value of the easement.

B.Land Donation-
In a case where the landowner would rather not continue to hold the land or pass it on to an heir, land donation can provide a substantial income tax deduction. With some types of donation (remainder interest donation, charitable gift annuity, charitable remainder unitrust, etc.), landowners and other specified individuals may continue to live on the land and even receive income from the invested value of the donated land. With any donation, managing the protected land becomes the responsibility of the land trust.

C.Bargain Sale-
For landowners who need some initial income associated with the long-term protection of their land, a bargain sale might be feasible. When a land trust is able to purchase a given piece of land for less than the fair market value, the landowner receives the income of the sale as well as charitable income tax deductions based on the difference between the land's sale price and its market value.

III. Short-term Programs
Often called Cost-Share Programs, these options usually provide landowners with annual reimbursements for specific conservation practices. Compensation may be as much as $10,000 to $30,000 per landowner per year but is usually limited to some percentage of the project costs (usually between 65% and 75%). In most cases the landowner works with a resource professional to develop a comprehensive management plan, which outlines the steps necessary to achieve the project goals. Note: Funding for cost-share programs tends to vary from year to year. Contact the responsible party for up-to-date information on availability of these and/or other possible programs.

A.Conservation Reserve Program (CRP)-
This cost-share program encourages landowners to restore marginal pastureland into forest buffers along creeks and rivers. Up to 90% of the instillation costs are reimbursable with an additional $70 per acre per year.

B.Environmental Quality Incentives Program (EQIP)-
EQIP is a broad ranging program that provides funding for a variety of projects, such as erosion control, cross-fencing, and off-site watering, designed to restore or protect private lands. Reimbursements can reach 75% of instillation costs. Due, in part, to its wide scope, EQIP is also a fairly competitive program.

C.Wetlands Reserve Program (WRP)- Similar to the CRP, the WRP is designed to fund wetlands restoration of applicable farm/ranchlands.

D.Forest Incentives Program (FIP)- Landowners in this program are reimbursed for increasing the productivity of their Non-industrial Private Forestland with activities such as tree planting to establish a forest and timber stand improvements. An intention to harvest is not a requirement of the FIP.

E.Wildlife Habitat Incentives Program (WHIP)- The WHIP program encourages wildlife habitat improvement projects on private land.










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Table of Contents for Mattole Restoration Newsletter, Issue 17 - Winter/Spring 2002