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Easement Incentive to Expire Despite 290 Co-sponsors, LWCF Funding Increased

Advocates Alert: December 20, 2011

12/23 UPDATE: The 2-month payroll tax cut extension enacted today does NOT extend the easement incentive. It does, however, set up a new negotiation on tax issues as soon as Congress returns, providing a potential vehicle for renewing the incentive.

While Congress continues to debate a payroll tax cut extension, it appears that the enhanced easement incentive will expire at the end of this year. Landowners and land trusts for whom the enhanced deduction is essential should do whatever they can to ensure their easements are recorded by December 31.

290 Co-sponsors, Opportunities for Retroactive Renewal Early Next Year

This expiration comes despite a remarkable year-end push that secured an additional 24 co-sponsors for H.R. 1964, our bill to make the incentive permanent. That brings our support to a record 290 co-sponsors, including 32 out of 37 members of the House Ways & Means Committee. See the full list or scroll down for recent additions.

A surge of new letters and constituent action created genuine buzz on the Hill regarding the incentive, and an extension was still on the table as recently as Friday. Unfortunately, none of the traditional "extenders" were included in the Senate's 2-month extension package on Saturday and even that bill's survival is now in serious doubt.

The silver lining of Congressional inaction in 2011 is that a number of tax items will require action early in 2012 -- any one of which could become a vehicle for renewing the easement incentive or making it permanent. Your Senators and Representatives will be back home soon, and now is a great time to wish them happy holidays at events around the district. Thank them for co-sponsoring H.R. 1964 or S. 339, or for anything they've done to help your land trust! After a bruising year of partisan head-butting, a kind word will be appreciated. Don't forget to let them know that the incentive expiring -- even if only for a few months -- is a problem for the landowners you work with.

What Is Expiring -- and What Isn't

To be crystal clear, conservation easements donated in 2011 will continue to benefit from the enhanced incentive. Easements donated in 2012 will still be tax deductible and will be treated just like any other non-cash charitable donation -- deductible up to 30% of a donor's income for up to six years. The reforms enacted in the 2006 Pension Protection Act also do not expire.

What is expiring is the enhanced incentive that helps modest income donors, particularly agricultural landowners, deduct a larger share of their generous gift. Do run the numbers -- some donors, particularly those with larger incomes, will find that the incentive's expiration makes little difference. But for most farmers and ranchers, this expiration and the accompanying uncertainty are extremely frustrating, potentially reducing the tax benefit of an easement donation by 88%. That's why we've been working so hard to make the incentive permanent! We've updated our Frequently Asked Questions and Conservation Donation Rules pages to reflect how the law is changing.

UPDATE: Please see our January 12, 2012 alert for more information about how you can help renew the easement incentive and make it permanent.

The S-corporation donation incentive and IRA Charitable Rollover are also set to expire at the end of 2011:

  • Charitable deductions by S-corporation shareholders will, again, be limited to their basis in the donated property. Given the long holding periods of many farm properties, this change could severely limit the ability for S-corporation shareholders to deduct the full value of donated land or easements.
  • This month could also be the last chance for individuals aged 70 1/2 and older to donate up to $100,000 from their Individual Retirement Accounts (IRAs) to public charities without having to count the distributions as taxable income.

It's possible that all these provisions could be renewed retroactively, as they were in October 2008 and December 2010, but it's far from certain, and a good reason to solicit such donations before December 31. If you (or a family member) have appreciated assets in an IRA, we hope you will also consider making a year-end contribution to the Land Trust Alliance.

And Now Your Holiday Present: A Funding Increase for LWCF

This week we expect President Obama to sign an appropriations package for the remainder of fiscal year 2012 that includes funding for the Department of Interior and related agencies. In marked contrast to a House bill earlier this year that cut important conservation programs by 46 to 95 percent, most of the programs we follow will receive essentially level funding -- a significant achievement in this tough fiscal climate. Here are some highlights:

  • Overall, the Land and Water Conservation Fund (LWCF) will INCREASE by $21.9 million, to $322.9 million.
  • The Forest Legacy Program (FLP) will increase slightly to $53.4 million, a vast improvement from the $3 million proposed in the House bill.
  • The North American Wetlands Conservation Act (NAWCA) gets $35.6 million and State Wildlife Grants gets $61.4 million. These are just slight cuts for programs that had been proposed for elimination in February's H.R. 1.
  • For details on other programs, we've created a NEW summary table of recent appropriations levels. We'll keep this chart updated as Congress begins work on Fiscal Year 2013 in February.

We owe a debt of gratitude to the Interior Subcommittee chairmen Rep. Mike Simpson (R-ID) and Senator Jack Reed (D-RI) for restoring funding for these important programs. We'd also like to thank the hundreds of land trusts that signed the conservation funding letters circulated by The Nature Conservancy and the America's Voice for Conservation, Recreation and Preservation coalition, along with the great many efforts of the LWCF Coalition here in DC. These efforts made a big difference!

IRS Announces Form 990 Filing Delay for Early 2012

The Internal Revenue Service (IRS) announced December 16 that the filing date for tax-exempt organizations with annual returns due in January and February will be pushed back to March 30, 2012. The extension applies to organizations that electronically file Forms 990, 990-EZ, 990-PF, or 1120-POL. Form 990-N filers are not affected and no form needs to be filed to get the March 30 extension. The IRS said it moved the filing deadline because the part of the service's modernized e-file system will be offline during the first two months of 2012. Read more from Independent Sector.

Thanks for all your help this year. We wish you a very happy holiday season!

H.R. 1964 Co-sponsors Added Since Our Last Update:

  • Rep. Elton Gallegly (R-CA/24th)
  • Rep. Laura Richardson (D-CA/37th)
  • Rep. Darrell Issa (R-CA/49th)
  • Rep. Mike Coffman (R-CO/6th)
  • Rep. Eleanor Holmes Norton (D-DC)
  • Rep. Steve Southerland (R-FL/2nd)
  • Rep. Austin Scott (R-GA/8th)
  • Rep. Robert Dold (R-IL/10th)
  • Rep. Andy Harris (R-MD/1st)
  • Rep. G.K. Butterfield (D-NC/1st)
  • Rep. Renee Ellmers (R-NC/2nd)
  • Rep. Jon Runyan (R-NJ/3rd)
  • Rep. Bill Johnson (R-OH/6th)
  • Rep. Dennis Kucinich (D-OH/10th)
  • Rep. Greg Walden (R-OR/2nd)
  • Rep. Mike Kelly (R-PA/3rd)
  • Rep. Pedro Pierluisi (D-PR)
  • Rep. Trey Gowdy (R-SC/4th)
  • Rep. Diane Black (R-TN/6th)*
  • Rep. Marsha Blackburn (R-TN/7th)
  • Rep. Stephen Fincher (R-TN/8th)
  • Rep. Michael McCaul (R-TX/10th)
  • Rep. Pete Olson (R-TX/22nd)
  • Rep. Kenny Marchant (R-TX/24th)*
  • And Senator Joe Lieberman (ID-CT) has co-sponsored S. 339

*Member of the Ways & Means Committee

See the full list and map at: www.lta.org/easementincentive/cosponsors.

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