Conservation and the Fiscal Cliff Deal
Enhanced Tax Incentive & Charitable Deduction Survive
Congress passed a fiscal cliff deal that renews the enhanced tax incentive for conservation easements 2012 and 2013 and leaves the charitable deduction largely intact for now, but with limits for higher-income donors. Below is an overview of the legislation’s impact on land conservation:
Enhanced Easement Incentive – A renewal for 2012 and 2013 will help land trusts work with modest-income landowners to increase the pace of conservation by about a third. See our Grassroots Toolkit for tools to share the news with landowners and thank Congress.
Charitable Deduction – Because of your help, the charitable deduction remains largely intact. The bill does, however, bring back the “Pease Amendment,” which gradually reduces the value of itemized deductions against income exceeding $250,000. Deductions could be at risk again as Congress tackles budget reform in March.
Estate Tax Incentives – The Estate Tax retains its current $5.1 million unified credit, indexed for inflation, but the top rate rises to 40%. We are happy to report the geographic limitations on estate conservation incentives are permanently repealed.
Farm Bill Easement Programs – The 2008 Farm Bill is extended for a year, through September 30. Congress must now renegotiate the new Farm Bill, having lost $500 million from the funding “baseline” for easement programs over the next decade. Contrary to our initial assessment, it now appears this extension will allow new enrollment for GRP and WRP. FRPP had already been extended. Read more >>
Conservation Funding – Sequestration, which promised automatic 8.2% across-the-board cuts, is now delayed until March 1. Conservation funding and the charitable deduction will again be at risk as that deadline approaches.
- 20 Questions: Conservation and the Fiscal Cliff Deal
- Recording of our Fiscal Cliff Deal Conference Call
Congress has passed a fiscal cliff deal that renews the enhanced income tax deduction for conservation easements through 2013, and retroactive to the beginning of 2012. This incentive will help land trusts work with farmers, ranchers and other modest-income landowners to increase the pace of conservation by about a third.
Thanks to your help, the charitable deduction remains largely intact in the fiscal cliff agreement. It does, however, bring back the “Pease Amendment,” which gradually reduces the value of itemized deductions against income exceeding $250,000 (or $300,000 for couples, up from $145,950 when it was last in effect).
- Summary with a detailed explanation of the "Pease" limitation (note)
- Forbes article discussing the limited impact of Pease on charitable giving
Lawmakers heard loud and clear from nonprofits that capping or cutting the charitable deduction did not make sense, but we expect deductions could be at risk again as Congress faces the debt limit and sequestration in the months ahead. Please continue reaching out to your senators and representative with your stories about the impact of the charitable deduction.
The fiscal cliff deal passed by Congress permanently extends the current $5.1 million unified credit, indexed for inflation, as the top rate rises to 40%. It also permanently repeals geographic limitations on the Section 2031(c) estate tax exclusion for land under easement that otherwise would have excluded about half the country.
This agreement averts a return to estate tax levels that would have hampered intergenerational transfers of productive working landscapes, forcing many farm and ranch families to sell land for development, clear cut timber, and/or sell equipment and livestock critical to farm viability.
- See the geographic limitations that were eliminated
- Information on the estate tax benefits of land conservation
We hoped that the fiscal cliff deal could be a vehicle to enact a 5-year farm bill that would provide as much as $1.58 billion for land trusts to purchase Agricultural Land Easements over the next decade. Unfortunately, the fiscal cliff deal includes only a one-year extension of the 2008 Farm Bill, through September 30.
Congress must now renegotiate the new Farm Bill, having lost $500 million from the funding “baseline” for easement programs over the next decade. We will once again work with land trust leaders to engage the agriculture committees as they craft this legislation in the months ahead.
Contrary to our initial assessment, USDA now believes that the extension will allow new enrollment in the Grassland Reserve Program (GRP) and Wetland Reserve Program (WRP) this year. The bill itself mentions neither program, but since they had not yet reached their acreage cap, it appears they may continue. It is not yet clear how much funding will be available.
The Farm and Ranch Lands Protection Program (FRPP) had already been extended through 2014 under a previous appropriations bill. The latest continuing resolution would provide $151 million for fiscal year 2013.
The fiscal cliff deal includes a two-month delay of sequestration, which threatened automatic 8.2% cuts to federal conservation programs like LWCF and NAWCA. This new March 1 deadline, along with the debt ceiling and the expiring continuing resolution, will drive the next round of negotiations, with President Obama insisting on revenue raisers as well as the spending cuts sought by Republicans. That means conservation funding and the charitable deduction could again be at risk.
We must remain vigilant as some in Congress are pushing even deeper cuts to "non-defense discretionary" to avoid 9.4% cuts to defense spending. While less dramatic than sequestration, one manifestation of this trend is continuing reductions in the overall budget caps that the Appropriations committees must operate under. For example, this delay was partially paid for with a $6 billion reduction in the non-defense discretionary caps for FY 13-14 -- that's a relatively-painless half percent, but over time such reductions force appropriators to make tough choices that could harm conservation.
- Chart of current levels and sequestration impacts on specific conservation programs
- Details on Farm Bill programs, which are treated differently
- Join America's Voice for Conservation, Recreation & Preservation to defend conservation funding