Idaho Considers Landowner Tax Credits

Farmers, ranchers, conservationists and lawmakers are working together to bring about a conservation tax credit program in Idaho for 2008.The Idaho Working Lands Initiative would offer tax credits to eligible landowners who preserve their land through conservation easements.
House Bill 262 calls for a 50 percent tax credit on the fair market value of land belonging to a “taxpayer who makes a voluntary conservation donation to a qualified sponsor.” Credits would be capped at $500,000 per donation and $3 million per year for the entire program.
The incentive for landowners is the transferable credits program, which is modeled after similar credit programs in Colorado and Virginia according to Bas Hargrove of The Nature Conservancy. Landowners who don’t have a large tax bill still have an incentive to donate land.
“If you get one of these tax credits, you have the possibility of selling it on the open market,” Hargrove says.
In one example laid out by Hargrove, Joe Rancher could take an easement valued at $1 million and receive the maximum allowable credit of $500,000. He then has two options with his credit. He could take it to the open market and sell those credits or carry them forward and apply them to his tax bill for up to 15 years.
The tax credits can also be divided. A landowner with $500,000 in credits could keep $150,000 for himself and spread them out over 15 years at $10,000 a year and then sell the remaining $350,000 tax credits. In Colorado, those credits are quite valuable.
“What we found in Colorado where this program has been in place is that landowners are getting about 80 cents on the dollar for the credit,” Hargrove says. “It sets up a market for brokers who match buyers and sellers.”
The core idea still remains the preservation of land, which has been rapidly decreasing. Hargrove cites a recent study by the American Farmland Trust that said Idaho could lose up to 5 million acres of farmland in coming years.
Hargrove said comments from lawmakers have been favorable regarding the bill.
“The reception has been good,” Hargove said. “It’s a complex enough bill that we wanted to take time to introduce it last session and start the education process and really make a run at it in the session coming up which starts the first week of January.”
The key has been taking what Colorado and Virginia have learned from the program, both good and bad, and improving on it in the Idaho bill.
“We’ve seen in Colorado and Virginia a tremendous popularity in this program where they’ve grown incredibly fast. So much so that they’ve started putting some checks on it and doing some oversight. We’ve tried to address a lot of growing pains issues in other states on the front end of ours,” Hargrove said. “By virtue of having a cap you have to address what happens to the excess. What we’ve done is set up a tax credit advisory committee. That committee would be responsible for the process of deciding how the tax credits are given out. We envision based on the objectives stated in the act that there would be certain criteria. That way we think we will weed out the abuses that we’ve seen in cases in other states.”
Eventually, the planners would like to see an increase in the $3 million cap on credits according to Hargrove. Displaying the benefits of a conservation program versus tax revenue will be the key.
“Weighing [tax revenues] against the public benefits, clean water, working farms and ranches, that’s really the question that is out there, we want to give landowners the option of staying on the land rather than selling out to the highest bidder,” Hargrove said. “Our history is all about working forests, ranchland and farmland and we’re losing them quickly and this gives us another tool so that landowners don’t have to give up.”