The tax package that Congress finally passed and President Obama signed into law on Dec. 17 addresses one of the most onerous issues facing farmers. "And that issue is taxes," says Jon Scholl, president of American Farmland Trust. "Land, barns and farm equipment are typically the most valuable assets held by farm families."
Scholl says Congress has successfully addressed the estate tax issue for two-more years. "By exempting the first $5 million dollars of a farm estate, with a 35% tax rate thereafter, the majority of farmers will not face the same pressure to sell their farmland to cover the tax bill." In the past when families have had to sell some of their land to help pay the estate tax, that land not only is no longer owned by the farm family, but it often is sold for development purposes. It's agricultural and food production use is then lost.
"The new tax package that Congress passed and is now law is a great start, and in the intervening two years, we hope they will look take another look at legislation that would permanently exempt farms, ranches and forest lands estate taxes as long as the land remains in agriculture," Scholl adds. "If a family or estate chose to later sell the land out of production, the land would be subject to an estate tax, charged on the value of the land at the time of such a sale. This would be permanent solution that would protect farmland even more effectively."
Tax law has another key provision to help protect farmland
In addition estate tax provisions, "the package contains another key mechanism to help protect our nation's farm and ranch land," Scholl says. "The final bill contains tax incentives for donating a conservation easement on agricultural property, allowing conservation easement donors to get a larger tax deduction over a longer period—15 years. This will give thousands of farm families a greater opportunity to protect their land in the 2010 and 2011 tax years."
The tax deduction is given to landowners who donate a conservation easement on their farm or ranch land, with the enrolled property then permanently limited to ag or other compatible uses. Participating farmland remains in private ownership and on the tax rolls. Since its inception in 2006, this tax incentive has been effective in helping thousands of farm families protect their operations from development. This deduction was renewed in the new 2010 tax legislation.
It's a temporary solution, Congress needs to make a permanent fix
Scholl hopes Congress will take up the estate tax and incentives for donating conservation easements again in the new session, and work toward permanent solutions. "Our nation's farm and ranchland is not only a critical asset to farm families, it is one of our country's most valuable natural resources," says Scholl. "We need to permanently extinguish federal taxes that cause farmers and ranchers to stop production and sell their land."
American Farmland Trust is a leading conservation organization dedicated to saving America's farm and ranch land, promoting environmentally sound farming practices and supporting a sustainable future for farms. Since its founding in 1980 by a group of farmers and citizens concerned about the rapid loss of farmland to development, AFT has helped save millions of acres of farmland from development and led the way for the adoption of conservation practices on millions more. AFT's national office is in Washington, DC. For more information, visit www.farmland.org or phone 202-331-7300.
Incentive for conservation is renewed, but needs to be permanent
Another farmland preservation group, the Land Trust Alliance, also points out the benefit of having the tax incentive for conservation renewed. The deduction boosts the benefits for landowners to keep their land being used for ag purposes.
In a press release, the organization noted that after the year-long lapse that left many important conservation donations in limbo, Congress renewed the enhanced tax incentive for conservation easements that increased private land conservation by a third—to over a million acres a year. The renewed incentive will be in effect through Dec. 31, 2011 and retroactive to Jan. 1, 2010.
Land Trust Alliance President Rand Wentworth gave special credit to the sponsors of another piece of legislation that hasn't been passed yet, which seeks to make this tax incentive permanent. The sponsors of that bill are Senators Max Baucus (D-MT) and Charles Grassley (R-IA), and Representatives Mike Thompson (D-CA) and Eric Cantor (R-VA).
Tax deduction boosts benefits for keeping land in agriculture
"These leaders have worked hard to make sure we can continue the success this incentive has already had, protecting special places and productive working lands in hundreds of communities across the country," says Wentworth. "The land this incentive helps protect is an investment in clean water, fresh, local food, wildlife habitat, and scenic beauty."
A broad coalition of sportsmen, outdoors enthusiasts, farmers, ranchers and national conservation groups worked together to renew the incentive and will push to make it permanent in the 112th Congress. Bills to do just that (H.R. 1831 and S. 812) have 274 House and 41 Senate co-sponsors from all 50 states, including majorities of Democrats and Republicans in the House.
By helping modest income landowners deduct the full value of their contributions, this enhanced easement incentive has increased the pace of private, voluntary land conservation by about 250,000 acres a year nationwide, and is especially important now that the latest reports show that America is losing land to development at the rate of 1.5 million acres per year.
The enhanced incentive, which applies to a landowner's federal income tax, will do the following:
• Raises the deduction a donor can take for donating a voluntary conservation agreement from 30% of their income in any year to 50%;
• Allows farmers and ranchers to deduct up to 100% of their income; and
• Increases the number of years over which a donor can take deductions from 6 to 16 years.
The Land Trust Alliance is a national conservation group that works on behalf of America's 1,700 land trusts to save the places people love by strengthening conservation throughout America. It works to increase the pace and quality of conservation by advocating favorable tax policies, training land trusts in best practices and working to ensure the permanence of conservation in the face of continuing threats. For more information go to www.landtrustalliance.org.