VOF board chair seeks protection for Land Preservation Tax Credits at IRS hearing

On Nov. 5, VOF Board Chair Eleanor Weston Brown spoke at an Internal Revenue Service hearing in Washington, D.C., to address a proposed regulation that could cause unintended negative consequences for Virginia’s Land Preservation Tax Credit (LPTC) program.

Brown, a tax attorney, said that a proposal to treat state and local tax credits as a payment would reduce the ability of donors to fully utilize federal tax deductions for easement and land donations. In Virginia, donors are eligible to receive LPTCs worth 40 percent of the donation, and may also deduct up to 100 percent of the donation’s value on their federal income taxes. The IRS proposal would not allow donors to claim a federal deduction for the 40 percent received in LPTCs.

The proposed regulation is designed to address recent developments in State and Local Tax (SALT) policy, in which some states have used tax credit programs as a workaround to a $10,000 cap on federal deductions for SALT taxes. If enacted it would take effect retroactively to August 28, 2018.

“The proposed regulation significantly undercuts the stated goals of Congress in enacting tax deductions for land conservation,” said Brown. “VOF urges the IRS to reconsider the proposed regulation as it applies to state tax credits for land conservation.”

Specifically, Brown asked the IRS to exempt such credits from the rule. If they do not, she asked that the effective date be moved to 2019 to allow VOF to complete as many as 75 easement projects that are already underway, and whose landowners began the process under the old rules. She also said that if the rule is enacted and LPTCs are not exempted, that the reductions in tax liability should be given basis.

Brown was joined at the hearing by VOF Executive Director Brett Glymph, as well as representatives from Virginia United Land Trusts, the Land Trust Alliance, and the Piedmont Environmental Council.

A copy of Ms. Brown’s written comments to the IRS are available below.

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