RD407 - Calendar Year 2012 Land Preservation Tax Credit Conservation Value Summary


Executive Summary:
The Virginia Land Preservation Tax Credit (LPTC) Program has proven to be a valuable incentive for landowners interested in voluntarily conserving their property through perpetual conservation easements or fee-simple donations. The transferability feature of Virginia’s tax credit program is especially valuable to landowners with little or no state income tax liability, enabling them to sell their tax credits for income. Responsibilities for oversight of the LPTC program are shared by the Virginia Department of Taxation (TAX) and the Virginia Department of Conservation and Recreation (DCR).

Virginia’s Land Preservation Tax Credit Program began in January 2000 and continues to advance the preservation of important lands across the Commonwealth. TAX’s records indicate that as of October 3, 2013, land owners permanently protected 634,596 acres across the Commonwealth through 2,982 land donations since program inception. The appraised value of this conserved acreage is about $3.55 billion, with land owners receiving $1.32 billion in tax credits.

DCR’s review of LPTC applications for $1 million or more began in January of 2007. As directed by the Code of Virginia, DCR follows the Conservation Value Review Criteria as adopted by the Virginia Land Conservation Foundation to verify the conservation value of donated land or conservation easements. This review process serves as an important tool for the Commonwealth to ensure that the lands protected have worthy conservation values and that their natural and historical resources are adequately protected in perpetuity.

The tax credit report contained herein summarizes the donations for which taxpayers claimed 2012 Land Preservation Tax Credits, within the $111,054,000 LPTC cap established by § 58.1-512.D.4.a. of the Code of Virginia. Based on information provided to DCR from the LPTC applicants and TAX, in 2012, there were 201 applications that were granted $56,227,473 in land preservation tax credits protecting 42,085.62 total acres. However, the annual tax-credit cap was not met by the end of the 2012 calendar year. In fact, the 2012 cap still has not been met. In order to gather and summarize data for this annual report, applications received by TAX through July 31, 2013, are included in this report. At that time, a balance of $54,826,527 remained in the 2012 cap.

TAX will continue to apply tax-credit applications for land donations recorded in 2012 or earlier to the 2012 cap until it is depleted. Meanwhile, any LPTC applications with land donations recorded in 2013 will be applied to the 2013 cap of $100 million, creating a situation where TAX is effectively managing two separate caps of tax credits simultaneously. Next year’s annual Land Preservation Tax Credit Conservation Value Summary report will provide an update on progress made in the 2012 cap as well as a summary of the 2013 cap.

For the 2012 LPTC, taxpayers in 68 localities claimed a tax credit. The largest number of individual donations occurred in Albemarle County with 17 properties (8.46 percent of all donations). The greatest total acreage preserved occurred in Smyth County with 2,569.21 acres or 6.10 percent of the total acres preserved in the 2012 LPTC program. Loudoun County land owners requested the largest amount of total tax credit dollars at $8.59 million or 15.28 percent of the total LPTCs requested.

Of the eight conservation purposes that a landowner can claim to be eligible for a LPTC, approximately 78 percent of the total acreage preserved in the LPTC program or 32,673.97 acres were claimed to be in the Scenic Open Space category. Applicants may claim more than one conservation purpose and many in fact do, however it is not necessary in order to request or qualify for the LPTC Program. The other prominent categories claimed were: Forestal Use (21,256.19 acres) 51 percent of the total acreage, Agricultural Use (17,891.47 acres) 43 percent, and Watershed Preservation (14,638.55 acres) 35 percent. The remaining purposes claimed in order of rank were: Lands Designated by the Federal, State, or Local Government at 8,114.16 acres or 19 percent; Natural Habitat and Biological Diversity at 7,217.20 acres or 17 percent; Historic Preservation at 2,730 acres or 6 percent; and Natural Resource Based Outdoor Education and Recreation at 1,069 acres or 3 percent of the total acreage.

As reported by land owners in their LPTC application packages to TAX under the 2012 cap, so far about 14,238 acres of active agricultural land and 11,654 acres of active forestal land were conserved. Within the LPTC application, land owners are also asked to report on the total length of riparian buffers with a minimum width of 35 feet required in their donated easements or gifts of land. The applications for 2012 indicate a total length of 674,916 feet of forested buffers and 168,487 feet of no-plow buffers along rivers, streams, wetlands, ponds, springs, and shorelines. The two different categories of buffers are differentiated by the types of activities that are restricted or allowed within the conservation easement or deed of gift. Activities such as mowing or timber harvesting are restricted in forested buffers, but are allowed within no-plow buffers to maintain non-woody vegetation such as pasture or grasslands.

In 2012, the Virginia Land Conservation Foundation (VLCF) distributed dedicated funding to land conservation agencies and organizations for their stewardship efforts. Per authority granted in Chapters 229 and 248 of the 2010 Virginia Acts of Assembly, the VLCF distributed a total of $2,210,118 in stewardship funds to 52 land trusts, conservation organizations, and agencies to support their ongoing monitoring and enforcement of donated lands. The dedicated funding is generated from a two percent fee imposed on the sale of LPTCs.

In addition to the responsibility to prepare an annual LPTC report, DCR is also charged with conducting reviews of the Conservation Value of LPTC requests of $1 million or more (based on a 40% credit for a donation valued at $2.5 million or greater) and with verifying the conservation value of these donations in advance of TAX issuing a land preservation tax credit. DCR’s review is carried out in accordance with criteria adopted by the VLCF for this purpose.

In 2012, DCR reviewed and commented on the conservation value associated with 13 LPTC applications that were over the $1 million review threshold. Of the 13 reviews, nine final applications were filed with TAX requesting more than $10.8 million in tax credits for 4,396 acres. In addition, another four DCR-approved applications from the previous year were applied to the 2012 LPTC. One application that was reviewed by DCR in 2010 and one from 2009 also applied for tax credits in 2012. Those 15 DCR-verified donations represented 7.96 percent of total applications, 12.40 percent of the LPTC acres preserved, and 31.02 percent of the total LPTC dollars claimed in 2012. The four remaining potential donations reviewed in 2012 that did not complete the LPTC process by filing for a credit with TAX may have been delayed for any number of reasons, including fluctuations in the real estate market, difficulties with bank subordinations, or other timing issues.

DCR’s oversight continued to provide benefits to the Commonwealth’s efforts to ensure the conservation value of properties applying for the LPTC. DCR’s review process resolved a number of issues with applications that would have negatively affected the donation’s conservation value if the applicants had recorded their deeds as originally submitted during DCR’s pre-filing review. In addition, DCR’s review helped to ensure that persons eligible for $1 million or more in state land preservation tax credits also addressed water quality and forest stewardship protections associated with their conserved lands. Although state law allows DCR 90 days to complete its review, DCR took only 22 days on average to review a pre-filing application (including a site visit) and five days to verify the conservation value of final applications.