RD7 - Calendar Year 2013 Land Preservation Tax Credit Conservation Value Summary (including an update of the 2012 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 31, 2014, land owners have received tax credits for permanently protecting 700,207 acres across the Commonwealth through 3,232 land donations since program inception. The appraised value of this conserved acreage is about $3.75 billion, with land owners receiving $1.40 billion in tax credits.

DCR’s review of LPTC applications for $1 million or more began in January of 2007. As directed by § 58.1-512 D.3.a. of 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 verification 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 provides an updated accounting of the remaining balance for the 2012 Land Preservation Tax Credit cap of $111,054,000, as established by § 58.1-512.D.4.a. of the Code of Virginia. The report also summarizes the land donations for which landowners applied for 2013 Land Preservation Tax Credits, within that year’s cap of $100 million. Based on information provided to DCR from the LPTC applicants and TAX, for 2012, a total of 222 applications were granted $59,960,529 in land preservation tax credits protecting 44,329.89 acres. The 2012 annual tax-credit cap still has not been met. LPTC applications for land donations recorded in 2012 or earlier and received by TAX through July 31, 2014, are included in the 2012 portion of this report. For 2013, there were 211 applications that were granted $75,703,982 in land preservation tax credits protecting 60,948 total acres. The 2013 annual tax-credit cap was not met by the end of the 2013 calendar year. In fact, the 2013 cap still has not been met. In order to gather and summarize data for this annual report, applications received by TAX through July 31, 2014, are included in this report. At that time, a balance of $24,296,018 remained in the 2013 cap.

TAX will continue to apply tax-credit applications for land donations recorded in 2012 or earlier to the 2012 cap and those recorded in 2013 to the 2013 cap until they are depleted. Meanwhile, any LPTC applications with land donations recorded in 2014 will be applied to the 2014 cap of $100 million, thereby creating a situation where TAX is effectively managing multiple caps of tax credits for each year simultaneously. Next year’s annual Land Preservation Tax Credit Conservation Value Summary report will provide an update on progress made in the 2012 cap and the 2013 cap, as well as a summary of the 2014 cap.

For the 2012 LPTC, taxpayers in 73 localities claimed a tax credit. The largest number of individual donations occurred in Albemarle County with 19 properties (8.56 percent of all donations). The greatest total acreage preserved occurred in Smyth County with 2,787.30 acres or 6.29 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 $8.89 million or 14.83 percent of the total LPTCs requested.

For the 2013 LPTC, taxpayers in 67 localities claimed a tax credit. The largest number of individual donations occurred in Albemarle and Fauquier Counties with 12 properties each (5.69 percent of all donations each). The greatest total acreage preserved occurred in Essex County with 5,346.72 acres or 8.77 percent of the total acres preserved in the 2013 LPTC program. Loudoun County land owners requested the largest amount of total tax credit dollars at $9.62 million or 12.71 percent of the total LPTCs requested.

Of the eight conservation purposes that a landowner can claim to be eligible for a LPTC, approximately 82 percent of the total acreage preserved in the 2013 LPTC program or 49,996.95 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 (32,745.75 acres) 54 percent of the total acreage, Watershed Preservation (27,120.21 acres) 45 percent, and Agricultural Use (25,657.42 acres) 42 percent. The remaining purposes claimed in order of rank were: Natural Habitat and Biological Diversity at 17,405.23 acres or 29 percent; Lands Designated by the Federal, State, or Local Government at 14,501.47 acres or 24 percent; Historic Preservation at 3,740.88 acres or six percent; and Natural Resource Based Outdoor Education and Recreation at 3,373.67 acres or six percent of the total acreage.

As reported by land owners in their LPTC application packages to TAX, under the 2013 cap so far about 19,486 acres of active agricultural land and 18,143 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 2013 indicate a total length of 1,119,571 linear feet of forested buffers and 95,621 linear 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 2013, the Virginia Land Conservation Foundation (VLCF) distributed dedicated funding to land conservation agencies and organizations for their stewardship efforts. Pursuant to the authority granted in Virginia Code § 58.1-513 C.2., the VLCF Board of Trustees distributed a total of $1,236,939 in stewardship funds to 50 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 2013, DCR reviewed and commented on the conservation value associated with 23 LPTC applications that were above the $1 million review threshold. Of the 23 reviews, 15 final applications were filed with TAX requesting more than $25.6 million in tax credits for 8,565 acres. Those 15 DCR-verified donations represented seven percent of the total number of applications, 14 percent of the LPTC acres preserved, and 34 percent of the total LPTC dollars claimed in 2013. Of the eight remaining potential donations reviewed by DCR in 2013 that did not complete the LPTC process by filing for a credit with TAX: two landowners applied for tax credits in 2014; one applicant recorded their easement as reviewed but has not yet applied for tax credits; and three landowners requested their applications be carried over into 2014 for ongoing considerations. The other two remaining applicants may have been delayed for any number of reasons, including challenges with appraisals or bank subordinations, fluctuations in the real estate market, 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 19 days on average to review a pre-filing application (including a site visit) and one day to verify the conservation value of final applications.