Friday, February 11, 2011

Virginia General Assembly: Land Preservation Credits

Earlier this week, Todd Hochrein of Virginia Conservation Credit Exchange (their website is here) sent out the following excellent summary of the status of pending legislation related to conservation easement donations and Land Preservation Credits:
Crossover was yesterday. Here is my impression of the current legislative proposals affecting the land preservation tax credits:
  • HB1445 – Imposes limit of $10MM in credits per year to any taxpayer for donations recorded in Calendar Year 2012 and beyond. Passed finance sub-committee 5-0. Seems to have support. Update: This was incorporated into HB1820, but then gutted – there is no longer a per taxpayer limit.
  • HB1820 – Has 3 important factors: (1) It takes any credits from prior years that have been disallowed or invalidated and rolls them into the current year cap (2) It allows the TAX Dept to commission a second appraisal for “good cause” on any applications requesting > $1MM in credits. If the second appraisal is more than 15% different, then the easement value is changed (post-recording). (3) It allows credits to sold post-mortem through an estate. If this bill could be de-coupled, I think there would be full support for items 1 and 3. Item 2 will create a level of uncertainty on the tax benefits received. Furthermore, Item 2 is problematic since it could adjust the value after the donation has been recorded (timing issue). Passed finance sub-committee 5-0. Update: Item 1 is still the same. Item 2 threshold was increased to $2.5MM. item 3 was removed (IRS complications). Passed House in block vote.
  • SB979 – Lowers the DCR review threshold to $500k in credits from $1MM in credits. I don’t think this is an issue that needs to be changed. No vote yet. Update: This has been gutted.
  • SB1087 – This is interesting – it requires brokers or other transfer agents to be licensed if transferring credits to non-individual taxpayers. It requires licensed agents to use standards established by the tax department to review proposals for transferring credits. Fees, penalties and levies may be imposed for unclear reasons. This is the stuff that gives gov’t a bad name. No vote yet. Update: This has been incorporated into SB1232, but effectively gutted.
  • SB1088 – Provides a tax refund to easement donors for 90% of the face value of credits, up to $100,000 face value. Remaining 10% is placed in a PDR grant fund. This would accelerate the cost of the program to the state (and remove lots of credits from the market), but provide quick liquidity to easement donors. It is written so that you would have to request the refund prior to selling any credits. No vote yet. Update: This bill has been tabled indefinitely.
  • SB1232 – Deeds Bill - Basically the senate version of 1820. Update: The bill has been simplified. Says the tax commissioner can notify the donor that a second appraisal is warranted within 30 days of the application. No $ threshold or any other changes.