Selling your Virginia Tax Credits on a Qualified Gift of a Conservation Easement

A gift of a conservation easement given in perpetuity may qualify as a non-cash charitable gift that may yield a credit for Virginia state income tax purposes. Landowners may claim a Virginia state tax credit of up to 50% of the fair market value of any land or easement donated for land conservation or historic preservation. If a conservation easement is valued at $500,000, for example, a donor would receive a $250,000 tax credit.

In April 2002, the Commonwealth of Virginia enacted a new law that allows the direct sale of credits from on taxpayer to another. This 2002 law makes it possible for qualified easement donors who cannot take full advantage of the state tax credit accrued by an easement to sell their unused credits for cash. See Code of Virginia, Sec. 58.1-510 through 513 for details of the legislation.

Landowners may choose one of the following options:

A. Apply their Virginia tax credit to state taxes owed. These credits may be used in amounts of no more than $100,000 per year and unused credits can be carried forward for five additional years, or;

B. Transfer or sell all or a portion of the unused tax credit to a third party who can apply the credit to offset their Virginia tax obligation. The third party pays cash for the unused tax credits, which allows an immediate financial return to the easement donor and avoids the possibility of the credit expiring before all the value can be used.

If the landowner chooses to sell the credits, s/he can go directly to people or businesses and offer to sell the credits. For example, if the landowner has a tax credit of $50,000, s/he might sell the credit for $37,500 - $40,000 or 75-80% of the value to create an inducement for others to buy the credits. There are also a number of brokers working in Virginia to bring together buyers and sellers of tax credits related to conservation easement donation. Landowners might want to contact a broker, if they are interested in this option, before they have their easement appraised or move forward with donating. There is no guarantee that all eligible tax credits will be sold. Contact VCC for an up-to-date listing of tax credit brokers.

Please consult with your tax advisor, financial planner or attorney about qualifying and for and using any tax benefits associated with conservation easements. The Valley Conservation Council provides information to assist donors in the easement process. The organization does not provide tax advice.