Income Tax Deductions Can Reduce Your Taxes Right Away.  The immediate benefit of an income tax deduction is something that most everybody can understand.  The value of the Conservation Easement is treated as a charitable deduction that you can take on your Form 1040  income tax return and reduce your taxes. 

The Pension Protection Act of 2006 (PPA) has mad these tax benefits even sweeter.   Instead of a deduction equal to 30% of Adjusted Gross Income (AGI), with minor adjustments, the new law permits  a deduction of up to 50% for Conservation Easements granted in 2006 and 2007.  Even more important, the unused deduction can be carried forward for 15 years, not five. 

Ranchers and farmers get an even better break.  They are able to deduct the value of the easement up to 100% of AGI and also get the benefit of a 15 year carry forward for the unused portions of the deduction.  For those of you who advise farmers in our area, this can be a tremendous benefit.  Please check into the definition of Afarmer@.  A Aqualified farmer@ usually means that at least half of gross income must come from the trade or business of farming.  Advisors should check the precise definitions because land owners with other sources of income may well quality as "farmers" for purposes of this added deduction.  All financial advisors should be aware of these terrific benefits.  Bring them to the attention of your clients who may be inclined to protect their property for future generations and reap the benefits of substantial tax deductions besides.

Michigan Weighs In Also.  The Michigan legislature in 2006 enacted a beneficial amendment  to the property tax laws.  Now, property subject to a conservation easement will not be uncapped when the owner dies and transfers the property to a new owner or gives the property to family members during owner=s lifetime..  While this new provision would not extend to the buildings on the property, it nonetheless makes it easier for future generations to continue to own property which is subject to the Conservation Easement.

The Michigan law is Act 446 of the Public Acts of 2006 amending the portion of the statute which enumerates various changes which will not be considered Atransfers of ownership@ for purposes of uncapping taxable value. 

What Does The Conservancy Do?  Because a conservancy is the "owner" of the Conservation Easement, it has responsibility for supervision of the property.  That is, the Conservancy has an obligation to protect the rights of the public and at least pay a visit to the property periodically to make sure that the terms of the easement are not being violated.  As the number of Conservation Easements increases in our area, you can image that this requires more and more staff time.  Conservation Easements can be granted to other  non-profit or governmental agencies, but generally the other groups do not have the staffing to supervise or enforce the easements.

Conclusion.  Conservation Easements in 2007 can provide great benefits to your clients.  Those that own scenic property, waterfront, farms or forest lands, should be aware of this potential special benefit for 2007 easements while there is still time to implement them, if an owner is interested.  Conservation Easements generally tie in to overall estate planning and if you have a client may be interested in a Conservation Easement or needs an estate plan, please contact  Jim Modrall at (231) 941-9660 or any of the other attorneys listed below.