| The Senate is expected to pass new legislation that will create tax credits for habitat restoration and habitat protection easements for endangered species. Some view tax credits as a more effective way to reduce tax liability. While deductions, either itemized or standard, reduce your amount of taxable income, credits cut your actual tax bill, dollar-for-dollar. That's because credits come into play AFTER your tax liability is figured.
The proposal establishes a tax credit for:
- Costs paid or incurred by landowners for establishing a habitat management plan for certain qualified habitat protection agreements referred to as the “habitat restoration credit”. The habitat restoration tax credit will be reduced by the amount of government financing provided for the restoration activities.
- A percentage of the loss in property value from a habitat protection easement (less any amount received in connection with the easement) referred to as the “habitat protection easement credit”. The allowable credit amount is;
- 100 percent of costs paid or incurred and the loss in value to property pursuant to qualified perpetual habitat protection agreements;
- 75 percent of costs paid or incurred and the loss in value to property pursuant to qualified 30-year habitat protection agreements; and
- 50 percent of costs paid or incurred pursuant to a qualified habitat protection agreement.
For purposes of the habitat protection easement credit, the loss in value is the difference between the fair market value of the real property subject to the agreement determined on the day before the agreement is entered into, less the fair market value of such property determined one day after the agreement is entered into. To claim such credit you must include a qualified appraisal in your tax return. No credits will be allowed unless the qualified agreement will contribute to the recovery of a qualified species.
The habitat restoration credit is taken into account after other credits and may not offset the alternative minimum tax. The habitat protection easement credit is also taken into account after other credits, but may offset the alternative minimum tax. The tax credit allocations will be available until the end of 2012.
There will be annual credit limitations imposed and if the sum of your credit exceeds your imposed annual limit you will be able to carryover the credit into the next year. There are annual aggregate credit amounts that will be allowed for all habitat restoration and preservation agreements conveyed in a year. Applications for credits will be evaluated and priority will be given to agreements:
- with habitats that will significantly increase the likelihood of recovering and delisting a species as an endangered species or a threatened species
- that are cost-effective and maximize the benefits to a qualified species per dollar expended,
- for habitats with species that have a Federally approved recovery plan,
- for habitats with the potential to contribute significantly to the improvement of the status of a qualified species,
- for habitats with the potential to contribute significantly to the eradication or control of invasive species that are imperiling a qualified species,
- for habitat management plans that will manage multiple qualified species,
- with habitat management plans that will create adjacent or proximate habitat for the recovery of a qualified species,
- with habitats for qualified species with an urgent need for protection,
- with habitat management plans that assist in preventing the listing of a species as endangered or threatened,
- with habitat management plans that may resolve conflicts between the protection of qualified species and otherwise lawful human activities, and
- with habitat management plans that may resolve conflicts between the protection of a qualified species and military training or other military operation.
Read the notice from the Senate Finance Committee
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Farm & Ranch Estate Planning