Contact Land Conservation Concepts, Inc. so that we may confirm current pricing and availability and send you a term sheet. When you are ready to proceed, sign and return the term sheet. After we receive your term sheet, we'll confirm your credit allocation, closing date, and the payee for your check. We complete closings within two weeks, subject to seller availability to sign the transfer form (Form LPC-2). Once we receive your check and the transfer form notarized by the seller, we complete the closing. The Virginia Department of Taxation will send you an acknowledgement letter to confirm that you have the credits when they process the transfer form.
Contact Land Conservation Concepts, Inc. and send us copies of your easement documents. After we review them, we'll send you a contract to complete. As sales occur, we'll send you transfer forms to sign before a notary (Form LPC-2). Once we receive your notarized transfer form, your check for the Department of Taxation's credit transfer fee, and the purchaser's check, we complete the closing and send you a check for your proceeds.
The land preservation tax credit arises from a donation of land or a conservation easement on property. A conservation easement is a landowner's relinquishment of certain property rights in perpetuity. Typically, the property rights relinquished include development rights, or the ability to conduct certain types of activities on the property. Donations are conveyed by deed of gift to independent holders such as government agencies or land trusts, which, in the case of conservation easement donations, are responsible for monitoring and enforcing compliance. If a conservation easement diminishes the value of the property, the owners may claim part of the diminution as a credit against their Virginia income tax liability. Similarly, land donors may claim part of the value of their land donation. For donations made on or after January 1, 2007, 40% may be claimed. For donations made before January 1, 2007, 50% could be claimed. The economic substance of the credit is that it enables the Commonwealth of Virginia and other holders to receive donations of Virginia land and development rights at a cost to the taxpayer of $.40 for each dollar in value donated (the amount of the tax credit).
Before land preservation tax credits may be used to pay Virginia income taxes or transferred to buyers, they must be registered with the Virginia Department of Taxation. Form LPC-1is the application for registering credits. Once Taxation processes the LPC-1, they send the donor an acknowledgement letter to confirm that the credits have been registered. The total amount of credit that may be registered each year is capped at $100,000,000 by statute (Governor McDonnell and the Legislature eliminated the annual inflation adjustments to the cap in 2013). Special review requirements apply to conservation easements recorded after January 1, 2007 yielding $1,000,000 or more in credits, and, if any part of the property has been eased within the preceding three years, to applications for more than $250,000 in credits. For these donations, the Virginia Department of Conservation and Recreation (DCR) must verify conservation value before Taxation will register the credits. The DCR verification process was not required to register credits originating from donations recorded before January 1, 2007.
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How much of my Virginia income tax liability can I pay with land preservation tax credits in a given tax year?
Former Governor Kaine and the Legislature reduced the amount of land preservation tax credit that could be claimed in tax years 2009 and 2010 from $100,000 to $50,000 per taxpayer per year. Governor McDonnell and the Legislature extended this reduction through tax year 2011. Taxpayers may claim up to $50,000 per year in tax years 2009-2011. Married couples could claim up to $100,000 if each spouse separately purchased $50,000 of credit. In 2012 and subsequent tax years, the limit reverted to $100,000 per taxpayer per year. Business entities filing consolidated returns should note that the Virginia Department of Taxation views unconsolidated affiliates as separate taxpayers.
Credits originating from donations made on or after January 1, 2007 may be used for ten years after the year in which they were registered with the Virginia Department of Taxation. Credits cannot be used to pay Virginia income tax liabilities for years prior to their acquisition, nor can their life be extended by overpaying current year tax liabilities. However, former Governor Kaine and the Legislature enacted temporary provisions to extend the life of credits owned by taxpayers adversely affected by the reduction of the amount that could be claimed in tax years 2009 and 2010. Governor McDonnell and the Legislature extended this relief through 2011.
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What if I cannot use my Virginia land preservation tax credits before they expire?
If you are liable for any State or local taxes in Virginia and the land preservation tax credits have not yet expired, you may sell them. Land Conservation Concepts, Inc. markets land preservation tax credits and helps sellers transfer them to buyers.
Land preservation tax credits generally sell for a discount to their face value. The discount varies seasonally and year-to-year. Tax credit sellers get cash for a tax credit they might otherwise be unable to use. Tax credit buyers realize a discount on their Virginia income tax liability by paying it with tax credits they purchased for less than face value. To illustrate with round numbers: if a buyer purchases $10,000 of land preservation tax credits at a discount of 20% from face value (for $8,000) the buyer could pay his or her $10,000 Virginia income tax liability with the credits in lieu of cash, at savings of $2,000. This equates to a 25% return on the $8,000 purchase.
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How much does it cost to sell my Virginia land preservation tax credits?
For land preservation tax credits originating from donations made on or after January 1, 2007, the Virginia Department of Taxation imposes a 2% transfer fee on the appraised value of the donation. This equates to $.05 per dollar of credit face value. The transfer fee was capped at $10,000 per credit holder per donation through June 30, 2010. Governor McDonnell and the Legislature eliminated the $10,000 transfer fee cap for donations recorded after June 30, 2010. Land Conservation Concepts, Inc. charges a fee for introducing the seller and buyer and facilitating the credit transfer.
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Are there limits on how many Virginia land preservation tax credits I can sell in a given tax year?
No - if you are liable for any State or local taxes in Virginia and the land preservation tax credits have not yet expired, you may sell all of them in any year. Sellers are limited only by how many credits they have to sell and the willingness of buyers to purchase the credits at the seller's price. Sellers are strongly encouraged to consult with their advisors to plan the tax implications of any sales.
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Are there limits on how many Virginia land preservation tax credits I can purchase in a given tax year?
No - you may purchase as many land preservation tax credits as you wish in any year. Once you have purchased the credits, you may use them to pay your Virginia income taxes subject to the per-taxpayer limits of $50,000 in tax years 2009, 2010, and 2011 and $100,000 in 2012 and subsequent tax years. The credits may not be used to pay Virginia income tax liabilities for years prior to their acquisition, nor may their life be extended by overpaying current year tax liabilities. If you cannot use all of your credits before they expire, you may re-sell them.
The tax authorities have challenged donations they perceive to be abusive. Tax credit buyers can mitigate this risk by purchasing credits backed by donor indemnification through firms whose credits have not been challenged or adjusted by the tax authorities. Prospective donors can mitigate this risk by ensuring that the attorney who drafts the deed, the appraiser who values the donation, and the tax advisor who plans the financial aspects of the donation and prepares the filings for the tax authorities are highly qualified and experienced in this specialized area of practice. If the deed of gift for the donation is not properly prepared, the qualified appraisal inadequately supports the claimed donation value, the documents required by the tax authorities are not correctly prepared, etc., the IRS and the Virginia Department of Taxation may disallow part or all of the value of the donation from which the land preservation tax credit arises. Prospective donors should verify track record, experience working with similar donations, training, and certifications before hiring an attorney, appraiser, or tax advisor. Have they worked on any donations that have been challenged by the tax authorities? If so, did the tax authorities disallow part or all of the value of the donations?