UW-Madison UW-Madison

Can Tax Credits Promote Land Conservation?

Since the federal government first offered tax deductions for landowners who donate conservation easements back in 1976, "the growth of land trusts and their increasing use of conservation easements is one of the most striking trends in American land conservation," says Nick Parker. He is launching a new research project to quantify the effects of state and federal tax incentives on landowner conservation decisions.
Conservation easements protect land for recreation, wildlife habitat, agriculture, scenic enjoyment, or historic importance, and more recently, the production of sustainable energy. Landowners who donate easements agree to leave their land undeveloped, usually in perpetuity, in exchange for a tax break.
"We don't know much about the extent to which the availability of tax deductions motivates charitable giving," says Parker, so his analysis will compare variations in state tax rules with the location and growth of conservation easements over time. Wisconsin, for example, has seen twice the national average growth in easements between 2005 and 2010. Nationally, the number of land trusts tripled since 1984, while the number of acres protected increased by 470 percent. The Nature Conservancy is the most well-known of such trusts, but there are over 1500 others nationwide.
Though the quality of environmental amenities on protected land is difficult to quantify, Parker's research will try to assess the relationship between tax rules and both the quantity and quality of easements acquired by land trusts. "Obviously, some land is more valuable when it is protected than other lands," he notes. Parker will use surveys carried out by the Land Trust Alliance and spatial data on the precise location of conservation easements from a recently created data clearinghouse.
Parker is creating a "tax calculator" to determine the after-tax "price" of the donation to landowners in different states and across time. He will also look at the landowners' income, because the federal laws originally favored wealthier donors until a change in 2005 temporarily equalized the incentive for lower-income landowners. Preliminary findings reveal that in states with high tax burdens easement donations are also high. Likewise, the states with the lowest taxes have less land placed into conservation, indicating that the deductibility of conservation easement donations might be an important driver of donations.
Parker's ultimate goal is to devise a framework for quantifying the impact of a wide range of sustainable energy and conservation-focused tax incentives on landowner decisions. Easements have been around for a long time, so there are rich data available for the study of their growth. "But the incentives for developing biofuels, or solar or wind energy are relatively new, so there is not yet much information for us to study," he explains. "A model for predicting landowner behavior toward sustainable energy initiatives would be very useful for policy makers and conservationists."
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Last updated on Fri, Sep 13, 2013 6:42am