After 15 years, conservation easement tax incentives become permanent

It was nearly 17 years ago that a pair of conservation-minded Montanans began a quest to help working ranchers and farmers keep their land in agriculture. In the recently passed federal budget bill, the initiative Rock Ringling and Bill Long spearheaded became a permanent part of conservation law.

Conservation easements are offered by a variety of state and federal agencies and nongovernment organizations to private landowners. The terms can range from payment for development rights to securing perpetual public access, but Ringling’s organization, Montana Land Reliance, specializes in easements restricting subdividing in favor of traditional uses that maintain open space.

While the federal tax code is a maze of deductions and credits, the pre-2007 tax incentives allowed conservation easement donors to deduct between 30 and 50 percent of the value against their income, with deductions eligible for up to six years. The code worked well for landowners with sizeable incomes that could recoup the values of the easements. But for classic working ranches with plenty of land but lower incomes, often the numbers just could not add up.

“Depending on your income you really couldn’t use it,” Ringling said. “So you were leaving the entire donated value of the conservation easement in the dirt so to speak.”

Inspired by the idea of putting land-rich, cash-poor landowners on a path to recouping their donations, in 1999 Ringling and Long approached former Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa.

“We’re a small land trust sitting in Helena, Montana, and we didn’t know any better. So we went out and tried to sell this idea,” Ringling said.

They first approached the lawmakers with an idea for a tax credit, but the senators were not interested in another credit in the tax code. Instead, staffers pitched the idea of raising the deductible value and extending the time period to take it. The bill offered landowners up to a 100 percent deduction against their adjusted gross incomes and extended the period to 16 years.

The changes meant that a land-rich, cash-poor landowner could deduct enough income to match the value of the easement while also adding flexibility to deduct more in economically down years.

With the bill’s language in place, the crash-course in Washington, D.C., politics became an odyssey of attending hearings and lobbying — a process that lasted until 2007.

“By God, one day we woke up and it got passed,” Ringling said.

The passage led to an uptick in conservation easements, with ranchers and farmers wanting to maintain their land but waiting for the incentives to make financial sense, he said. But after the initial surge, it became clear that the seemingly continual need for Congress to reauthorize the incentives, at times retroactively, made on-the-ground planning increasingly difficult.

“If you’re a landowner you’re generally working with a land trust for nine months,” said Glenn Marx, executive director for the Montana Association of Land Trusts. “You’re right on the cusp of a conservation easement, both parties agree to terms, but at that time the incentives might not be in place. The land trust can say they’re pretty sure Congress will reauthorize them, but it put everyone in a place of uncertainty. So that added a lot of stress and pressure at the end of the year not knowing.”

The coalition of organizations responsible for the original legislation continued the push, this time to make the incentives permanent. That effort lasted until 2015 when the legislation, which received support from Montana’s delegation and House Speaker Paul Ryan, R-Wis., among others, was included in last month’s tax reform package.

“It’s important to be able to plan for people’s taxes and for estate purposes into the future, and we need more than one-year extensions to do it,” said Prickly Pear Land Trust Executive Director Mary Hollow. “So that’s probably the biggest advantage of no longer having to worry about constant lobbying to make these happen.”

In the latest push for tax reform, those incentive programs not included in the budget bill are likely off the table for good, Ringling said.

“Looking through the mirror today, if we wouldn’t have gotten this made permanent we might never have gotten it done,” he said. “We probably wouldn’t have had the political power to make it happen.”

Marx applauded the achievement not only as a benefit for legacy ranching, but as a tale of perseverance.

“One thing that I think is amazing is that these guys from Montana who were just driving down the road changed the way America is governed,” he said. “They affected national change in a tangible way that’s an impressive, historical achievement.”

With the tax incentives now permanent, Ringling believes the program can sustain the need for new conservation easements for the next two decades. Montana’s aging ranching population and shifts in commodity prices will also dictate the market, he added.

Ringling estimates Montana Land Reliance spent up to $1 million on the effort, along with other organizations at the national level. Private land issues are not a priority for many federal lawmakers, but enough key senators and representatives saw the incentives as a program working for every private landowner in every state, he said.

“Had I known it would take 16 years I probably wouldn’t have done it,” Ringling said. “I still can’t quite believe it happened. It’s kind of nice to know because not everybody in the United States can wake up in the morning and say you helped pass a significant piece of conservation law.”

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