How to Reform Virginia’s Conservation Tax Credit

This map, taken from the Virginia Department of Conservation and Recreation website, shows the fragmented distribution of conservation easements on Virginia's upper peninsula.

This map, taken from the Virginia Department of Conservation and Recreation website, shows the fragmented distribution of conservation easements on Virginia’s upper peninsula.

by James A. Bacon

The state of Virginia spends $100 million a year in the form of tax expenditures to place conservation easements on land parcels around the state. Could the state get more for its investment? Amy Murphy, an environmental studies major at the University of Richmond, thinks so. In a paper presented to the  Climate Change and Resiliency Update Commission Tuesday, she recommended three changes t0 make the law more effective, including a restructuring of the tax credit to favor easements that offered greater environmental benefits.

Murphy’s paper on conservation easement reform was one of 11 prepared under the tutelage of biology professor Peter D. Smallwood and journalism professor Stephen D. Nash that were packaged for consideration by the climate change commission. Each paper focused on a practical, small-bore proposal for helping Virginia ecosystems adapt to warming temperatures. While climate change was the unifying theme, it struck me that many of the proposals make sense whether you believe in catastrophic global warming or not.

Murphy’s paper, in particular, addressed concerns that I have long harbored about Virginia’s conservation easement program. On the plus side, the program provides a way to protect Virginia lands from development that is far cheaper than purchasing the land outright. Landowners receive a tax credit worth 40% of the fair market of the value of the land, with deductions up to $100,000 for the year of donation and 10 subsequent years. In effect, taxpayers pay 40 cents on the dollar to protect land from development beyond its current use, typically agriculture or forestry. Not a bad deal.

The problem is that not all land is equally worth conserving. Some lands harbor endangered species and biological diversity; others don’t. Some easements abut other easements, creating larger bodies of protected habitat; others are tiny islands, creating fragments of little ecological value. The state caps the easement credits at $100 million per year but has no system for prioritizing one easement over another.

Murphy proposes creating a statewide plan, to be administered by the Department of Conservation and Natural Resources, to rank and prioritize land based on conservation value. Factors to be considered would include biodiversity, land resilience, land cover, proximity to existing lands and threat of development. Parcels would be scored. Parcels with high scores (of greater conservation value) would receive higher tax credits, while lower-scoring parcels would receive lower credits.

“Ideally, implementing these changes will result in obtaining easements on more land of high ecological importance without altering the total amount of tax credits given annually,” she writes.

A second tweak to the program would address problems created by freezing an easement in judicial stone. Static easements that prescribe specific responsibilities and expectations of future land owners can become outdated over the decades, limiting adaptation to changes in scientific knowledge and climate conditions. Murphy recommends that Virginia require the inclusion of “adaptive management plans” in easement terms. “These plans should require that the landowner manages the land in a manner consistent with preserving the conservation purpose of the easement rather than require specific management techniques.”

Finally, Murphy recommends setting up a system for monitoring easements to ensure that the terms are being adhered to. In Maine, which requires monitoring, 90% of the easements were in compliance — which implies that 10% were not. There is a cost to monitoring, she acknowledges, but the burden “may have a positive influence as [it] may force landowners to limit their holdings so they can provide proper stewardship to them. This may cause a selective pressure away from low value easements.”

Bacon’s bottom line: Virginia’s conservation easement program is a valuable tool for protecting the natural environment. It’s also a great tax break for landowners, some of whom may be motivated to participate for less-than-altruistic motives. Murphy’s recommendations would ensure that this significant state investment yields maximum benefits.

There are currently no comments highlighted.

5 responses to “How to Reform Virginia’s Conservation Tax Credit

  1. I know you”re going to find this hard to believe but I cannot find a single thing to disagree with as I not only totally agree on everything mentioned but I’d double down on it.

    Sometimes I wonder when the GA sets up things like this that they could not have possibly not understood the flaws that are clearly evident and they knew it was going to be a cash cow for some folks who no more care about the environment and conservation than the man-in-the-moon – they just like the idea of getting free money and wrapping themselves with a “good guy” cloak.

    I’m especially a skeptic of Conservation Easements that are off limits to the public – the public that paid for them – and they have no management plan – they’ve just become exclusive enclaves for the owners – and in some cases – de-facto amenities for adjacent land being developed as residential.

    I also worry that they could – after some number of years – create a patchwork of lands that can no longer be used for new roads or electric or pipeline corridors… water/sewer, new broadband cable, etc.

    the National Park Service uses a point system to determine “significance”. It’s an important word. The Nature Conservancy does a similar thing – that helps them to prioritize donated land – to be permanently protected – or to sell so they can use the money to permanently preserve other land – via strategic purchases.

    The State is developing a point system for transportation projects – why not for Conservation Easements?

    Why not adopt the Park Service or Nature Conservancy process as a “best practices” protocol or for that matter hire the Natural Conservancy to do the rating process and make that a cost to the donor so no tax dollars get expended in the lead-up to the decision and the property owner has to have some skin in the game.

    Finally – every set-aside needs a management plan to include how the property will be maintained … i.e. will a 25 acre plot surround by residential or commercial development end up being an attractive nuisance that actually ends up detracting not adding to the area?

    I think most any process can be improved – and should be – especially when it starts out a little like a do-gooder concept gone amok.

  2. Thanks for bringing this to the forefront Jim. I admit to being a supporter of the conservation and preservation of unique natural and historic places. And while a lot of this protection effort is performed by private, non-profit, enterprises the hold easements on property; they all seem to rely on tax credits as a motivation for sellers to forego development rights. You point out that these protection activities are not well coordinated under any over-arching master plan. To some, the surveying and monitoring efforts may seem intrusive. But to me, the assurance that $100 million in tax expenditures are well spent, is a sufficient reason for the General Assembly to take action on this proposal.

  3. I guess spending 100 million a year on Virginia swampland is a conservation conservative’s ideal. If the parcels you pointed out in that map are any indication, Virginia’s taxpayers are getting ripped off big time. And I bet the prime land that this bill would make priority is owned by some well connected donors.

  4. Jim: We are working on a more complete response but in the interim, this critique suffers from a narrow perspective and a failure to review the purposes and outcomes of the Land Preservation Tax Credit. Bio-diversity, while an admirable goal, is not the primary or exclusive purpose of conservation in Virginia. The Constitution and statutes refer to a range of goals, including but not limited to protection of natural resources.
    Both the Open Space Lands Act and the Conservation Easement Act define a broad set of purposes, each important.

    “Open-space easement” means a nonpossessory interest of a public body in real property, whether easement appurtenant or in gross, acquired through gift, purchase, devise, or bequest imposing limitations or affirmative obligations, the purposes of which include retaining or protecting natural or open-space values of real property, assuring its availability for agricultural, forestal, recreational, or open-space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural or archaeological aspects of real property.
    “Open-space land” means any land which is provided or preserved for (i) park or recreational purposes, (ii) conservation of land or other natural resources, (iii) historic or scenic purposes, (iv) assisting in the shaping of the character, direction, and timing of community development, (v) wetlands as defined in § 28.2-1300, or (vi) agricultural and forestal production.

    “Conservation easement” means a nonpossessory interest of a holder in real property, whether easement appurtenant or in gross, acquired through gift, purchase, devise, or bequest imposing limitations or affirmative obligations, the purposes of which include retaining or protecting natural or open-space values of real property, assuring its availability for agricultural, forestal, recreational, or open-space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural or archaeological aspects of real property.

    What the Land Preservation Tax Credit has accomplished is remarkable. Since its inception, more than 700,000 acres has been conserved for less than $2000 per acre. That land includes a large land base that is critical for the agricultural and forestry economy. It includes important historic and cultural lands, including Civil War battlefields, Monticello, Montpelier and hundreds of other sites that make up the landscape that tourists travel the globe to visit.

    Even if we were to only focus on biological and ecological factors, the results are impressive. The Virginia Outdoors Foundation, the largest easement holder in the Commonwealth, published in their 2015 annual report that their easements protected the following resources:

    –193 miles of waters containing threatened and endangered species
    –81 miles of native trout streams
    –108,100 acres in National Audubon Society designated Important Bird Areas
    –284,100 acres in high integrity watersheds
    –215,000 acres in ecologically significant landscapes

    In Virginia, we are working to conserve a landscape of private land with many parcels through a voluntary program. To submit mapping that shows “scattered parcels” is to ignore the significant blocks of land that are developing all over the Commonwealth as the program matures and takes affect.

    • Chris, you’re absolutely right, I focused on ecosystem benefits to the exclusion of other priorities, particularly historical/culture preservation and scenic easements. Any ranking of priorities should include those. But I still maintain that not all easements are created equal. And, given the $100 million-per-year cap, we need to ensure that we get the biggest bang for the buck.

Leave a Reply