Vero Beach, Fl…The tax experts employ various tax strategies designed to help, in many case, significantly reduce a client’s tax liability. While they employ various strategies, two strategies have proven very effective – Conservation Easements and Historic Property Renovation Programs. Both are touched upon below, The Conservation Easement Program is presently facing challenges in Congress, and voter support can help to ensure that small business owners, hi-income earners and high-net worth individuals can continue to utilize these government programs to help reduce taxes while at the same time helping to preserve valuable land and historic properties across America.
Conservation Easement Program – The Legislation
Since 2006, an enhanced income tax deduction has allowed family farmers, ranchers, and forest land owners to get a significant tax benefit for donating a conservation easement on their land. Unfortunately, this legislation expired at the end of 2013 and legislators are seeking the assistance of voters to ensure that this valuable legislation does not disappear permanently.
How a Conservation Easement Works to Reduce Taxes
Conservation easements allow private landowners to permanently retire development rights to protect significant natural resources. The enhanced conservation easement tax incentive opened the door to voluntary, landowner-led conservation on millions of acres of important wildlife habitat, farmland, and scenic open space across the country. The incentive also enhances “bargain sales” of easements purchased by local, state and federal conservation agencies.1
Conservation Easements: Proven Effective and Valuable
A survey by the Land Trust Alliance showed that this incentive helped America’s 1,700 land trusts increase the pace of conservation by a third – to over a million acres a year. Senators Max Baucus (D-MT) and Orrin Hatch (R-UT) introduced S. 526, the Rural Heritage Conservation Extension Act, and Representatives Jim Gerlach (R-PA) and Mike Thompson (D-CA) introduced H.R. 2807, the Conservation Easement Incentive Act in the House to make the incentive permanent. A bipartisan group of more than 200 Members of Congress have co-sponsored these bills, but we need your support to get this legislation across the finish line. On May 29, the Ways & Means Committee voted in favor of sending H.R. 2807 to the House floor.
Donating development rights to land – often a family’s most valuable asset – requires careful planning and consideration. It often takes years from the initial conversations with a landowner before a conservation easement is executed. Landowners considering a perpetual commitment of their land should not be pressured by an artificial deadline, and many will never begin the process without the reassurance of a permanent incentive.
How the Enhanced Easement Incentive Works
The enhanced incentive helps landowners of modest means choose conservation by:
- Raising the maximum deduction a donor can take for donating a conservation easement from 30% of their adjusted gross income (AGI) in any year to 50%;
- Allowing qualified farmers and ranchers to deduct up to 100% of their AGI; and
- Increasing the number of years over which a donor can take deductions from 6 to 16 years.
Without the enhanced easement incentive, an agricultural landowner earning $50,000 a year who donated a conservation easement worth $1 million could take a total of no more than $90,000 in tax deductions! Under the enhanced incentive, that landowner can take as much as $800,000 in tax deductions – still less than the full value of their donation, but a significant increase.
Historic Property Renovation : Good for Small Business Owners,
Small Town America and Investors who Fund Historic Renovation Projects
Another uncommon, rarely used and valuable approach offered by The Tax Saving Professionals provide opportunities to investors to turn dilapidated buildings and blighted neighborhoods into thriving economic communities using Tax Credits offered by the Federal Government through the Federal Historic Preservation Tax Incentive Program.
During the past 36 years the Federal Historic Preservation Tax Incentive Program has proven to be a powerful financial rejuvenator to many formerly forgotten communities. And while the tax act has created much needed housing, jobs, and revenues for cities across the country, it also provides interesting if not unique opportunities for investors who see the value of participating in preserving iconic properties of small town Americana – from banks and gas stations, to movie theatres, schools, warehouses, factories and other commercial properties, while taking advantage of the tax credits available to investors who participate in historic property renovation and acquisition projects.
The Tax Saving Professionals has developed expertise and strategic partnerships that provides a vehicle for clients to participate and invest in these unique development opportunities while taking advantage of tax credits offered by the Federal government for investors who participate in these historic property renovation partnership projects.
“There is no question that the federal historic tax credit, currently a 20% credit on the qualified rehabilitation costs, has had a profound impact on how historic buildings are viewed,” says Jonathan B. Jarvis, Director of the National Parks Service, under whose purview the program is administrated.
“There is definite and clear economic benefit of investing in these properties, other than the tax benefits, but the tax benefits are incredible,” says Bob Barth, Tax Director/Tax Attorney at Tax Saving Professionals. “Our partners carefully choose and acquire real estate where the market, rents and cash flows are predictable and assured,” says Barth, who points out that residual cash flows, as well as deductions, from the income producing property pass through to the investor at the investor’s proportionate share of ownership in a project.
The Investor purchases a partial or incremental owner of the L.L.C. that owns a revenue producing asset which is the commercial building. The operating agreement defines a promised Preferred Investor Return as a percentage of Invested Dollars before any proportionate share of profits and residual cash flows are distributed amongst the partners. A “Should” Level Tax Opinion is provided to the invested entity ensuring the validity of the partner structure along with the correctness of any tax positions taken.