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Virginia Land Preservation Tax Credits
The Virginia Land Preservation Tax Credit (also known as the Conservation Easement Tax Credit) allows individuals or corporations a tax credit against their Virginia Income tax equal to 50% of the value of land set aside for conservation use. The maximum credit that can be used in a given year is $100,000, but any excess can be carried forward for five years.
The individuals and corporations who initially receive the credits often cannot use them due to a lack of taxable income. They are allowed to sell the credits, which generates cash for them and makes the credits available to you.
In prior years, these credits were not as attractive as they are now. To determine the value of the easement given, an independent valuation of the land must be performed. This valuation is subject to audit by the Virginia Department of Taxation and the Internal Revenue Service. In the past years, if an audit took place that resulted in a change in the valuation, each taxpayer who had used the credit had to then file an amended return.
Tax Credit Capital, LLC, the organization that provides the credits we offer, went to the General Assembly last session and secured a significant improvement in the process. Now someone who has the credits and offers them to other taxpayers may elect to hold back 20% of the credits. Therefore, it an audit results in a change in the valuation, the Virginia Department of Taxation must first look to this hold back to absorb the change in the amount of credit. Tax Credit Capital, LLC, will hold back the full 20%.
In addition to this holdback, Tax Credit Capital, LLC also hires a second independent appraiser to determine the value of the easement. If there is a significant difference in the two appraisals, they do not acquire those credits. These two changes have made the Virginia Land Preservation Tax Credit very attractive.
How can these credits work for me?
Depending on your particular tax situation, the credits can be acquired by what is known as a “transfer of credits”.
In this situation, the credits can be directly transferred to you. In this form, you would pay 85% of the face value of the credits to acquire them. Instead of recognizing a capital loss in year two, you would take an itemized deduction for the full value of the credits on your Federal return in year one. You would then increase in year two the amount of any Virginia income tax refund you report on your Federal return by the 15% difference between what you paid and the face value you deducted.
Who can this program help?
This program is ideal for those who have large capital loss carry forwards or those who generally don’t have large capital gains in a given year.
Who can use these credits?
These credits can be used by individuals and corporations to reduce their Virginia income tax liability. We are happy to help you determine whether these credits are right for your particular situation.