Information Summary

The New York State Conservation Easement Tax Credit (CETC) offers NY taxpayers whose land is restricted by a conservation easement an annual NY State income tax credit of up to 25% of the school district, county and town real estate taxes paid on the restricted land , up to an annual maximum of $5,000 per taxpayer.  Unlike a tax deduction, which is an adjustment to taxable income, a tax credit offsets a taxpayer's lax liability on a dollar-for-dollar basis.  The CETC is a REFUNDABLE income tax credit, which means that if a landowner's tax credit exceeds the amount he or she woes in state income taxes, the landowner gets a check for the difference.

The CETC is available to individual landowners, estates, trusts, partnerships and certain corporations as long as the land they own is restricted by a perpetual and permanent conservation easement as defined in Article 49 of New York's Environmental Law. The land must be located in New York State and the conservation easement must be held by a public or private conservation agency.  The easement must serve to protect open space, biodiversity or scenic, natural agricultural, watershed, or historic preservation resources by limiting or restricting development, management and/or use of the property.

The easement must be filed with the Department of Environmental Conservation (DEC) and must comply with Section 170(h) of the Internal Revenue Code (IRC): i.e. it was donated or partially donated (sold for less than fair market value) to a public or private conservation agency.

The CETC applies to all conservation easements, regardless of when they were created, provided they meet the criteria listed above.  They DO NOT APPLY to

non-conservation easements, such as utility or transportation rights-of-way, etc. Nor does it apply to conservation easements that were created for the purpose of obtaining subdivision or building permits or to easements that were required as mitigation. These easements do not comply with IRC Section 170 (h).  Likewise, deed restrictions that do not conform to the definition of "conservation easement" in Article 49, Title 3, of the NYS Environmental Law do not qualify for the credit, even if they have a conservation purpose. You can claim a tax credit for each of the qualified easements on your land up to a total of $5,000 per year for all of them.

1. Location of the easement-restricted property (it should appear on the easement).
2. Date the easement was conveyed.
3. The county the easement was recorded in, the liber and page instrument number , or control number.
4. The DEC identification number assigned to the easement.
5. County, town and school district property taxes paid on the easement-restricted land.

There are several ways a landowner can prove compliance with IRC, Section 170 (h):

1. If the landowner who donated the easement claimed a federal tax deduction, the land trust or governmental agency that holds the easement should be able to provide you with a copy of the Federal Tax Form 8283 that was filed at the time of the donation. This alone is sufficient documentation.
2. If the easement was donated or sold to the land trust or governmental agency for a nominal amount, you can ask the land trust or governmental agency to send you a letter stating this fact.
3. If the easement was sold to the land trust or governmental agency for more than a nominal amount but less than fair market value, a letter from the l and trust stating this fact will be sufficient but only if it is accompanied by an appraisal report written by a qualified appraiser who meets federal standards (section 1.170A-13©(5).
4. The credit applies only to that portion of your land that is protected by the easement.  Ask your local assessor to calculate the fraction of your assessment that applies to your land (and not to buildings or other structures). Then calculate the fraction of the land that is protected by the easement. Multiplying these numbers times the total property taxes give you the allocated taxes:

[Fraction of assessment represented by land X fraction of land protected by easement X total property tax = allocated taxes]

Example:

A landowner pays a total of $10,000 in property taxes on a 100-acre parcel. of which 75 acres is protected by a conservation easement.  The landowner learns from the assessor that the house and garage account for 50% of the assessed value of the property.  The landowner would calculate the allocated taxes as follows:

[ .75 (fraction of land) X .5 (fraction of assessment that applies to land) X

$10,000 (total property taxes) - $3,750 (allocated taxes) ]

The tax credit is 25% of the allocated taxes or $937.50

1. Remember, the credit only applies to the land protected by a conservation easement. If your assessor can't or won't provide you the information you need to allocate the taxes the law asks only that you employ a reasonable method to allocate the taxes (see NYS tax form: IT-242 and CT- 242 and accompanying instructions).
2. The landowner claims the CETC when filing his or her state income tax returns:

• Individual landowners file the new Form IT-242 with their personal NYS income tax retrurns: IT-201 for NY residents and IT-203 for nonresidents and part-year residents.
• Estates and trusts file Form IT-242 with Form It-205 to show each beneficiary's share of the credit.
• Partnerships file Form IT-242 with Form IT-204, showing the total amount of the credit.
• Corporations file Form CT-242 with Form CT-3 or CT-3-A/

FOR FURTHER INFORMATION?

Contact the RLT Office (518-659-LAND (5263)) OR the Land Trust Alliance (518-587- 0774).

IMPORTANT NOTE:

The information about the New York State Conservation Easement Tax Credit contained in this document is furnished as a tool to assist qualified landowners. It is provided with the understanding that the Rensselaer Land Trust or the Land Trust Alliance is not engaged in rendering legal, accounting, tax or other counsel.  If legal advice or other expert assistance is required, the services of a competent professional should be sought. This document is not a substitute for legal, accounting, or tax advice and should not be relied on as such.

A NOTE OF THANKS:

The RLT is grateful to the LTA for providing guidance with this new State tax incentive program.