Presentation on theme: "Land Preservation Credit. 2 Virginia Department of Taxation Virginias Land Preservation Tax Credit Presented to: Conservation Partners LLC Appraiser Roundtable."— Presentation transcript:
Land Preservation Credit
2 Virginia Department of Taxation Virginias Land Preservation Tax Credit Presented to: Conservation Partners LLC Appraiser Roundtable Crozet, Virginia August 20, 2008 Presented By: Larry Durbin Assistant Tax Commissioner Virginia Department of Taxation
Donation History Data Tax Year# of Credits # of Acres Credit Requests ,953 $ 52,608, ,531 $ 62,067, ,059 $ 75,358, ,235 $140,444, ,914 $155,281, ,487 $242,316,354 * ,423 $100,000,000 * ,521 $ 17,949,252 Grand Total 1, ,123 $846,026,950 * Through July 2008
Large Donations (>$1,000,000) Data Tax Year# of Credits# of AcresCredit Requests ,634 $ 13,893, ,910 $ 21,205, ,173 $ 47,754, ,478 $ 84,608, ,648 $ 86,795, ,564 $122,372,820 * ,620 $ 28,255,400 * ,460 $ 10,499,477 Grand Total 15972,487 $415,385,148 * Through July 2008
5 Breakdown of Large Donations Data Appraised Value # of Credits # of Acres Credit Reqd $2.0M - $2.4M 35 10,314 $ 38,378,250 $2.5M - $3.6M 57 29,579 $ 83,871,490 $3.7M - $4.9M 22 10,029 $ 44,186,881 $5.0M-$10.0M 22 12,030 $ 78,849,804 >$10.0M 23 10,535 $170,098,723 Total ,487 $415,385,148
6 Breakdown of Large Donations Data contd Tax Year % of Credits % of Acres % of Credit Requested % 5% 26% % 8% 34% % 26% 63% % 25% 60% % 30% 56% % 27% 51% % 9% 28% % 17% 58%
7 Comparative Donation Data Type # Credits # Acres Appraised Value Fair Market/Acre Large Donation ,487 $ 845,997,735 $ 11,671 Small Donation 1, ,636 $ 905,030,795 $ 3,157 Grand Total 1, ,123 $1,751,028,530 $ 4,876
8 Comparative Donation Data Type # Credits # Acres Credits Reqd Credit Value/Acre Large Donation ,487 $ 415,385,148 $ 5,730 Small Donation 1, ,636 $ 430,641,802 $ 1,502 Grand Total 1, ,123 $ 846,026,950 $ 2,356
9 Transfer History Data Tax Year#of Credits # of Recipients Amt Transferred % of Total ,788 $ 51,121,412 82% ,845 $ 69,375,269 92% ,050 $122,889,373 88% ,371 $134,956,157 87% ,113 $213,349,130 88% * ,449 $ 62,465,975 62% * $ 4,189,991 23% Grand Total 1,346 14,686 $658,347,307 83% * Through July 2008
10 Statewide LPC CAP Tax Year CAP AMOUNT 2007 $ 100,000, $ 102,287,081
11 LPC Claimed on Returns Data Tax Year # of Returns Amount Claimed $ 6,462, $ 5,641, ,322 $ 32,319, ,815 $ 94,901, ,539 $ 114,343, ,511 $ 167,400, ,851 $ 81,897,219 Grand Total 23,938 $ 502,967,624 *Through July 2008
12 Easement Value Ratio Data Reduction % Range# of Donations Credit Requested $ 78,144, $326,392, $194,116, $148,967,006.
13 Where are donations being made? Number of Donations Locality # of Donations Acres Credit Value Fauquier ,083$104,271,730 Albemarle ,932$108,973,227 Loudoun ,230$143,763,872 Rockbridge ,183$ 19,595,771 Rappahannock 79 14,230$ 22,240,509 Clark 58 6,846$ 16,761,941 Augusta 55 9,151$ 8,642,752
14 Where are donations being made? Dollar Value Locality # of Donations Acres Credit Value Loudoun ,230$143,763,872 Albemarle ,932$108,973,227 Fauquier ,083$ 91,191,650 New Kent 2 2,688$ 24,706,836 Rappahannock 79 14,230$ 22,240,509 Spotsylvania 15 2,291$ 22,024,623 Rockbridge ,183$ 19,595,771 Orange 48 12,246$ 18,621,322 Fredericksburg 5 190$ 17,973,250 Bath 36 11,659$ 17,041,025 Clarke 58 6,846$ 16,761,941
15 Legislative Changes Changes Effective for 2007 Donations Credit is 40% of FMV of the donation. $100 million statewide cap on tax credits. Applications in excess of statewide cap are first in line for the following year.
16 Legislative Changes Changes Effective for 2007 Donations If credit is $1 million or more: Application must be filed with DCR and TAX. DCR must verify conservation value within 90 days. If the maximum $100 million cap is reached before the conservation value is verified by DCR, the credit shall be issued for the following calendar year.
17 Legislative Changes Changes Effective for 2007 Donations Charitable organizations can earn and transfer the credit unless they: Meet the definition of a holder as defined in Code Section and; Hold one or more conservation easements.
18 Legislative Changes Changes Effective for 2007 Donations Any transfer arising from a sale of a credit or distribution is subject to a fee of 2% of the FMV of the donation up to $10,000 per credit holder. This equates to 5% of the credit amount transferred.
19 Legislative Changes Code of Virginia § A The Department of Taxation shall establish and make publicly available guidelines that incorporate, as applicable (without limitation), requirements under § 170 (h) of the United States Internal Revenue Code of 1986, as amended, and the Uniform Standards of Professional Appraisal Practice (USPAP).
20 Legislative Changes Code of Virginia § B For any otherwise qualified donation of a less-than-fee interest under this article, however, no more than 25% of the total credit allowed shall be for reductions in value to any structures and other improvements to land.
21 Legislative Changes Code of Virginia § C The fair market value of any property with respect to a qualified donation shall not exceed the value for the highest and best use (i) that is consistent with existing zoning requirements; (ii) for which the property was adaptable and needed or likely to be needed in the reasonably near future in the immediate area in which the property is located.
22 Legislative Changes Code of Virginia § C (iii) that considers factors such as, by way of illustration and not limitation, slopes, flood plains, and soil conditions of the property; and (iv) for which existing roads serving the property are sufficient to support commercial or residential development in the event that is the highest and best use proposed for the property.
23 Legislative Changes Other changes: Carryover period extended from 5 to 10 years. Burden of proof is on taxpayer to show that the fair market value and conservation value at the time the qualified donation is consistent with this section and that all requirements of this article have been satisfied. Any building which serves as a basis for an LPC or a Historic Rehabilitation tax credit cannot serve as the basis for the other tax credit for 5 subsequent years.
24 Consolidated Group Ruling Number The amount of credit that may be claimed by a taxpayer shall not exceed….$100,000. Because the statute imposes the limitation on a per- taxpayer basis, not a per-return basis, it is clear that when more than one taxpayer is included in a return, then the separate limitations must be applied to each taxpayer. Each taxpayer must have earned or otherwise acquired credits claimed on the return.
25 Federal Donee Ruling Number Qualified donations shall be eligible for the tax credit if the donation is made to the Commonwealth of VA, or a charitable organization described in § 501 (c) (3) of the United States Internal Revenue Code of 1986 as amended Property to be assured in perpetuity. Donor must provide sufficient assurance that the purpose for which the conveyance is made, and the credit granted, will be preserved indefinitely.
26 Credit Requested by Taxpayer PD Under Va. Code § A, a Credit is allowed for certain donations and, effective for donations made on and after January 1, 2007, the Credit shall be 40% of the fair market value of the land or interest in land so conveyed. The Credit is not self executing, however. The taxpayer must apply for the Credit; but this does not mean that the taxpayer must apply for the entire allowable amount.
27 Credit Requested by Taxpayer – Cont. PD The law states, The taxpayer shall apply for a credit after completing the donation. If the application requests a credit of $1 million or more, then a copy of the application shall also be filed with the Department of Conservation and Recreation by the taxpayer. Va. Code § D 1. Therefore, the taxpayer must request a Credit amount $1 million or greater in order to be required to file the application with DCR and meet the requirements imposed by the agency.
28 Fees for PTEs A Pass-Through-Entity (PTE) may elect to pass all of the tax credit through to its partners or shareholders or retain the credit and transfer it at the entity level. If the PTE elects to transfer the credit at the entity level there will be a single $10,000 cap applied to the entity. If an entity elects this approach, they must include a letter (preferably on business letterhead) stating such with their LPC application. If the PTE elects to pass the credit to its members, the $10,000 cap will apply to the PTE and to each member if they transfer their credit.
Donations Credits will be issued by the tax year that the donation is recorded in until the statewide cap is met. Once the cap is met, credits will be issued for the next available year Credits cannot be transferred until TAX has issued a credit for the donation TAX cannot guarantee that any LPC-1 application received in December will be processed in time to make a current year transfer
30 Enforcement Litigation: Ware Creek Preserve, LLC, et al. v. Virginia Dept. of Taxation, et al., Circuit Court of New Kent County, Chancery No. CH Case is still proceeding through pre-trial stages
31 Additional Enforcement Tax has performed preliminary reviews on many donations and has contracted for independent appraisals on some. Assessments have been issued and some are being appealed.
32 IRS Activities IRS has reviewed Taxs LPC database IRS has initiated multiple cases in Virginia
33 LPC Review Criteria Uniform review criteria applied to all donations regardless of size Multiple review factors included Review factors are weighted to recognize the degree of variation Process recognizes existence of multiple factors Specific review/selection based on relevant information.
34 LPC Review Criteria Some easements will be reviewed by in-house and/or contract appraisers to: Identify Valuation Issues Verify USPAP Compliance Verify IRC §170(H) Conformity Determine if full appraisal is warranted Review for specific issues Allow specific review/selection based on known issues
35 LPC Fees Tax Year DCR TAX 2007* $ 90,000 $1,101, *$ 20,000 $ 22,500 Grand Total $1,234,027 * Through July 2008