§ 58.1-510. Purpose.
The purpose of this act is to supplement existing land conservation programs
to further encourage the preservation and sustainability of Virginia's unique natural
resources, wildlife habitats, open spaces and forested resources.
(1999, cc. 968, 983.)
§ 58.1-511. Definitions.
For the purposes of the article:
"Interest in real property" means any right in real property,
including access thereto or improvements thereon, or water, including but not
limited to an open-space easement or conservation easement, provided such
interest complies with the requirements of the U.S. Internal Revenue Code § 170
(h), partial interest, mineral right, remainder or future interest, or other
interest or right in real property.
"Land" or "lands" means real property, with or without
improvements thereon; rights-of-way, water and riparian rights; easements;
privileges and all other rights or interests of any land or description in,
relating to or connected with real property.
"Public or Private Conservation Agency" means any Virginia
governmental body, or any private not-for-profit charitable corporation or
trust authorized to do business in the Commonwealth and organized and operated
for natural resources, land conservation or historic preservation purposes, and
having tax-exempt status as a public charity under the U.S. Internal Revenue
Code of 1986, as amended, and having the power to acquire, hold and maintain
land and/or interests in land for such purposes.
(1999, cc. 968, 983; 2005, c. 940.)
§ 58.1-512. Land preservation tax credits for individuals and corporations.
A. For taxable years beginning on or after January 1, 2000, there shall be
allowed as a credit against the tax liability imposed by §§ 58.1-320 and
58.1-400, an amount equal to 50% of the fair market value of any land or
interest in land located in Virginia which is conveyed for the purpose of
agricultural and forestal use, open space, natural resource, and/or biodiversity
conservation, or land, agricultural, watershed and/or historic preservation, as
an unconditional donation by the landowner/taxpayer to a public or private
conservation agency eligible to hold such land and interests therein for
conservation or preservation purposes. For such conveyances made on or after
January 1, 2007, the tax credit shall be 40% of the fair market value of the
land or interest in land so conveyed.
B. The fair market value of qualified donations made under this section
shall be determined in accordance with § 58.1-512.1 and substantiated by a
"qualified appraisal" prepared by a "qualified appraiser,"
as those terms are defined under applicable federal law and regulations
governing charitable contributions. The value of the donated interest in land
that qualifies for credit under this section, as determined according to
appropriate federal law and regulations, shall be subject to the limits
established by United States Internal Revenue Code § 170(e). In order to
qualify for a tax credit under this section, the qualified appraisal shall be
signed by the qualified appraiser, who must be licensed in the Commonwealth of
Virginia as provided in § 54.1-2011, and a copy of the appraisal shall be
submitted to the Department. In the event that any appraiser falsely or
fraudulently overstates the value of the contributed property in an appraisal
that the appraiser has signed, the Department may disallow further appraisals
signed by the appraiser and shall refer the appraiser to the Real Estate
Appraiser Board for appropriate disciplinary action pursuant to § 54.1-2013,
which may include, but need not be limited to, revocation of the appraiser's
license. Any appraisal that, upon audit by the Department, is determined to be
false or fraudulent, may be disregarded by the Department in determining the
fair market value of the property and the amount of tax credit to be allowed
under this section.
C. 1. The amount of the credit that may be claimed by each taxpayer,
including credit claimed by applying unused credits as provided under
subsection C of § 58.1-513, shall not exceed $50,000 for 2000 taxable years,
$75,000 for 2001 taxable years, $100,000 for each of 2002 through 2008 taxable
years, $50,000 for each of 2009 and 2010 taxable years, and $100,000 for 2011
taxable years and for each taxable year thereafter. In addition, for each
taxpayer, in any one taxable year the credit used may not exceed the amount of
individual, fiduciary or corporate income tax otherwise due. Any portion of the
credit that is unused in any one taxable year may be carried over for a maximum
of 10 consecutive taxable years following the taxable year in which the credit
originated until fully expended. For taxpayers affected by the credit reduction
for taxable years 2009 and 2010, any portion of the credit that is unused in
any one taxable year may be carried over for a maximum of 12 consecutive
taxable years following the taxable year in which the credit originated until
fully expended.
2. Qualified donations shall include the conveyance of a fee interest in
real property or the conveyance in perpetuity of a less-than-fee interest in
real property, such as a conservation restriction, preservation restriction,
agricultural preservation restriction, or watershed preservation restriction,
provided that such less-than-fee interest qualifies as a charitable deduction
under § 170(h) of the United States Internal Revenue Code of 1986, as amended.
The Department of Conservation and Recreation shall compile an annual report
on qualified donations of less-than-fee interests accepted by any public or
private conservation agency in the respective calendar year and shall submit
the report by December 1 of each year to the Chairmen of the House Committee on
Appropriations, House Committee on Finance, and the Senate Committee on
Finance. Qualified donations shall not include the conveyance of a fee
interest, or a less-than-fee interest, in real property by a charitable
organization that (i) meets the definition of "holder" in § 10.1-1009
and (ii) holds one or more conservation easements.
3. Any fee interest, or a less-than-fee interest, in real property that has
been dedicated as open space within, or as part of, a residential subdivision
or any other type of residential or commercial development; dedicated as open
space in, or as part of, any real estate development plan; or dedicated for the
purpose of fulfilling density requirements to obtain approvals for zoning,
subdivision, site plan, or building permits shall not be a qualified donation
under this article.
4. Qualified donations shall be eligible for the tax credit herein described
if such donations are made to the Commonwealth of Virginia, an instrumentality
thereof, or a charitable organization described in § 501(c)(3) of the United
States Internal Revenue Code of 1986, as amended, if such charitable
organization (i) meets the requirements of § 509(a)(2) or (ii) meets the
requirements of § 509(a)(3) and is controlled by an organization described in §
509(a)(2).
5. The preservation, agricultural preservation, historic preservation or
similar use and purpose of such property shall be assured in perpetuity. In the
case of conveyances of a fee interest to a charitable organization that is a
"holder" as defined in § 10.1-1009, the credit shall not be allowed
until the charitable organization agrees that subsequent conveyances of the fee
interest in the property will be (i) subject to a previous conveyance in
perpetuity of a conservation easement, as that term is defined in § 10.1-1009,
or subject to the conveyance in perpetuity of an open-space easement, as that
term is defined in § 10.1-1700, or (ii) conveyed to the Commonwealth of
Virginia or to a federal conservation agency. No credit shall be allowed with
respect to any subsequent conveyances by the charitable organization.
D. The issuance of tax credits under this article for donations made on and
after January 1, 2007, shall be in accordance with procedures and deadlines
established by the Department and shall be administered under the following
conditions:
1. The taxpayer shall apply for a credit after completing the donation by
submitting a form or forms prescribed by the Department in consultation with
the Department of Conservation and Recreation. 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. The
application shall include, but not be limited to:
a. A description of the conservation purpose or purposes being served by the
donation;
b. The fair market value of land being donated in the absence of any
easement or other restriction;
c. The public benefit derived from the donation;
d. The extent to which water quality best management practices will be
implemented on the property; and
e. Whether the property is fully or partially forested and a forest
management plan is included in the terms of the donation.
2. Applications for otherwise qualified donations of a less-than-fee
interest shall be accompanied by an affidavit describing how the donated
interest in land meets the requirements of § 170(h) of the United States
Internal Revenue Code of 1986, as amended, and the regulations adopted
thereunder. The application with accompanying affidavit shall be submitted to
the Department of Taxation, with a copy also provided to the Department of
Conservation and Recreation.
3. a. No credit in the amount of $1 million or more shall be issued with
respect to a donation unless the conservation value of the donation has been
verified by the Director of the Department of Conservation and Recreation,
based on the criteria adopted by the Virginia Land Conservation Foundation for
this purpose. Such criteria and subsequent amendments shall be exempt from the
Administrative Process Act (§ 2.2-4000 et seq.), but the Virginia Land
Conservation Foundation shall provide for adequate public participation,
including adequate notice and opportunity to provide comments on the proposed
criteria. The Director shall act on applications within 90 days of his receipt
of a complete application and shall notify the taxpayer and the Department of
Taxation of his action.
b. For purposes of determining whether a credit requires verification of the
conservation value, the credits allowed under this article with respect to
donations of any other portion of a recorded parcel of land within the
preceding 11 years shall be aggregated with the credit claimed for the current
donation. This subdivision shall not apply if (i) all owners of the parcel who
have been allowed credit for a qualified donation are not affiliated with the
person or entity seeking credit for the current donation of a different portion
of the parcel and (ii) in the case of an individual seeking credit, the
individual has not previously made a qualified donation for any portion of the
parcel and is not an immediate family member of any such owners.
4. a. Tax credits shall be issued on a calendar year basis, and in no case
shall the Department issue more than the maximum allowed for the calendar year.
For donations made in calendar year 2007 the maximum allowed is $100 million.
The credits shall be issued in the order that each complete application is received.
If more than one application is received at the same time, the credits with
respect to those applications shall be issued in the order that the conveyances
were recorded in the appropriate circuit court of the Commonwealth. In the
event that a credit requires verification of the conservation value by the
Department of Conservation and Recreation and such verification has not been
received at the time the maximum $100 million allowed is reached for the
calendar year of the donation, such credit shall not be issued for that
calendar year but shall be issued in the calendar year that the conservation
value of the credit is verified by the Department of Conservation and
Recreation.
b. Beginning with calendar year 2008, the $100 million amount contained in
subdivision 4a shall be increased by an amount equal to $100 million multiplied
by the percentage by which the consumer price index for all-urban consumers
published by the United States Department of Labor (CPI-U) for the 12-month
period ending August 31 of the preceding year exceeds the CPI-U for the
12-month period ending August 31, 2006.
5. a. Any taxpayer that has been issued a tax credit by the Department shall
be allowed to use such credit for his or its taxable year that begins in the
calendar year for which such credit was issued and for succeeding taxable years
in accordance with the 10 consecutive taxable year carryforward provisions of
this article, except for any taxpayer affected by the credit limitation for
taxable years 2009 and 2010. Such a taxpayer shall be allowed to use such
credit for his or its taxable year that begins in the calendar year for which
such credit was issued and for succeeding taxable years in accordance with the
12 consecutive taxable year carryforward provisions of this article.
b. Any taxpayer to whom a credit has been transferred may use such credit
for the taxable year in which the transfer occurred and unused amounts may be
carried forward to succeeding taxable years, but in no event may such
transferred credit be used more than 11 years after it was originally issued by
the Department or in any taxable year of such taxpayer that ended prior to the
date of transfer, except for any taxpayer affected by the credit limitation for
taxable years 2009 and 2010. Such a taxpayer may use such credit for the
taxable year in which the transfer occurred and unused amounts may be carried
forward to succeeding taxable years, but in no event may such transferred
credit be used more than 13 years after it was originally issued by the
Department or in any taxable year of such taxpayer that ended prior to the date
of transfer.
6. Neither the verification of conservation value by the Department of
Conservation and Recreation nor the issuance of a credit by the Department of
Taxation shall in any way be construed or interpreted as prohibiting the
Department of Taxation or the Tax Commissioner from auditing any credit claimed
pursuant to the provisions of this article or from assessing tax relating to
the claiming of any credit under this article.
E. In any review or appeal before the Tax Commissioner or in any court in
the Commonwealth the burden of proof shall be on the taxpayer to show that the
fair market value and conservation value at the time of the qualified donation
is consistent with this section and that all requirements of this article have
been satisfied.
(1999, cc. 968, 983; 2005, c. 940; 2006, Sp. Sess. I, cc. 4, 5; 2009, cc.
12, 510.)
§ 58.1-512.1. Determination of fair market value of donation.
A. Each appraisal estimating the value of any donation upon which credits
are to be based shall employ proper methodology and be appropriately supported
by market evidence. 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). The Department shall update the guidelines as necessary as
determined by the Tax Commissioner. Such guidelines shall be exempt from the
Administrative Process Act (§ 2.2-4000 et seq.) but the Department shall
provide for adequate public participation, including adequate notice and
opportunity to provide comments on the proposed guidelines.
B. For purposes of any appraisal for a conveyance under the provisions of
this article, the value for any structures or other improvements to land shall
be determined in accordance with law. 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.
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; (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. Any appraisal submitted in support of an application for a credit
under this article shall include an affidavit by the appraiser that to the best
of his knowledge and belief the valuation complies with this section and shall
set forth in the affidavit or refer to the specific portion of the appraisal
setting forth the facts and basis for this knowledge and belief.
(2006, Sp. Sess. I, cc. 4, 5.)
§ 58.1-513. Limitations; transfer of credit; gain or loss from tax credit.
A. Any taxpayer claiming a tax credit under this article shall not claim a
credit under any similar Virginia law for costs related to the same project. To
the extent a credit is taken in accordance with this article, no subtraction
allowed for the gain on the sale of (i) land dedicated to open-space use or
(ii) an easement dedicated to open-space use under subsection C of § 58.1-322
shall be allowed for three years following the year in which the credit is
taken. Any building which serves as the basis, in whole or in part, of a tax
credit under this article shall not serve as the basis of the tax credit
allowed under § 58.1-339.2 for a period of five years following the donation on
which the credit is based; and any building which serves as the basis for the
tax credit allowed under § 58.1-339.2 shall not serve as the basis, in whole or
in part, for a tax credit under this article for a period of five years
following the completion of the rehabilitation project on which the credit is
based.
B. Any tax credits that arise under this article from the donation of land
or an interest in land made by a pass-through tax entity such as a trust,
estate, partnership, limited liability company or partnership, limited
partnership, subchapter S corporation or other fiduciary shall be used either
by such entity if it is the taxpayer on behalf of such entity or by the member,
manager, partner, shareholder or beneficiary, as the case may be, in proportion
to their interest in such entity in the event that income, deductions and tax
liability pass through such entity to such member, manager, partner,
shareholder or beneficiary or as set forth in the agreement of said entity.
Such tax credits shall not be claimed by both the entity and the member,
manager, partner, shareholder or beneficiary for the same donation.
C. 1. Any taxpayer holding a credit under this article may transfer unused
but otherwise allowable credit for use by another taxpayer on Virginia income
tax returns. A taxpayer who transfers any amount of credit under this article
shall file a notification of such transfer to the Department in accordance with
procedures and forms prescribed by the Tax Commissioner.
2. A fee of 2% of the value of the donated interest, or $10,000, whichever
is less, shall be imposed upon any transfer arising from the sale by any
taxpayer of credits under this article and upon the distribution of a portion
of credits under this article to a member, manager, partner, shareholder or
beneficiary pursuant to subsection B. Revenues generated by such fees shall be
used by the Department of Taxation and the Department of Conservation and
Recreation for implementation of this article.
D. To the extent included in and not otherwise subtracted from federal
adjusted gross income pursuant to § 58.1-322 or federal taxable income pursuant
to § 58.1-402, there shall be subtracted any amount of gain or income
recognized by a taxpayer on the application of a tax credit under this article
against a Virginia income tax liability.
E. The transfer of the credit and its application against a tax liability
shall not create gain or loss for the transferor or the transferee of such
credit.
F. A pass-through tax entity, such as a partnership, limited liability
company or Subchapter S corporation, may appoint a tax matters representative,
who shall be a general partner, member/manager or shareholder, and register
that representative with the Tax Commissioner. The Tax Commissioner shall be
entitled to deal with the tax matters representative as representative of the
taxpayers to whom credits have been allocated or transferred by the entity
under this article with respect to those credits. In the event a pass-through
tax entity allocates or transfers tax credits arising under this article to its
partners, members or shareholders and the allocated or transferred credits
shall be disallowed, in whole or in part, such that an assessment of additional
tax against a taxpayer shall be made, the Tax Commissioner shall first make
written demand for payment of any additional tax, together with interest and
penalties, from the tax matters representative. In the event such payment
demand is not satisfied, the Tax Commissioner shall proceed to collection
against the taxpayers in accordance with the provisions of Chapter 18 (§
58.1-1800 et seq.) of this title.
(1999, cc. 968, 983; 2002, c. 347; 2004, c. 635; 2005, c. 255; 2006, Sp.
Sess. I, cc. 4, 5.)