Information for Sellers
What are conservation easements?
Conservation easements are agreements between landowners and a qualifying organization that restrict development of real property. These documents vary and are unique for each landowner. They are used to preserve land in perpetuity and they are designed specifically to protect the conservation values of a property, such as wildlife habitat, agricultural lands, outdoor recreation areas for the public, scenic vistas or historic lands or structures.
What are conservation easement tax credits?
Donors of either land or a conservation easement are eligible for conservation tax credits under New Mexico law. You can use these conservation tax credits against your personal, corporate, or fiduciary income tax liability imposed by either the Income Tax Act or the Corporate Income and Franchise Act. Conservation tax credits may be used by the donor over a 20 year period and/or transferred to other New Mexico taxpayers.
What is the maximum credit amount I can receive for my donation?
As of 2008, donors of either land or conservation easements can receive tax credits at the rate of 50% of their donation value. For example, a $400,000 donation will yield $200,000 in state income tax credits. The maximum credit that a landowner can earn in one year is $250,000 (based on a $500,000 donation).
How do I know the value of my donation?
The value of a conservation tax credit is based on the appraised value of either donated land or conservation easement. For conservation easement appraisals, a qualified appraiser will determine how much your land value has decreased as a result of placing conservation easement restrictions on your property. The appraiser will consider the value of the property before the conservation easement restrictions and the value after the restrictions. For example, assume you own a property that could be sold for $1,000,000 today. If you placed a conservation easement on your property that limited its use to agriculture with one house, its value today might only be $600,000. In this case, you have reduced the value of your property by $400,000 by restricting its use through a conservation easement and you have $400,000 in donation value.
How can conservation easement tax credits be sold?
New Mexico law provides that donors of either land or a conservation easement may transfer their tax credits to other New Mexico taxpayers. You must sell your credits through a qualified intermediary such as Tax Credit Connection, Inc.
What are the benefits of selling a credit?
Donors of either land or conservation easements may sell their credits and receive cash payments for their credits. Even with a discount on the credit amount, this will often be more favorable as it could take the donor many years to use his/her credits. Donors may sell all of their credits or keep some for themselves.
How much money will I receive for selling my tax credits?
Sellers will receive 82% of the value of their tax credits in 2015. For example, if a Seller wants to sell $200,000 worth of tax credits, that Seller will receive $164,000 in cash.
Who can sell a credit?
To be eligible to conservation income tax credits, you must donate either land or a conservation easement to a qualified conservation organization in the state of New Mexico. You must apply and obtained approval from the Department of Energy, Minerals, Natural Resources (EMNRD) because the Department must approve all conservation tax credits issued by the state.
What is the smallest tax credit I can buy or sell?
Tax Credit Connection, Inc. will assist with transfers of credits in minimum values of $10,000.
When can I sell a credit?
As soon as you receive a certificate of eligibility from EMNRD a qualified intermediary such as Tax Credit Connection, Inc. can help sell your tax credits. Before selling your credits, Tax Credit Connection, Inc. will review all of your documents to make sure everything is complete and accurate. In order for buyers to use your credits against their 2014 taxes, you will need to sell your credits by December 31, 2014. Regardless of when you sell your credits, you will still receive the full 82%, so there’s no reason to wait!
Are there requirements for the conservation easement donation to qualify?
To qualify, a conservation easement donation must meet certain federal and New Mexico requirements. The conservation easement must be donated to a qualifying 501(c)(3) non-profit entity or governmental agency. The conservation easement must be perpetual and meet certain other standards. A qualified appraisal detailing the reduction in value due to the conservation easement is also required.
In addition, EMNRD must approve all conservation income tax credits issued in the state through a two step application process. Once you have completed the application process and are approved to receive tax credits, you will obtain a certificate of eligibility from EMNRD.
What if my land is owned by an entity?
For members of pass through entities, the credit may be claimed by the entity or the members, managers, partners, shareholders or beneficiaries. These credits are 100% transferrable, but may only be sold once.
How do I register?
Simply download the appropriate forms from our registration page, fill them out and return to Tax Credit Connection, Inc.