Urbanization of our country’s natural habitats is a phenomenon that has been going on for decades and is still rampant today. The protection and preservation of nature versus the urbanization of land is a frequently and passionately debated topic. This argument is often borne through the desire for profits. Due to this conundrum, many states have offered incentives to landowners to keep their land undeveloped, and Virginia happens to be one of those states. This preservation credit provides landowners a tax credit to voluntarily limit future development on their land and conserve integral cultural, scenic, and historic resources. In 1999, the Virginia General Assembly enacted this Virginia Land Preservation Tax Credit (LPTC). Since 2000, the Virginia Land Preservation Tax Credit has protected over one million acres from urban sprawl.
Virginia LPTC Basics
The Virginia LPTC provides taxpayers a tax credit when they donate land located in Virginia or enter a conservation easement. The donation must be made to a qualified charity that is a public or private conservation agency. In addition, the agency must be eligible to hold such land for the purpose of open space, natural resource, agricultural use, forest use, biodiversity conservation of land, or agricultural watershed and/or historic preservation.
The credit that can be claimed is 40% of the fair market value of the donated land or preservation easement. The fair market value appraisal must be substantiated and prepared by a qualified appraiser. The credit that can be used by each taxpayer must not exceed $20,000 per person every year. In addition, any portion of the credit that has not been used can be carried forward for a maximum of 10 consecutive taxable years, following the origination of the tax credit. If the taxpayer is unable to utilize the credit, it is transferable either during the taxpayer’s life or at death.
The amount of tax credits that can be issued in a calendar year is capped at $75 million.
How to Apply
For applications for donations or easements recorded after January 1, 2020, you must apply to the Virginia Department of Taxation by December 31 of the 2nd year following the year the donation/easement was recorded. If the request is over $1 million, the application must also be verified by the Department of Conservation and Recreation, and it is advised that the application be submitted at least days before the annual return due date that the credit is being requested on. It is important to get this application in early so there is no issue with processing.
Applications must include the following:
- Form LPC-1, its schedules, and attachments
- A copy of the recorded deed of donation
- A copy of the completed and signed IRS Form 8283
- A copy of the full appraisal
- A signed statement or notarized affidavit from the appraiser
The main portion of the application is the Form LPC-1, which is the actual application for the credit. To avoid delays, the LPC-1 should be submitted within 90 days following the donation/easement. If it is not filed within those 90 days, it should at least be filed within 90 days before you file the annual tax return you are claiming the credit on.
Upon receipt of the completed Form LPC-1, the Virginia Department of Taxation will provide a letter of acknowledgement to the credit holder to acknowledge the credit and fees. It is important to note that this does not necessarily mean the amount of the credit has been approved. There will be a subsequent review and audit by the Department of Conservation and Recreation, and the credit could end up being disallowed.
New Changes Effective July 1, 2023
The deadline for filing an application for the LPTC made on or after January 1, 2017, was extended. This deadline extension is for any number of days past 90 during which the application is being reviewed for verification of conservation value by the Department of Conservation and Recreation. The excess days for review will be added onto the deadline for the final application. This extension will go into effect provided that the application under review is otherwise complete at the time of the original filing deadline.
- https://www.dcr.virginia.gov/land-conservation/lp-taxcredit#:~:text=The%20Land%20Preservation%20Tax%20Credit,up%20to%20%2420%2C000%20per%20year. (Virginia Department of Conservation and Recreation)
- https:wtax.virginia.gov/land-preservation-tax-credit (Virginia Department of Taxation)
- https://checkpoint.riag.com/app/view/previewDocNew?feature=tstate&lastCpReqId=4b303&preview=y&tabLoc=240&tabPg=41&DocID=id2b009374de941bcef23a8ebf9e01d63&SrcDocId=T0SLEXANNW%3A53256.1-1&text=%C2%B6%2011%2C328 (Checkpoint)
- https://www.pecva.org/resources/publications/piedmont-view/virginias-land-preservation-tax-credit-hits-a-milestone/ (Piedmont Environmental Council)