Frequently Asked Questions
Consult General Statues 105-130.34 and 105-151.12 for the specific requirements of the Conservation Tax Credit Program.
For answers to additional questions about the Conservation Tax Credit certification process administered by the N.C. Department of Environment and Natural Resources call (919) 707-8110.
For answers to additional questions about the Conservation Tax Credit filing process administered by the N.C. Department of Revenue call: (877) 252-3052 for individual income taxes or for corporate income taxes.
- What are the tax advantages of a donation of interests in real property for conservation purposes?
For federal tax purposes, the donation may be claimed as a charitable contribution. For state tax purposes, the donation counts as a charitable contribution, and can also be claimed as Conservation Tax Credit. Other tax advantages may also result, including reduction or avoidance of capital gains, estate, and property taxes.
- How does a tax credit compare with the charitable contribution allowed for other types of gifts?
The value of a charitable contribution is subtracted from the filer's taxable income before the calculation of taxes owed, while the tax credit is subtracted directly from taxes owed.
- How does the N.C. Department of Environment and Natural Resources determine that a conservation benefit will result from a donation of interests in real property?
For conservation easements, the distribution of rights are reviewed to determine whether conservation benefits can be certified. In the case of a fee simple donation, the determination is simplified if the deed specifies that the transaction is being undertaken in expectation of qualifying the grantor/donor for a tax credit under the Conservation Tax Credit statutes, and noting one or more of the required conservation purposes to describe the intended conservation use.
- Do bargain sales of interests in real property for conservation tax purposes qualify for a Conservation Tax Credit?
The donated value that results from a bargain sale is eligible for application to a Conservation Tax Credit.
- Will a donation of interests in real property for conservation purposes made through a charitable remainder trust (CRT) qualify for a Conservation Tax Credit?
A donation made through an irrevocable CRT will be eligible for a Conservation Tax Credit in the year of its creation. A donation through a revokable CRT will not be eligible until the interests in real property are transferred to the donee.
- Would a golf course donation be eligible for the conservation tax credit?
The Attorney General’s office has provided an informal opinion that the use of land for golf courses is not entitled to certification of a public benefit under either N.C.G.S §105-130.34 or N.C.G.S. §105-151.12. This relates to tees, fairways, traps, greens, areas for in-bounds play, cart paths, and any other areas modified for golf course use.
- When should the real property appraisal required to support a claim for Conservation Tax Credit be completed?
The N.C. Department of Revenue advises that the appraisal must be conducted by a licensed appraiser at a time that would insure that it reasonably estimates the fair market value of the gift at the time of the donation. Since the same appraisal might be used for federal income tax purposes, IRS regulations should also be consulted.
- How is the value of a conservation easement determined?
Easements are typically valued by a before-and-after appraisal. That is, the value of the real property before the easement, minus the value after the easement, equals the value of the easement.
- Can a Conservation Tax Credit be received for a donation made for a specific length of time, such as 20 years or 50 years?
The N.C. Department of Revenue advises that to be eligible for the Conservation Tax Credit, donations of interests in real property must be made in perpetuity.
- Can reversion interests be included in a gift transaction and still qualify for a Conservation Tax Credit?
When the donor has reason to include a reversion interest, it must be supportive of the requirement that conservation benefits result from the transaction. Therefore the N.C. Department of Environment and Natural Resources cannot certify the conservation benefits of a real property donation unless the potential reversion interest recipients are "qualified recipients," as required by general statute.
- Is land or interests in land donated for conservation purposes under the Conservation Tax Credit Program protected from condemnation that would lead to conversion to non-conservation uses?
No. The Conservation Tax Credit statutes provide no protection in addition to those that may already apply to any specific conservation site by virtue of other laws.
- Would a smoke easement be eligible for Conservation Tax Credit?
Prescribed fire is a public benefit for a number of reasons, including safety through hazard reduction. The greatest interest to the Conservation Tax Credit Program is in providing the benefit to habitat conservation. Smoke easements demonstrate an interest in, or indicate the landowner’s commitment to, habitat conservation. Agreements, or the terms of such an agreement, would be encouraged in all conservation easements, especially those near conservation lands. Check with the North Carolina Prescribed Fire Council for examples of smoke easements.
- Would a project that received approval -- or even some limited funding for transaction costs -- from another program be eligible for tax credit?
The project may be eligible, but it should be noted that approval and/or funding by other government agencies or funding sources does NOT guarantee DENR certification of public benefit for tax credit.
- Can a home site be reserved within the conservation area and still get the tax credit?
This is a difficult question, but the reviewers have worked to identify an approach to take in this regard. Below is the general rule for a reserved home site – in order of preference:
- Prefer to exclude the reserved home site from the conservation area.
- In the cases where there is some practicality for a home site to be within the conservation area, and the home site is reserved in the corresponding easement, reviewers prefer that that the location be specified. Reviewers will examine location, footprint/envelope, impervious surface, building square foot/height, as well as reservations for access road and utilities and other associated retained rights. Prescribed caps or limits will help reviewers evaluate impact on conservation values. Reviewers would expect impact to be minimal, and the recipient (easement holder) to have right of review before construction.
- Easements where a home site is reserved in the conservation area, but the location is not identified as part of the conservation easement will be evaluated as if the future home site will be located in the least ideal location (e.g. prime farm fields, within stream buffers, on rare plant populations, or situated to maximize fragmentation of wildlife habitat).
Some programs have a rule of thumb for the number of reserved home sites (e.g. for USDA Farm and Ranchland Protection Program, one home site per the average size farm in the area, which usually translates to one home site per 50-100 acres). Of course, fragmentation is a great concern for wildlife habitat, so home sites will be carefully evaluated in non-farmland projects.