[Congressional Record Volume 144, Number 105 (Thursday, July 30, 1998)]
[Senate]
[Pages S9434-S9435]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS:
  S. 2376. A bill to amend the Internal Revenue Code of 1986 to provide 
tax incentives for land sales for conservation purposes; to the 
Committee on Finance.


              the conservation tax incentives act of 1998

 Mr. JEFFORDS. Mr. President, today, I am introducing the 
Conservation Tax Incentives Act of 1998, a bill that will result in a 
reduction in the capital gains tax for landowners who sell property for 
conservation purposes. This bill creates a new incentive for private, 
voluntary land protection. This legislation is a cost-effective non-
regulatory, market-based approach to conservation, and I urge my 
colleagues to join me in support of it.
  The tax code's charitable contribution deduction currently provides 
an incentive to taxpayers who give land away for conservation purposes. 
That is, we already have a tax incentive to encourage people to donate 
land or conservation easements to government agencies like the Fish and 
Wildlife Service or to citizens' groups like the Vermont Land Trust. 
This incentive has been instrumental in the conservation of 
environmentally significant land across the country.
  Not all land worth preserving, however, is owned by people who can 
afford to give it away. For many landowners, their land is their 
primary financial asset, and they cannot afford to donate it for 
conservation purposes. While they might like to see their land 
preserved in its underdeveloped state, the tax code's incentive for 
donations is of no help.
  The Conservation Tax Incentives Act will provide a new tax incentive 
for sales of land for conservation by reducing the amount of income 
that landowners would ordinarily have to report--and pay tax on--when 
they sell their land. The bill provides that when land is sold for 
conservation purposes, only one half of any gain will be included in 
income. The other half can be excluded from income, and the effect of 
this exclusion is to cut in half the capital gains tax the seller would 
otherwise have to pay. The bill will apply to land and to partial 
interests in land and water.
  It will enable landowners to permanently protect a property's 
environmental value without forgoing the financial security it 
provides. The bill's benefits are available to landowners who sell land 
either to a government agency or to a qualified conservation nonprofit 
organization, as long as the land will be used for such conservation 
purposes as protection of fish, wildlife or plant habitat, or as open 
space for agriculture, forestry, outdoor recreation or scenic beauty.
  Land is being lost to development and commercial use at an alarming 
rate. By Department of Agriculture estimates, more than four square 
miles of farmland are lost to development every day, often with 
devastating effects on the habitat wildlife need to thrive. Without 
additional incentives for conservation, we will continue to lose 
ecologically valuable land.

  A real-life example from my home state illustrates the need for this 
bill. A few years ago, in an area of Vermont known as the Northeast 
Kingdom, a large well-managed forested property came on the market. The 
land had appreciated greatly over the years and was very valuable 
commercially. With more than 3,000 acres of mountains, forests, and 
ponds, with hiking trails, towering cliffs, scenic views and habitat 
for many wildlife species, the property was very valuable 
environmentally. Indeed, the State of Vermont was anxious to acquire it 
and preserve it for traditional agricultural uses and habitat 
conservation.
  After the property had been on the market for a few weeks, the seller 
was contacted by an out-of-state buyer who planned to sell the timber 
on the land and to dispose of the rest of the property for development. 
After learning of this, the State quickly moved to obtain appraisals 
and a legislative appropriation in preparation for a possible purchase 
of the land by the State. Subsequently, the State and The Nature 
Conservancy made a series of purchase offers to the landowner. The out-
of-state buyer however, prevailed upon the landowner to accept his 
offer. Local newspaper headlines read, ``State of Vermont Loses Out On 
Northeast Kingdom Land Deal.'' The price accepted by the landowner was 
only slightly higher than the amount the State had offered. Had the 
bill I'm introducing today been on the books, the lower offer by the 
State may well have been as attractive--perhaps more so--than the 
amount offered by the developer.
  This bill provides an incentive-based means for accomplishing 
conservation in the public interest. It helps tax dollars accomplish 
more, allowing public and charitable conservation funds to go to 
higher-priority conservation projects. Preliminary estimates indicate 
that with the benefits of this bill, nine percent more land could be 
acquired, with no increase in the amount governments currently spend 
for conservation land acquisition. At a time when little money is 
available for conservation, it is important that we

[[Page S9435]]

stretch as far as possible the dollars that are available.
  State and local governments will be important beneficiaries of this 
bill. Many local communities have voted in favor of raising taxes to 
finance bond initiatives to acquire land for conservation. My bill will 
help stretch these bond proceeds so that they can go further in 
improving the conservation results for local communities. In addition, 
because the bill applies to sales to publicly-supported national, 
regional, State and local citizen conservation groups, its provisions 
will strengthen private, voluntary work to save places important to the 
quality of life in communities across the country. Private fundraising 
efforts for land conservation will be enhanced by this bill, as funds 
will be able to conserve more, or more valuable, land.
  Let me provide an example to show how I intend the bill to work. 
Let's suppose that in 1952 a young couple purchased a house and a tract 
of adjoining land, which they have maintained as open land. Recently, 
the county where they lived passed a bond initiative to buy land for 
open space, as county residents wanted to protect the quality of their 
life from rampant development and uncontrolled sprawl. Let's further 
assume that the couple, now contemplating retirement, is considering 
competing offers for their land, one from a developer, the other from 
the county, which will preserve the land in furtherance of its open-
space goals. Originally purchased for $25,000, the land is now worth 
$250,000 on the open market. If they sell the land to the developer for 
its fair market value, the couple would realize a gain of $225,000 
($250,000 sales price minus $25,000 costs), owe tax of $45,000 (at a 
rate of 20% on the $225,000 gain), and thus net $205,000 after tax.

  Under my bill, if the couple sold the land for conservation purposes, 
they could exclude from income one half of any gain they realized upon 
the sale. This means they would pay a lower capital gains tax; 
consequently, they would be in a position to accept a lower offer from 
a local government or a conservation organization, yet still end up 
with more money in their pockets than they would have had if they had 
accepted the developer's offer. Continuing with the example from the 
preceding paragraph, let's assume the couple sold the property to the 
county, for the purpose of conservation, at a price of $240,000. They 
would realize a gain of $215,000 ($240,000 sales price minus $25,000 
cost). Under my bill, only half of this gain $107,500, would be 
includible in income. The couple would pay $21,500 in capital gains tax 
(at a rate of 20% on the $107,500 gain includible in income) and thus 
net $218,500 ($240,000 sales price minus $21,500 tax). Despite having 
accepted a sales price $10,000 below the developer's offer, the couple 
will keep $13,000 more than they would have kept if they had accepted 
his offer.
  The end result is a win both for the landowners, who end up with more 
money in their pocket than they would have had after a sale to an 
outsider, and for the local community, which is able to preserve the 
land at a lower price. This example illustrates how the exclusion from 
income will be especially beneficial to middle-income, ``land rich/cash 
poor'' landowners who can't avail themselves of the tax benefits 
available to those who can afford to donate land.
  As this bill also applies to partial interests in land, the exclusion 
from income--and the resulting reduction in capital gains tax--will, in 
certain instances, also be available to landowners selling partial 
interests in their land for conservation purposes. A farmer could, for 
example, sell a conservation easement, continuing to remain on and farm 
his land, yet still be able to take advantage of the provisions in this 
bill. The conservation easement must meet the tax code's requirements 
i.e., it must serve a conservation purpose, such as the protection of 
fish or wildlife habitat or the preservation of open space (including 
farmland and forest land).
  There are some things this bill does not do. It does not impose new 
regulations or controls on people who own environmentally-sensitive 
land. It does not compel anyone to do anything; it is entirely 
voluntary. Nor will it increase government spending for land 
conservation. In fact, the effect of this bill will be to allow better 
investment of tax and charitable dollars used for land conservation.
  The estimated cost of this bill is just $50 million annually. This 
modest cost, however, does not take into account the value of the land 
conserved. It is estimated that for every dollar foregone by the 
Federal treasury, $1.76 in land will be permanently preserved.
  I urge all my colleagues to join me in support of the Conservation 
Tax Incentives Act of 1998.
                                 ______