Division of Legislative Services > Legislative Record > 2005

House and Senate Finance Land Conservation Tax Credit Subcommittee

November 10, 2005


The third meeting of the special subcommittee made up of members of the House and Senate Finance Committees which is studying the land conservation tax credit program was held in Richmond. After the meeting was called to order by Chairman Lee Ware and each of the subcommittee members introduced themselves, Becky Covey, one of the subcommittee staff, presented options for dealing with the concerns surrounding the tax credit program. Following this, there was some discussion among the members and Senator Watkins offered three drafts of legislation, each one addressing different issues, to be considered by the subcommittee. In the interest of time and to give the members an opportunity to review the legislative drafts and options, another meeting was scheduled for December and the meeting adjourned.


The presentation began with a brief review of the concerns surrounding the land conservation tax credit program. These included the rising cost of the program, the problem with appraisals, and the marketing of the tax credits. The following policy questions were raised:

  • Should the Commonwealth's financial exposure be open-ended?
  • Should the program provide cash-flow for developers or development-related activities?
  • Should the program provide cash-flow for tax-exempt entities whose mission is preservation?
  • Are all open-space objectives equally worthy of state support?
  • Should non-developable land or land with limited development potential be viewed differently?
  • Should multiple benefits be provided for the same property, i.e., grants and more than one type of tax preference?

In addition to leaving the program alone or repealing it, four other options for dealing with the program were outlined. Options under consideration are to:

  • Retain current structure and strengthen enforcement.
  • Retain transferability but apply cap to each donation rather than to each taxpayer.
  • Limit transferability of the tax credit.
  • Establish a cap on annual financial exposure.

Finally, several generic changes, any or all of which could be undertaken on their own or included with the four options, are to:

  • Preclude the tax credit for a specific property that has received an appropriation grant.
  • Deny tax-exempt entities access to tax credits altogether, or deny access only to those tax-exempt entities whose mission is preservation of land and/or structures.
  • Clarify intent of existing Code of Virginia language disallowing a double credit;
  • Direct some portion of annual savings from any changes to a Chesapeake Bay Trust Fund for clean-up activities.
  • Either disallow subdivision method of appraisal or, if method is allowed, require pre-certification of value by the Department of Taxation. Value recognized would be based on the average of two independent appraisals, if the donor's value exceeds this amount by a specified percentage.


Next followed discussion among the subcommittee members, and they agreed that conserving open-space land is something the state should continue to do. However, several members expressed concerns about the lack of any kind of cap on the amount of the credit allowed, the questionable appraisals, and the possibility of having a pre-credit certification process in order to ensure that the land being conserved is appropriate and represents a responsible expenditure of public funds in the form of a tax credit.

Staff distributed three legislative bill drafts that Senator Watkins had requested.

  • The first draft provides that for property donated on or after July 1, 2006, land preservation tax credits shall be allowed only for land (i) that is located in the Chesapeake Bay watershed, (ii) that is used for agricultural production for market for which reasonable agricultural best management practices are in place, (iii) that is devoted to open-space use, or (iv) that is currently included in an individualized Forest Stewardship Plan.
  • The second draft provides that only the taxpayer making a qualified donation of property may transfer the unused tax credits relating to that donation.
  • The third draft prohibits nonprofits from transferring land preservation tax credits.


In order to give the members and other interested parties time to consider the options staff presented, as well as Senator Watkins' three legislative drafts, the subcommittee scheduled a final meeting in Richmond on December 12 at 2:00 PM. Further discussion will focus on recommendations concerning possible legislation for the 2006 General Assembly Session. The final meeting summary will be posted on the study website as soon as available.

The Hon. Lee Ware

For information, contact:
Joan Putney & David Rosenberg
DLS Staff



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