Conservation Easements: Frequently Asked Questions
How do I sell/buy credits?
Individuals or organizations can buy and sell tax credits directly with each other, or they may work through one of the brokers specifically established to match credit buyers and sellers. A taxpayer that transfers any amount of credit shall file a notification of such transfer to the Department in accordance with procedures and forms prescribed by the Tax Commissioner.
How much can I sell/buy them for?
The market for credits is fairly well developed. Of course you will need to sell tax credits at a discount in order to attract buyers. You will likely also have to pay federal tax on the sale of these credits. Starting in 2007, a 2% or $10,000 fee, which ever is less. Please contact your own legal/accounting profession or a tax credit broker for more information.
Can I sell tax credits if I do not pay income tax in Virginia?
Yes, you can sell your credits if you are subject to any state or local taxation in Virginia. The Virginia Attorney General has issued an official advisory letter that states that "any person, corporation, partnership, organization, trust or estate subject to state or local taxation may hold and transfer the land conservation tax credit." (Buyers of tax credits must, of course, pay income tax in Virginia.)
Am I limited to selling/buying $100,000 per year?
According to the Attorney General, sellers are limited only by the amount of credits they have to sell (40% of the value of the easement, minus any credits they use themselves). Buyers are subject to the $100,000 per year limitation on the use of credits.
Can I buy a credit in 2007 to offset 2006 taxes?
The Department of Taxation has opined that conservation tax credit transfers must occur in the year in which the tax credit is to be applied. In other words, if you wanted to buy credits to offset 2006 taxes, you must have done so before December 31, 2006.
What happens when the $100 million statewide cap has been met?
Credits will be issued on a first-come first-serve basis. The Department of Taxation will keep track of requested credits based on the date they receive a completed tax credit application. New applicants in a year where the $100 million cap has been reached will simply be rolled over into the next year