In addition to federal income and estate tax advantages, the donation of a conservation easement qualifies Colorado taxpayers for a Colorado Income Tax Credit. This is a unique incentive for Colorado residents to donate conservation easements. The tax credit is measured one to one to an easement value of $100,000. Therefore a donated easement valued at $100,000 qualifies for a $100,000 tax credit. However, for easement values above $100,000, the tax credit is reduced to 40 cents on the dollar for the next $400,000 in easement value. The maximum permitted tax credit is $260,000, which requires a donation value of $500,000.

Many donors do not have sufficient income to fully utilize their state income tax credits. However, this legislation permits the sale of credits from a qualifying donor to a qualifying buyer. The donor (seller) will receive approximately 80% of the value of the tax credit in cash. The broker receives 5 to 10% as commission and the buyer receives the remaining 10 to 15% as a reduction in their state taxes.

For example: Mr. and Mrs. Hill donate a conservation easement to a land trust. The easement is valued at $200,000. Based on the formula described above, the Hills qualify for a state tax credit worth $140,000. The Hills do not have sufficient annual income to use the credit so they sell it to a broker for 80% of the value ($112,000). The broker keeps $14,000 and the buyer receives a tax reduction of $14,000. In summary, the Hills have earned $112,000 in cash, by donating a conservation easement and selling their Colorado State Tax Credits. Additionally, the Hills still qualify for federal income tax deductions and a reduced property value for estate purposes.

Please contact us if you have further questions about Colorado State Income Tax Credits. You may also contact a broker directly: The Conservation Resource Center may be contacted at (303) 544-1044, and Spina Enterprises may be contacted at (970) 221-1910.