Tax Incentives

Colorado Tax Credits


What is the Colorado Conservation Tax Credit?

Effective January 1, 2015, the Colorado individual Conservation Easement tax credit formula is 75% of the first $100,000 donated value of the Conservation Easement and 50% of any remaining donation up to a total credit of $1,500,000.


Senate Bill 206 which passed on May 6, 2015, allows a landowner with a larger or high-value parcel of land to earn up to $1,500,000 in Colorado tax credits in a single year – no more multi-year phased Conservation Easement processes and all of the related annual expenses. Buyers will be able to purchase the credits they need because more tax credits will be available each year.


Tax credits are like a voucher issued to pay State Income taxes or the Tax credit may be sold to another State taxpayer. Basically, the Colorado laws provide for Conservation Easements that qualify for an IRS deduction closed in 2007 and beyond. The following points apply:



                              Hypothetical example of State Tax Credit – 160 acre project

                              Before appraisal ($10,000/acre) $1,600,000

                              After appraisal (50% - $5,000/acre) $ 800,000

                              Conservation Easement IRS Donation Value $ 800,000

                              State Tax Credit ($75,000 of the first $100,000 and 50% of

                              the Donation Value up to $3,000,000 or $1,500,000) $ 475,000

                              Broker discount (15-17%-varies) $ 60,000

                              Landowner gross from sale of tax credit $ 415,000

                              Landowner up-front costs (varies) $ 50,000

                              Landowner net $ 365,000 (Does Not Include Federal and State Income Tax Owed)

                              Variables include number of acres, Before appraisal value, After appraisal value, Broker fee and Landowner up-front costs.


(1) The tax credits for Conservation Easement donations are transferable to a third party.

(2) The tax credits may be used to pay State of Colorado income taxes over a 20 year period.

(3) A refund of up to $50,000 in years of a State revenue surplus may be requested.

(4) The maximum tax credit a landowner may earn from placing a Conservation Easement on their property is $75,000 of the first $100,000 and 50% of contributed value up to $3,000,000(1) or $1,500,000.

(5) One transaction per year is allowed per individual or entity.

(6) Colorado forms DR 1305 and IRS form 8283 and an appraisal summary copy should be submitted.

In addition, County property taxes for properties of 80 acres or more, with only one residence, with a Conservation Easement are assessed at an agricultural site in perpetuity. Landowner whose land is currently assessed as an agricultural site would no longer have to demonstrate/document agricultural use annually.


Colorado is one of only a handful of states in the nation to offer a transferable tax credit for the donation by a Colorado taxpayer of a qualifying Conservation Easement.


Federal Income Tax Deduction


What is the Federal Income Tax Deduction?

The Federal Income Tax deduction is related to the value of Conservation Easements. If the Conservation Easement meets the requirements of the IRS code and the Treasury regulations, the deduction is determined by a formal appraisal of the difference in the value of the land before the Conservation Easement is placed on the land as compared to the land’s value after the Conservation Easement is placed upon it. This difference may be used by the landowner as a charitable contribution. Starting in 2015, landowners are allowed to deduct 50% of their income and carry unused deductions forward for 15 years. Ranchers can deduct 100% of their income.


                              Hypothetical examples of Federal Income Tax Deductions

                              Non-Qualified Rancher Incentive

                              Conservation Easement Donation $1,000,000

                              Annual Income $ 100,000

                             Tax Deduction up to 50% $ 50,000 (50% of their $100,000 annual income)

                              Note: Unused portion of the deduction can be carried forward for up to 15 years or until it is used up.

                              Qualified Rancher Incentive - More than 50% of your “gross income” must come from farming, ranching or forestry activities.

                              Conservation Easement Donation $1,000,000

                              Annual Income $ 100,000

                              100% Tax Deduction $ 100,000

                              Note: Unused portion of the deduction can be carried forward for up to 15 years or until it is used up.


For more information, please contact MALT at (303) 679-0950 or [email protected].

Colorado Coalition of Land Trusts (CCLT) has a section of their website dedicated to Colorado tax policy and federal tax policy with regard to Conservation Easements at www.cclt.org. You should visit that web site and consult with your tax and legal advisors for the most up to-date information.


Will My Property Tax Be Affected?

It depends on your individual circumstances. You should check with your Local City or County assessor’s office, prior to making any decisions.


Can I Find Someone to Buy the State Tax Credits on my Conservation Easement?

Yes, since the credit has been in effect, every landowner MALT has worked with has found a buyer for their credit. There are several reputable brokers who match Conservation Easement donors with buyers of tax credits.


Do I Have to be a Colorado Resident to Qualify for the Colorado Tax Credit?

According to C.R.S. Section 39-22-522, taxpayers who may qualify to claim the Colorado gross Conservation Easement credit (including transferees of these credits) include:

  • Colorado residents,
  • C corporations, trusts and estates,
  • Partners, shareholders or members of pass-through entities (such as LLCs) which receive the credit from such entity, regardless of whether those individuals are Colorado residents.

The following restrictions apply:

  • Joint tenancy, tenancy in common and pass-through entities such as a partnership, S corporation, or LLC, must allocate the credit to the entity’s members in proportion to their distributive shares of income or ownership percentage in such entity or group.
  • A single-member LLC will generally be disregarded for federal tax purposes (I.R.S. Regulation 301.7701-3) as well as state tax purposes and does not qualify for the Conservation Easement tax credit unless the member is a Colorado resident.
  • Individuals who are not residents of Colorado cannot claim the Conservation Easement tax credit. Part-year residents may claim the credit only if they make the donation while they are Colorado residents. Nonresident owners included in a joint tenancy, tenancy in common, and similar groups cannot claim the Conservation Easement tax credit. Only a credit apportioned to nonresident members of a pass-through entity can be claimed by nonresidents.

Additional restrictions may also apply. For more information, please see C.R.S. Section 39-22-522, and the State of Colorado Taxpayer Service Division’s FYI 39 regarding the Gross Conservation Easement Tax Credit 


Will the IRS Tell Me in Advance if My Conservation Easement Donation Qualifies for Tax Benefits?

The IRS will NOT rule as to the Conservation Easement’s value or pre-approve an appraisal. In the past, for approximately $5,000-$10,000, the IRS has issued a private letter ruling for an individual Conservation Easement donation that determines whether the donation qualifies for tax benefits based on the stated case and circumstances at the time. Private letter rulings should not be relied upon by or extrapolated to other cases or circumstances not under review.


Will Donating a Conservation Easement Increase my Chances of Being Audited?

Large, one-time donations claiming significant tax deductions have always been subject to a higher level of attention from the Internal Revenue Service (IRS) than regular tax returns. MALT encourages donors to work closely with their attorney and accountant to create a solid donation that will stand the test of time. It is notable that Congress has given the Land Trust community a resounding vote of confidence by expanding the tax benefits for Conservation Easements on both the State and Federal level, speaking to the importance of Conservation Easements in protecting valuable open space.


What Limitations are put on Earning a Colorado Conservation Tax Credit?

An individual or entity may earn only one Colorado Conservation Tax Credit in a calendar year. An individual or entity cannot earn a credit in any year in which they have an outstanding credit that has not been entirely used, by the individual, entity or third party to whom it was transferred.


What if there is More Credit than Tax Owed?

If your State credit exceeds the taxes owed in that year, the credit can be carried forward and used over the next twenty years. The credit will expire if not used within the stipulated twenty year period. Colorado state law provided that in years of a budget surplus you may claim a cash refund of up to $50,000.


What are the Restrictions on Transferring the Credit to a Third Party?

The credit may only be transferred once. A landowner may use a portion of the credit and sell the remaining balance. Should a State surplus exist and you claim a refund you may not transfer any portion of the credit to a third party in that year. A third party who purchased a credit may only use that credit to offset their taxes and are not eligible for a tax refund.


What is the Process of Transferring a Colorado Conservation Tax Credit?

While you are allowed to facilitate this transfer, it is highly recommended that you find a qualified/reputable credit facilitator who is experienced in the process and procedures needed to prefect the sale.


When Must a Transfer be Completed to Qualify for a Tax Credit?

You have until the tax filing deadline of the following year to complete the transfer for applying the credit in a given year. Usually tax credit sales occur during the last quarter of the year or the following first quarter.


For more information on Conservation Tax Incentives…

Colorado Coalition of Land Trusts (CCLT) has a section of their website dedicated to Colorado tax policy and federal tax policy with regard to Conservation Easements at www.cclt.org.


If I Sell my Conservation Tax Credits for Cash, How will this Affect my Income Taxes?

Income from the sale of conservation tax credits is taxable. In addition, the amount of your federal income tax deduction for a Conservation Easement must be added back to your state income; therefore, we recommend that you have a qualified tax advisor help forecast your tax situation as you may wish to retain part of your credit to offset your state liability.