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Measuring the Effect of State Income Tax Incentives on Land Conservation

Jeffrey O. Sundberg

October 2007, English


Conservation easements can be used for land conservation purposes to keep land in private ownership, while preventing development that might harm conservation values.

Land conservation as conservation easements

Impetus for land conservation through a conservation easement may come from the property owner or an interested organization. Landowners may wish to protect their land from development by future owners, or take advantage of financial incentives associated with land conservation;

The owners may seek out land conservation organizations that may be willing to hold the easement;

Public or private groups interested in land conservation may identify specific parcels with particularly high conservation values and encourage the owner to consider land conservation by creating a conservation easement

Ten states offer income tax credits as incentives for landowners to participate in land conservation efforts by establishing conservation easements on their property. Such credits might be expected to increase land conservation donations; however, donations of land (conservation easements) have also risen dramatically in states without such credits.

This paper examines data on land conservation—specifically conservation easements held by land trusts—and evaluates the impact of various types of incentives on the growth in conservation easements held between 2000 and 2005.

Econometric results indicate that credits result in more easements, but only if they have high potential payoffs. Transferable credits, which provide benefits to any landowner regardless of state tax liabilities, have an even larger impact on land conservation acreage under conservation easements. State dummy variables are used to confirm that the impact of credits is large and statistically significant only in Virginia and Colorado, the only two states with a credit system that offered both high value and transferability during the study period.