Bill Text: NY S01394 | 2017-2018 | General Assembly | Introduced
Bill Title: Relates to a conservation, open space and farmland protection credit trading program to provide tax credits against income and corporation franchise taxes in the amount of fifty percent of the value of the easement property.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2018-01-03 - REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS [S01394 Detail]
Download: New_York-2017-S01394-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 1394 2017-2018 Regular Sessions IN SENATE January 9, 2017 ___________ Introduced by Sen. COMRIE -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Govern- ment Operations AN ACT to amend the tax law, in relation to the conservation, open space and farmland protection credit trading program The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. This act shall be known and may be cited as the "Conserva- 2 tion, Open Space and Farmland Protection Credit Trading Program". 3 § 2. Legislative intent. Protection of our state natural resources is 4 an important state policy. Conservation of open space, farmland and 5 forest protection are important to a healthy and sustainable future. Not 6 only does land conservation serve an important environmental and public 7 health benefit such as water quality protection and pollution 8 prevention, these conserved properties can provide a significant econom- 9 ic benefit to the people of this state. Farmers who participate in 10 conservation easements avail themselves to funds to invest in diversify- 11 ing and expanding their farm businesses, build new infrastructure, 12 introduce new crops, purchase equipment or livestock, and perhaps most 13 importantly, transfer family farms to the next generation of farmers. 14 This program is designed to further the policies set out in article 49 15 of the environmental conservation law and to increase incentives to 16 landowners to conserve their land. This program creates a market for 17 tradable conservation easement credits to stimulate land conservation in 18 the state of New York. 19 § 3. Section 210-B of the tax law is amended by adding a new subdivi- 20 sion 49 to read as follows: 21 49. Conservation, open space and farmland protection credit. (a) An 22 eligible donor who donates qualified real property interest for a quali- 23 fied conservation purpose to an eligible donee shall be allowed a credit 24 owned by such taxpayer against the tax imposed by this article. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD00761-01-7S. 1394 2 1 (b) The value of the credit shall equal fifty percent of the fair 2 market value of the qualified real property donation calculated to 3 exclude any short term capital gain pursuant to 26 U.S.C.A. § 170 (e) 4 (1)(A). The amount of the tax credit shall not exceed one hundred thou- 5 sand dollars for any contiguous parcels of land owned by the same land- 6 owner, or an entity in which the landowner has an interest. A taxpayer 7 shall not be allowed any other tax credit against taxes imposed under 8 this article for a conservation easement on such property. 9 (c) For purposes of this subdivision a qualified real property inter- 10 est means a conservation easement as defined in article forty-nine of 11 the environmental conservation law and the regulations promulgated ther- 12 eunder or a full real property interest as defined under 26 U.S.C.A. § 13 170(h)(2) and corresponding regulation in 26 C.F.R. § 170-A-14(b). 14 Either interest must be in fully instate land. Notwithstanding any other 15 provision of law, a golf course does not qualify as a conservation ease- 16 ment for purpose of this subdivision. 17 (d) For purposes of this subdivision an "eligible donee" means a 18 "public body" or a "not-for-profit conservation organization" as defined 19 in article forty-nine of the environmental conservation law. In addi- 20 tion, to qualify as an eligible donee a "not-for-profit conservation 21 organization" must be registered with the department of environmental 22 conservation. 23 (e) Eligible donor means any person or entity who owns a qualified 24 real property interest, including individuals, corporations, trusts and 25 estates, partners in partnerships and other flow through entities, and 26 both marriage partners. 27 (f) Any qualified donor holding a pre-approved conservation easement 28 credit may sell or transfer in part, or in full, the conservation ease- 29 ment credit to another person or entity for use against tax imposed 30 under this article. In order for the transferee or purchaser to apply 31 the conservation easement tax credit against taxes for a particular 32 year, the transferee must have acquired the conservation easement tax 33 credit on or before the date upon which the transferee's taxes are due 34 (without extensions) for the year in question. 35 (g) Limitations on use of conservation easement credits. (1) The 36 conservation easement credit may not be used, by amendment or otherwise, 37 against taxes owing for tax years prior to the year in which the conser- 38 vation easement credit was earned or acquired by the taxpayer. 39 (2) Only one conservation easement credit may be earned per a quali- 40 fied real property interest donation: 41 (A) If the qualified real property interest is held in common owner- 42 ship, the conservation easement credit shall be allocated in proportion 43 to respective ownership shares. 44 (B) If the qualified real property interest is held by a pass-through 45 entity, the conservation easement credit shall be allocated as 46 prescribed under 26 U.S.C.A. § 704(b) and corresponding regulations in 47 26 C.F.R. § 1.704A-1(b)(4)(ii). 48 (3) An eligible donor may earn only one conservation easement credit 49 per income tax year. 50 (4)(A) The credit shall only apply for ten years following the quali- 51 fied real property donation. 52 (B) In determining any carry-forward amount, the following rules 53 apply: (i) The amount of conservation easement credit used in a taxable 54 year, when combined with all other state income tax credits of the user, 55 may not exceed the user's total state tax liability for the taxable 56 year.S. 1394 3 1 (ii) Any unused portion of conservation easement credit may be carried 2 forward up to ten years. Any unused portion of a conservation easement 3 credit shall survive the death of the individual and may be used or 4 transferred by the decedent's estate. 5 (h) Approval process. (1) Before an eligible donor may use or transfer 6 a conservation easement credit, an eligible donor shall attain approval 7 from the easement credit approval board established by paragraph (i) of 8 this subdivision. Receipt of approval from the easement credit approval 9 board signifies only the satisfaction of the screening requirements 10 pursuant to subparagraph three of paragraph (i) of this subdivision. The 11 approval has no probative value in another state or federal administra- 12 tive action, such as an audit review of the conservation easement credit 13 used. 14 (A) The eligible donor shall submit to the conservation easement cred- 15 it approval board an application for approval on a form created by the 16 conservation easement credit approval board that contains information 17 required by the conservation easement credit approval board to assess 18 the criteria pursuant to subparagraph three of paragraph (i) of this 19 subdivision. Such documents may include a draft or recorded conservation 20 easement, a copy of a qualified appraisal, and any other required infor- 21 mation. For the purposes of this subdivision a qualified appraisal means 22 an appraisal in accordance with 26 C.F.R. § 170A-13(c)(4) and the 23 Uniform Standards of Professional Appraisal Practice ("USPAP"). 24 (B) An eligible donor may apply for conditional approval before a 25 qualified real property interest donation has been recorded. If condi- 26 tional approval is granted, the application must be resubmitted to the 27 conservation easement credit approval board after the donation has been 28 recorded for the limited purpose of demonstrating conformity with the 29 draft documents. 30 (C) The conservation easement credit approval board shall notify the 31 eligible donor of its decision within sixty days of receiving an appli- 32 cation or within thirty days of receiving a resubmission. 33 (D) In the event of approval, the conservation easement credit 34 approval board shall issue a tracking number to the donor. To use the 35 conservation easement credit, the donor or transferee shall enter the 36 tracking number on the appropriate tax forms issued by the department, 37 thus indicating receipt of approval. 38 (E) The conservation easement credit approval board shall provide a 39 brief statement of reasons for a decision to deny approval. Once the 40 problems identified by the conservation easement credit approval board 41 have been remedied, an eligible donor may resubmit the application for 42 approval. Decisions to deny approval are not subject to appeal. 43 (2) The following rules and procedures must be followed to transfer a 44 conservation easement credit: 45 (A) A transferor and a transferee shall notify the department of a 46 conservation easement credit transfer. Both parties shall provide the 47 conservation easement credit tracking number and amount transferred on 48 the appropriate tax forms, which shall be filed with the income tax 49 return for the year in which the conservation easement credit transfer 50 is made. A transferee may not use a transferred conservation easement 51 credit unless the transferor's written statement verifies the amount of 52 conservation easement credit used by the transferee. 53 (B) The donor of a transferred conservation easement credit shall be 54 the tax-matters representative in all matters with respect to the 55 conservation easement credit. A tax-matters representative shall be 56 responsible for representing and binding the transferees with respect toS. 1394 4 1 all issues affecting the conservation easement credit, including, but 2 not limited to, the appraisal, notifications, correspondence from and 3 with the department and the IRS, audit examinations, assessments, 4 settlement agreements, and the statute of limitations and extensions 5 thereof. Final resolutions of disputes regarding a conservation easement 6 credit between the department and a tax-matters representative, includ- 7 ing administrative and judicial decisions, shall be binding on transfer- 8 ees. 9 (C) In the event the transferred conservation easement credit is 10 disallowed or devaluated in audit procedures, the department shall first 11 make demands for payment of any additional tax, together with interest 12 and penalties, from the conservation easement credit earning donor. In 13 the event such payment demand is not voluntarily satisfied within appli- 14 cable time limit, the department shall proceed to collection against the 15 transferees on a pro rata basis. 16 (i) Administration. (1) To administer the conservation, open space and 17 farmland protection credit trading program, the department is author- 18 ized: 19 (A) to require additional information from an eligible donor or trans- 20 feree regarding the appraisal value of the easement, the amount of the 21 conservation easement program, the validity of the conservation easement 22 credit, and other relevant matters; and 23 (B) to review, for good cause shown, and accept or reject, in whole or 24 in part, all aspects relating to a conservation easement credit, includ- 25 ing compliance with federal rules and regulations. In applying federal 26 rules and regulations, the department shall determine whether a used 27 conservation easement credit complies with the appropriate Internal 28 Revenue Code sections and treasury regulations. Any positions taken by 29 the United States Commissioner of the Internal Revenue Service and/or 30 any federal courts should be considered but are not binding on the 31 department. 32 (2) There is created the conservation easement credit approval board 33 to administer the approval process set forth in this subdivision. The 34 board shall review applications pursuant to criteria set forth in this 35 subdivision. 36 (A) The conservation easement credit approval board shall consist of 37 three members as follows: a representative of the department who is 38 knowledgeable about appraisal valuations; a representative of the 39 department of environmental conservation who is knowledgeable about 40 conservation values; and a representative of the state attorney gener- 41 al's office who is knowledgeable about the legal requirements for quali- 42 fied real property interests. 43 (B) The board members shall be appointed administratively by the 44 directors of the respective departments and may be changed from time to 45 time at the pleasure of the appointing authority. 46 (3) The conservation easement credit approval board shall limit 47 approval review to the following considerations: 48 (A) Whether the appraisal appears to meet minimum USPAP standards and 49 IRS requirements for a qualified appraisal, and whether its valuation 50 does not appear to be manifestly abusive. 51 (B) Whether the conservation values arguably comply with the require- 52 ments pursuant to paragraph (c) of this subdivision. 53 (C) In the case of a conservation easement donation, whether the 54 documentation required for the easement arguably complies with minimum 55 standards for a qualified easement pursuant to article forty-nine of the 56 environmental conservation law.S. 1394 5 1 (4) The department shall issue a report every year summarizing by 2 county the following annual totals: 3 (A) Number of qualified real property interest donations approved by 4 the conservation easement credit approval board; 5 (B) Fair market value of qualified real property interest donations 6 approved by the conservation easement credit approval board; 7 (C) Value of conservation easement credits approved by the conserva- 8 tion easement credit approval board; 9 (D) Value of used conservation easement credits by class (eligible 10 donors or transferees). 11 (E) Acreage of qualified real property interests donated approved by 12 the conservation easement credit approval board, by donee class (land 13 trust, government, other). 14 (j) The following agencies shall have the following rulemaking power: 15 (1) The department of environmental conservation shall promulgate 16 rules for the implementation of the approval screen pursuant to para- 17 graph (i) of this subdivision. Such rules shall be promulgated in 18 accordance with the state's administrative procedure act statute. 19 (2) The department shall promulgate all other rules and regulations 20 necessary to implement and administer this subdivision. 21 (k) Registration of not-for-profit organization. The department of 22 environmental conservation shall promulgate all rules and regulations 23 necessary to develop a registration and certification system for non- 24 profit organizations to be eligible for credit under this subdivision. 25 One requirement must be that the not-for-profit adopt the Land Trust 26 Alliance "Best Standards and Practices". Such registration may be 27 revoked by the conservation easement credit approval board, the depart- 28 ment of environmental conservation or the attorney general upon a find- 29 ing that the not-for-profit organization willfully and with the intent 30 to defraud created an easement that does not match the value of the 31 credit received. 32 § 4. Section 606 of the tax law is amended by adding a new subsection 33 (ccc) to read as follows: 34 (ccc) Conservation, open space and farmland protection credit. (1) An 35 eligible donor who donates qualified real property interest for a quali- 36 fied conservation purpose to an eligible donee shall be allowed a credit 37 owned by such taxpayer against the tax imposed by this article. 38 (2) The value of the credit shall equal fifty percent of the fair 39 market value of the qualified real property donation calculated to 40 exclude any short term capital gain pursuant to 26 U.S.C.A. § 170(e) 41 (1)(A). The amount of the tax credit shall not exceed one hundred thou- 42 sand dollars for any contiguous parcels of land owned by the same land- 43 owner, or an entity in which the landowner has an interest. 44 (3) For purposes of this subsection a qualified real property interest 45 means a conservation easement as defined in article forty-nine of the 46 environmental conservation law and the regulations promulgated there- 47 under or a full real property interest as defined under 26 U.S.C.A. § 48 170(h)(2) and corresponding regulation in 26 C.F.R. § 170-A-14(b). 49 Either interest must be in fully instate land. Notwithstanding any other 50 provision of law, a golf course does not qualify as a conservation ease- 51 ment for purposes of this subsection. 52 (4) For purposes of this subsection an "eligible donee" means a 53 "public body" or a "not-for-profit conservation organization" as defined 54 in article forty-nine of the environmental conservation law. In addi- 55 tion, to qualify as an eligible donee a "not-for-profit conservationS. 1394 6 1 organization" must be registered with the department of environmental 2 conservation. 3 (5) Eligible donor means any person or entity who owns a qualified 4 real property interest, including individuals, corporations, trusts and 5 estates, partners in partnerships and other flow through entities, and 6 both marriage partners. 7 (6) Any qualified donor holding a pre-approved conservation easement 8 credit may sell or transfer in part, or in full, the conservation ease- 9 ment credit to another person or entity for use against tax imposed 10 under this article. In order for the transferee or purchaser to apply 11 the conservation easement tax credit against taxes for a particular 12 year, the transferee must have acquired the conservation easement tax 13 credit on or before the date upon which the transferee's taxes are due 14 (without extensions) for the year in question. 15 (7) Limitations on use of conservation easement credits. (A) The 16 conservation easement credit may not be used, by amendment or otherwise, 17 against taxes owing for tax years prior to the year in which the conser- 18 vation easement credit was earned or acquired by the taxpayer. 19 (B) Only one conservation easement credit may be earned per qualified 20 real property interest donation: 21 (i) If the qualified real property interest is held in common owner- 22 ship, the conservation easement credit shall be allocated in proportion 23 to respective ownership shares. 24 (ii) If the qualified real property interest is held by a pass-through 25 entity, the conservation easement credit shall be allocated as 26 prescribed under 26 U.S.C.A. § 704(b) and corresponding regulations in 27 26 C.F.R. § 1.704A-1(b)(4)(ii). 28 (C) An eligible donor may earn only one conservation easement credit 29 per income tax year. 30 (D)(i) The credit shall only apply for ten years following the quali- 31 fied real property donation. 32 (ii) In determining any carry-forward amount, the following rules 33 apply: (I) The amount of conservation easement credit used in a taxable 34 year, when combined with all other state income tax credits of the user, 35 may not exceed the user's total state tax liability for the taxable 36 year. 37 (II) Any unused portion of conservation easement credit may be carried 38 forward up to ten years. Any unused portion of a conservation easement 39 credit shall survive the death of the individual and may be used or 40 transferred by the decedent's estate. 41 (8) Approval process. Credits under this subsection shall be deter- 42 mined in accordance with the procedures, rules and provisions set forth 43 in paragraphs (h), (i), (j) and (k) of subdivision forty-nine of section 44 two hundred ten-B of this chapter. 45 § 5. This act shall take effect on the first of January next succeed- 46 ing the date on which it shall have become a law.
