Conservation tax credit plan poses dilemma for Kaine
The first-year governor has long supported the elimination of the estate tax, but the bill threatens his goal to protect wilderness from developers.
By Michael Sluss and Tim Thornton
(804) 697-1585 tim.thornton@roanoke.com
RICHMOND -- Gov. Tim Kaine said Wednesday that the General Assembly's hastily approved plan to contain the cost of a land preservation tax credit program could undermine his efforts to protect open spaces in the state, particularly in Western Virginia.
Kaine raised the possibility of amending legislation that would cap the size of a tax credit program that rewards landowners who shield their property from development. Both houses of the legislature have included the cap in bills that also repeal the tax on estates valued at $2 million or more. The two chambers passed the measures earlier this week after General Assembly budget negotiators included the tax changes in a compromise spending plan.
The tax legislation presents a conflict for Kaine. The first-year governor has supported the elimination of the estate tax. But he also wants to protect 400,000 acres from development before he leaves office in 2010, and considers the land preservation tax credit as an essential tool in that effort.
"I've been a longtime proponent of getting rid of the estate tax, but I don't want to cannibalize one of the best environmental programs we have in the commonwealth to do it," Kaine told reporters on Wednesday.
The legislation would cap the annual tax credits for conservation easements at $50 million in 2007 and $75 million each year afterward. It reduced the individual credit from 50 percent of fair market value to 40 percent. And it imposes a limit of $750,000 on individual credits for easements outside of the Chesapeake Bay watershed.
Kaine raised concerns about the effect of the statewide cap on conservation efforts and questioned the fairness of imposing a limit on easements outside of the watershed.
"Of course Chesapeake Bay preservation is important, but the cleanliness of any river and Virginia watershed is an important thing," Kaine said. "And I don't think western and rural Virginia should take a back seat in land preservation efforts to other parts of the state."
The Senate passed its version of the legislation (Senate Bill 5019) Monday by a vote of 24-9. The House passed an identical version (House Bill 5019) on Tuesday by a vote of 63-25. Each house must pass the other's bill next week before the legislation goes to Kaine's desk.
Del. Jim Shuler, D-Blacksburg, tried unsuccessfully to amend the bill to remove the $750,000 cap on credits for land outside the watershed.
Elizabeth Obenshain, the executive director of the New River Land Trust, sent Kaine a letter on Wednesday proposing a $100 million cap on tax credits and a statewide $750,000 cap on individual easements. Obenshain, a former editor at The Roanoke Times, said an individual cap would curb abuses and keep the program viable.
"We can and do support the $750,000 individual cap on tax credits for conservation easements -- but only if it is applied fairly statewide," she wrote to the governor. "This cap would remove the sky's-the-limit incentive that has prompted a few bad deals."
Obenshain added that the proposed $50 million cap on annual credits would create too much uncertainty for landowners seeking the credit. Roger Holnback, executive director of the Western Virginia Land Trust, said the cap would create "an immediate backlog" that would create delays for qualified landowners.
"Our preference is a very simple program that gives a reasonable benefit with a limited amount of headache," Holnback said.
Kaine could amend or veto the legislation. Any changes he makes could affect the balance of the new state budget, which accounts for the tax changes. The state would save $25 million in the next fiscal year by capping the land preservation tax credit. The estate tax repeal would cost $35 million when it takes effect in July 2007 and $140 million the following year.
Some House Republicans said they reluctantly supported the limits on the land preservation tax credit to preserve a fragile budget compromise with the Senate. Senate leaders have insisted on a cap and greater state controls over easements accepted into the program. The state has registered $413.9 million in tax credit requests on more than 170,000 acres since enacting the program in 2000, according to the Department of Taxation. The state received $112 million in land preservation tax credit requests last year.
"I know they're concerned about abuses in the program, and I am too, but I think you can solve some of the abuses without cutting the vitality of this open space preservation effort," Kaine said.
