What national problem does S.2187 address? The United
States' development and land use patterns are out of balance, which is
dramatically altering our way and quality of life. Denominated as "sprawl",
it is impacting essentially every area of the Country. According to the
Department of Agriculture's most recent land census numbers, the United
States created 15% of its total urban footprint between 1992 and 1997,
and is developing an estimated 400 acres of land per hour on average throughout
America. In addition to wasting our land base, this pattern of development
and the life styles that it encourages are also diminishing our water
quality, our air
What is the goal of S.2187? S.2187 will direct and empower all levels of government, land trusts, taxpayers and private landowners to work in an aligned partnership, focused at the local level and consistent with our heritage of private property rights, to conserve and restore our natural infrastructure for all generations to come.
How does S.2187 achieve this goal? S.2187 provides for $25 billion in transferable tax credits over a five year period for the sole purpose of acquiring and supporting conservation easements. The dollars are allocated annually on a state-by-state basis pursuant to a formula that is based on private open space (farm, ranch and forest lands) in each state. The scale, focus, requirements and pace of the program are set by the Federal Government; each State administers its performance under the program; and existing non-profit land conservation organizations are tasked with acquiring the conservation easements and the tax credit participants. If a State is unable to place its allocation in a given year, the unspent balance will be reallocated under the program based on regulations to be developed by the Secretary of Agriculture and the Secretary of the Interior.
Why was the program structured in this manner? To be successful, S.2187 had to scale to the needs of the Country, to be based on our heritage of private property rights, to evolve from tested strategies, to leverage our resources in the most financially efficient manner, to be focused at the local level and to involve as many people as possible. As explained in more detail in Exhibit A, S.2187 incorporates each of these concepts in its structure.
What are the "tested strategies" upon which S.2187 is based? S.2187 incorporates two primary legal strategies: the existing law concerning conservation easements and the highly successful structure for the low income housing tax credits. Conservation easements have been shown to be an extraordinarily effective means of accomplishing conservation requirements at the lowest cost while also retaining lands in private ownership and under private stewardship. Likewise, the low income housing tax credit system has been extraordinarily successful in resolving a national problem in a time and asset efficient manner.
How is S.2187 consistent with private property rights? All dollars allocated under S.2187 may only be spent on acquiring and supporting conservation easements. As a result, the following principles consistent with our heritage of private property rights will be part of every dollar spent:
How much control and participation will the Landowner have under S.2187? The landowner cannot be compelled to participate under S.2187; his participation will only be on a voluntary basis. Likewise, however, the landowner cannot act unilaterally. He must negotiate and convince the public, as represented by the State, the non-profit land conservation organization and the participating taxpayers, that the conservation easement that he seeks to sell is worthy of this program. He also may not be directly involved with the non-profit organization. The result is voluntary, effective and real third-party, arm's length, negotiations.
Will the natural infrastructure investments made under S.2187 also produce economic returns? The investments made through S.2187 will produce substantial economic returns: they will filter our water and protect it; they will clean our air and mitigate our escalating human respiratory and related health problems; they will keep our fisheries and food stocks healthy and productive; they will support and conserve our private farm, ranch and forest lands; they will help assure genetic diversity; and they will provide the much needed relief of "green space" for all of us, while simultaneously allowing us to avoid the costs of artificially replacing these same services. As shown in "The Value of Conservation Easements: The Importance of Protecting Nature and Open Space", a report published by the World Resources Institute in April, 2002, these savings and returns will significantly exceed the entire cost of this program. (See Exhibit B).
How does S.2187 relate to the current Tax Code and how would a transaction work under its provisions? (See Exhibit C).
There have been concerns expressed about potential abuses of the use of conservation easements: does the Bill address these concerns? The Senate Finance Committee has recently completed exhaustive hearings on this issue. While isolated cases of abuse were cited, the significance and effectiveness of conservation easements as currently structured was dramatically endorsed on November 17, 2005, when the United States Senate, in part as a result of these Hearings, passed legislation that would significantly enhance tax incentives to encourage the use and donation of conservation easements. Notwithstanding this endorsement of conservation easements, the Bill provides at least six safeguards against abuse: (1) current law concerning conservation easements must be satisfied; (2) easements are acquired though true arm’s length negotiations where buyer and seller have equal leverage; (3) notwithstanding such negotiations, no dollars may be spent under the Bill in excess of the appraised fair market value of the conservation easement; (4) the attorney general in each state is authorized to enforce the public’s rights and interests in the easements; (5) the Bill endows a fund whose proceeds are to be used for the monitoring and enforcement of the easement; and (6) the transactional architecture and process required by the Bill enforces a transparency that will greatly limit the opportunity for abuse.