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Report claims Virginia pays for low-quality conservation easements

The Office of the State Inspector General says Virginia’s land-conservation easement program, in which properties receive tax breaks, needs work.

One in three recent inspections of conservation easement found that monitoring by a land-trust company was inadequate, the office said in a statement last week.

After a yearlong audit of the state’s Conservation Easement and Land Preservation Tax Credit Program, the office concluded that Virginia needs to improve the conservation quality it receives for tax credits.

OSIG auditors found trash, old tires, scrap metal piles, old campers, inoperable vehicles and a manure storage area containing dead-cattle parts on properties in easement it inspected, the agency said.

Easements worth between $500,000 and $999,999 lacked restrictions for water quality, historical preservation and agricultural use when compared to easements with tax credits of $1 million or more, the office said.

Higher-valued tax credits trigger a review by the Virginia Department of Conservation and Recreation, so some landowners avoid applying for that large a credit, the office said.

“Virginia provides tax credits up to $75 million per year for conservation easements and land donations,” Inspector General Michael C. Westfall said. “In effect, Virginia is paying for natural resource preservation through these tax credits. Taxpayers have taken reduced credits on easements, which has resulted in staying below the $1 million threshold for a Department of Conservation and Recreation review.”

But a top staffer with the Piedmont Environmental Council questioned the audit’s conclusions and methodology.

The General Assembly’s watchdog agency, the Joint Legislative Audit Review Commission, has examined the conservation-easement program and found that it is one of only two credits reviewed which achieves the goals set by the legislature, Dan Holmes, PEC’s director of state policy, said in an interview Friday. Only the Land Preservation Tax Credit and the Historic Rehabilitation Tax Credit met the stated goals, he said.

The inspector general’s office recommended that the Land Trust Alliance be required to certify the land-trust companies that hold easements or land donations for tax credits. The Conservation Department concurred.

“If this recommendation goes into effect, it would have a positive impact on other aspects of the tax credit program, including the fiduciary obligation to ensure tax credits are issued for legitimate conservation projects in perpetuity,” the inspector general’s audit report stated. “Requiring land trusts to be accredited by the Land Trust Alliance ... will raise the standards and quality of their operations and ensure all of the legal requirements ... are met. Accreditation will also help land trusts avoid errors in drafting conservation easements, baseline documentation reports, monitoring and stewardship.”

The office also recommended amending state law to require a lower threshold for quality reviews by the Conservation Department.

Its audit suggested requiring a Conservation Department review when an easement’s appraised value involves a preservation tax credit of $1 million or more.

The state Department of Taxation also concurred with the report’s findings, the OSIG report said.

The state allows an income tax credit for 40 percent of the value of donated land or conservation easements, the Conservation Department said. “In effect, Virginia is paying for natural resource preservation through these tax credits,” the OSIG audit said.

Holmes of PEC said it appears the OSIG report wants to re-litigate a proposal to change the program that the General Assembly has twice rejected in recent years. Most recently, that was Senate Bill 604 in the 2020 session, he said.

It is misleading, at best, for OSIG to claim an easement that meets all applicable federal and state standards is deficient because it doesn’t meet a twice-rejected criteria, Holmes said.

“This tax credit is the foundation for all of Virginia’s conservation programs,” he said. “It is the most broad-based tool we have for sustaining our agricultural lands, preserving forests and protecting streams. And it is the basis of one of the most successful conservation programs in the United States.”

Since the state adopted the conservation tax credit, it has seen a five-fold increase in the acreage protected under easement over the last 22 years, compared to the previous 34 years, Holmes said.

“Conservation is going to play an integral role in the commonwealth’s future, especially with a growing national consensus to protect 30 percent of U.S. land and water by 2030,” he said. “As the country begins that effort, I don’t think it makes sense to undermine one of its most successful and cost-effective programs for protecting land.”

Nothing can happen without willing donors, who enter into these agreements voluntarily, Holmes said. People donate easements because of their love of the land and their desire to see it protected forever. Their charitable donations provide broad public benefits, he said.

“This audit ignored a significant part of the picture: These landowners are giving up land rights and donating a conservation easement to the commonwealth,” Holmes said. “The money spent on the program pales in comparison to the conservation value donated to the commonwealth.”

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