House Bill 1361 Documents
Increasing Accountability and Transparency of Conservation Easement Tax Credits
House Bill 1361 Summary
The information presented below is from an alert Isaacson and Rosenbaum P.C. put out in August of 2007. This is intended as a summary of the legislative changes and proposals. It is not to be treated as legal advice.
The Colorado Coalition of Land Trusts (CCLT) pursued legislation during the 2007 legislative session to require greater transparency and higher appraisal standards for the Colorado conservation easement tax credit program. This is part of an ongoing CCLT effort to improve the credibility of the program. The result was HB-1361, which requires organizations that accept donations of conservation easements in gross (including qualified organizations such as land trusts and local, state and federal governments), taxpayers, and appraisers to submit certain information before a state income tax credit is allowed. CCLT is working with the Colorado Department of Revenue to create standardized forms for this information. HB-1361 imposes the following requirements when a state tax credit is claimed for a conservation easement donation:
Several other matters were addressed by HB-1361:
HB-1361 applies to all state income tax credits "claimed" after the effective date of HB-1361, which is August 3, 2007. We believe "claim" to mean the first time the taxpayer identifies the tax credit to the Colorado Department of Revenue in a Colorado tax return. This is in contrast to the act of "generating" the state income tax credit, which occurs upon the recording of the conservation easement, and in contrast to the act of "carrying-forward" the state income tax credit, which occurs when a taxpayer has a credit surplus after making the initial claim and uses the surplus credit in later years. These distinctions are important, because the application of HB-1361 depends on which stage the state income tax credit is applicable, i.e., is it being generated, claimed, or carried-forward. HB-1361 generally applies to all 2007 conservation easement donations because the credit from a 2007 donation cannot be claimed before January of 2008, when a 2007 Colorado income tax return can first be filed. It will also apply to donations made in prior years where the credit has not been previously claimed by a taxpayer. We do not believe the submittal requirements under HB-1361 will be imposed multiple times when a credit is carried forward over several years.
This interpretation of HB-1361 is consistent with the legislative history and the broader legislative scheme. The Senate Committee on Finance heard testimony that HB-1361 would not apply to tax credits that were initially claimed prior to the bill's enactment. Furthermore, the conservation tax credit act (C.R.S. Section 39-22-522) requires taxpayers to submit a summary of an appraisal when a tax credit is claimed. The Department of Revenue has interpreted this requirement to mean the taxpayer must submit an appraisal only once at the time the credit is first claimed. We expect the Department of Revenue to apply HB-1361 similarly. Likewise, the Colorado Gross Conservation Easement Credit Schedule (Department of Revenue Form 1305) distinguishes between the initial credit claimed and credits that are carried forward, because the taxpayer must submit supporting documentation only if it is claiming the initial tax credit for a conservation easement donation.
The analysis here is predicated on an interpretation of HB-1361. Please note that HB-1361 is still subject to interpretation by the Colorado Department of Revenue.