Taxpayers who are looking for an income tax deduction, yet don’t want to give up title to real property to a charity, should consider making a qualified conservation contribution.

A QCC is a contribution of a qualified real property interest to a qualified charity for conservation-related purposes. The QRPI can be the owner’s entire interest in the property, or it may be only a restrictive covenant that prevents the development of land and safeguards its natural character.

A conservation purpose includes outdoor recreation, protection of habitat, preservation of open space including farmland and forests for the scenic enjoyment of the public, or the preservation of a historic structure.

Prior to the Pension Protection Act of 2006, if the taxpayer making the QCC deducted the QRPI’s fair market value, he was limited to taking a deduction of either 30 percent of his contribution base (adjusted gross income without deduction of any NOL carryback to that year) if the QCC was made to a public charity, or 20 percent if the QCC was made to a private charity. If the entire FMV could not be deducted in the year of contribution, the excess could be deducted in each of the five succeeding years until it was used up.

Code Sec. 170(b)(1)(E)(i), as added by PPA, increased the contribution base limitations for QCCs to public charities to 50 percent of an individual’s contribution base over the amount of all other charitable contributions made in 2006 and 2007. If the deduction exceeds 50 percent of the contribution base, the excess may be carried forward for 15 years. The 50 percent contribution base limitation applies first to contributions other than QCCs, and then to QCCs.

For example, let’s assume Tom has a contribution base of $200,000 in 2007, and makes a QCC having a FMV of $70,000. Tom also makes other charitable contributions of $40,000 that are subject to the 50 percent limitation. Tom is allowed a deduction of $40,000 for 2007 for the non-QCC contributions, and a deduction of $60,000 for the QCC, and is allowed a carryforward of the excess QCC ($10,000) for up to 15 years.

The PPA further enhanced this deduction for individuals who meet the requirements of a “qualified farmer or rancher.” These individuals are allowed a deduction for up to 100 percent of the year’s contribution base, as added by the PPA, for QCCs.

For QCCs made after Aug. 17, 2006, the QRPI must include a limitation that the property remains available for agriculture or livestock production to use the 100 percent contribution base.

A qualified farmer or rancher is an individual whose gross income from farming is greater than 50 percent of the taxpayer’s gross income for the tax year of contribution.

The advantage of these new provisions is the ability to take a larger charitable deduction each year, as well as the longer carryforward period. These benefits must be weighed against the permanent restrictions placed on the property, and the future problems they create in regard to salability and value.