What is the Land Preservation Credit (LPC)?

The Land Preservation Tax Credit (LPC) is an income tax credit of 40% of the value of land located in Virginia which is conveyed by taxpayers to a public or private agency for historical or conservation preservation, agricultural use, forest use, open space, and/or natural resource conservation. The conveyance must be in perpetuity.

The LPC is governed by the Code of Virginia § 58.1-510 to 513 and §170(h) of the United States Internal Revenue Code of 1986, as amended. Donations of less-than-fee must also qualify as a charitable deduction under IRS regulations.

The amount of the credit is based on 40% of the fair market value of the donation as determined by a qualified appraiser in a qualified appraisal as defined by federal law and IRS regulations governing charitable contributions.

Virginia Tax is authorized to issue no more than $75 million in land preservation credits each year. The credits are issued on a "first-come, first-served basis" until the cap is reached.

The amount of the credit that may be claimed by each taxpayer shall not exceed: 

  • $50,000 for each of the 2009, 2010, and 2011 taxable years; 
  • $100,000 for each of the 2012, 2013, and 2014 taxable years; 
  • $20,000 for each of the 2015, 2016, 2017, 2018, and 2019 taxable years; and
  • $50,000 for taxable year 2020 and thereafter

**However, taxpayers who make a fee simple donation of land to the Commonwealth on or after Jan. 1, 2015, may claim credits towards their income tax payable up to $100,000 per year provided that no part of their charitable contributions deduction under § 170 of the Internal Revenue Code related to such fee simple donation is allowable by reason of a sale or exchange of property.

Any taxpayer issued a tax credit by Virginia Tax shall be allowed to use the credits for the taxable year beginning in the calendar year of issuance. Any unused portion of a credit issued to a taxpayer may generally be carried forward for a maximum of 10 years. For taxpayers affected by the credit reduction for taxable years 2009, 2010, 2011, and 2015 and thereafter, any unused portion of a credit issued to a taxpayer may be carried forward for a maximum of 13 years. 

Taxpayers may also transfer unused credits for use by another taxpayer on Virginia income tax returns. For taxpayers to whom a credit has been transferred, any unused portion may be carried forward for a maximum of 11 years after the credit was originally issued. For taxpayers affected by the credit reduction for taxable years 2009, 2010, 2011, and 2015 and thereafter, any portion of a transferred credit may be carried forward for a maximum of 14 years after the credit was originally issued.

For additional information on the LPC:

How to Apply

A complete application must be filed with Virginia Tax by Dec. 31 of the year following the calendar year of the conveyance. All applications for the Land Preservation Tax Credit must include the following:

For Application Requests over $1 Million: All credit requests of $1 million or more must be submitted to both the Department of Conservation and Recreation (DCR) and Virginia Tax for review. Credits of over $1 million will not be issued until they have been verified by DCR.

** Statement from the appraiser (made under penalty of perjury that meets the requirements under Code of Virginia§ 8.01-4.3) or a notarized affidavit from the appraiser stating that the appraisal complies with Code of Virginia § 58.1-512.1(C), which states that: "Any appraisal submitted in support of an application for a credit under this article shall include an affidavit by the appraiser that to the best of his knowledge and belief the valuation complies with this section and shall set forth in the affidavit or refer to the specific portion of the appraisal setting forth the facts and basis for this knowledge and belief." For more details, see Land Preservation Credit Affidavit Requirements.

Send completed applications to:

Virginia Tax
Tax Credit Unit
PO Box 715
Richmond, VA 23218-0715

For general assistance call 804.786.2992.

Transferring Unused Credits 

Taxpayers may transfer unused credits for use by another taxpayer on Virginia income tax returns. Notification of such transfer shall be given to Virginia Tax using Form LPC-2. Transferred credits may be subject to a transfer fee of 2% of the value of the donated interest, except in the case of a transfer to a designated beneficiary. 

Transfer to a designated beneficiary. Effective July 1, 2018, individual taxpayers who originally earned the credit can transfer any unused credits through a will, bequest, or other instrument of transfer to a designated beneficiary upon his or her death. If such taxpayer dies without a will, any unused credits will be transferred to the next person who is eligible to receive according to Virginia's laws of intestate succession. This change applies to transfers of unused credits upon the death of a taxpayer occurring on or after July 1, 2018, regardless of when the unused credits were earned. The 2% transfer fee does not apply to transfers to a beneficiary. 

When to Apply

All LPC applications must be filed on or before Dec. 31 of the calendar year following the recorded year of the donation. The postmark will determine the date of filing and the effective year of the LPC credit.  

For example: A complete application postmarked on Jan. 1, 2018 will be issued a 2018 credit as credits are available. A complete application postmarked on Dec. 31, 2017 will be issued a 2017 credit. 

Virginia Tax is unable to guarantee that any LPC application postmarked on or after the first business day in November will be processed by the end of the year in time to make a transfer for that year. However, we will use our best efforts and resources to process applications as soon as administratively possible. You are encouraged to file your application as early as possible. 

Tips to Avoid Delays:

  • Make sure all signatures are included.
  • Fill out all forms completely.
  • Review the current Code of Virginia §§ 58.1-512 and 512.1.
  • For donations over $1 million, DCR offers a review of the conservation value prior to recordation of the easement.
  • You are encouraged to consult an attorney, tax professional, or the IRS for advice.
  • Virginia Tax is unable to guarantee that any LPC-1 application will be processed in time to make a transfer in that year. Therefore, you are encouraged to file your application as early as possible.

Appraisers

The credit is based on 40% of the fair market value of the donation as determined by a qualified appraiser in a qualified appraisal as defined by federal law and regulations governing charitable contributions.

For the purposes of the LPC, any qualified appraiser must be licensed in Virginia as provided in Virginia Code § 54.1-2011.

If the appraiser falsely or fraudulently overstates the value of the donated property, Virginia Tax is authorized to disallow further appraisals signed by that appraiser. In addition, we may disregard an appraisal that is false or fraudulent in determining the fair market value of the donation.

Appraisers must follow the Uniform Standard of Professional Appraisal Practice (USPAP), § 170(h) of the Internal Revenue Code, and Virginia Code § 58.1-512.C for all LPC donations/appraisals. 

LPC Applications are subject to review or audit by Virginia Tax at any time during the application process or within the applicable statute of limitations.

Frequently Asked Questions

How long does it take to process my application?

For donations of less than $1 million, it will take approximately 15 business days to process a completed application. However, during our busy season (October-January), it could take approximately 30 days due to the volume of applications we receive at this time. Applications for credits of $1 million or more can take up to 30-45 days to process.

How and when does the 2% transfer fee apply?

The fee applies when the credit is allocated, sold or transferred, except in the case of transfers of unused credits upon the death of the original credit holder (donors who originally earned the credit) to a designated beneficiary occurring on or after July 1, 2018.

Does the fee apply to a Disregarded Entity/Single Member LLC?

Currently, Virginia Tax's administrative process allows us to waive the allocation fee if an entity is disregarded for federal income tax purposes (e.g., a grantor trust or a single member LLC). We can accept a copy of the federal tax return that includes the donor's information (Form 1040 Schedule C or E) and a copy of the entity’s operating agreement to support this designation.

How do I complete Section VI - Less-Than-Fee Simple Donation?

This section should be completed by describing how the donation meets the requirements of § 170(h) of the Internal Revenue Code, as amended. Briefly describe how the donation provides conservation value: preserves wildlife, water quality, perpetual conservation and open space, scenic enjoyment, etc. Easements are less-than-fee simple because they provide partial rights to a parcel of land. A fee simple interest provides full rights and title to the land. Virginia Tax cannot accept any referrals to the deed of gift.