Detailed Final Steps
Even after the doner has formally approved the donation, a significant amount of work remains to be done. Some of the steps—and Conservation Partners’ capacity to make these steps go smoothly and in a timely fashion at a lower cost to the donor—are described below.
Completing the Donation:
The steps below will have to be completed before the donor can apply for a land preservation tax credit. Conservation Partners will work with the donor’s advisors and the recipient of the gift (the holder) to complete these tasks in a timely manner.
- Final Deed of Gift, Title Work, and Lien Subordination: The holder’s staff will work with the donor’s attorney to produce a final Deed of Gift. A crucial part of this process will be the resolution of any outstanding title issues before recordation, particularly the release or proper subordination of any mortgage liens (deeds of trust) on the property. Conservation Partners frequently works with banks and other lenders to help facilitate lien subordination or release and refinancing.
- Baseline Documentation: Generally prepared by the holder’s staff, the “baseline documentation report” is required for future stewardship of conservation easement donations and includes maps, reports, photographs, and other materials to establish the condition of the property at the time the easement is donated. Conservation Partners works with the holder to help ensure the baseline report is completed prior to recording the easement.
- Recordation of the Donation: When the Deed of Gift has been has been reviewed by all parties and is in its final form, it must be (i) signed by the donor, (ii) delivered to the holder for their signature, (iii) delivered to the person responsible for recordation and final title work, and (iv) recorded in the Clerk’s Office of the Circuit Court of the jurisdiction where the protected property is located. Conservation Partners will secure a copy of the recorded deed with recordation stamp and receipt and then forward a copy to the appraiser. A copy of the deed also will be included in the donor’s land preservation tax credit application.
- The Appraisal: The final appraisal report must be included with the land preservation tax credit application. The process of finalizing the lengthy—often 200 pages or more—report can be complex and subject to unexpected delays, but Conservation Partners will work directly with the appraiser to expedite this step.
Applying for the Land Preservation Tax Credit:
Formal application for a land preservation tax credit (tax credit) cannot begin until the Deed of Gift has been signed and recorded and the appraisal finalized and delivered. The tax credit application process entails the preparation, review, collection, and filing of the necessary documentation with the Virginia Department of Taxation (Tax Department).
These steps often are complicated, and the registration process can easily bog down if not actively managed by someone familiar with the Tax Department’s particular requirements. Conservation Partners has over a decade of experience facilitating and expediting the complex tax credit application process, and we have an exceptional record of timely submission of complete tax credit applications to the Tax Department.
- Tax Credit Application Documents. Conservation Partners will facilitate the drafting, finalization, and circulation of various application documents for review by the appropriate parties:
a) Virginia Form LPC-1, including any necessary Schedules.
b) Copy of Federal Form 8283 and Supplemental Statement (necessary for inclusion with Form LPC-1).
c) Credit Entitlement Agreement (if there are multiple donors).
d) Entity Distribution Letter (if donor is a pass-through entity).
e) If the donor is not an individual person, the Tax Department may require copies of entity formation documents and/or other proof of authorization.
f) A Form TCD-1 is necessary to allow advisors or consultants to communicate directly with the Tax Department about the donor’s tax credit.
- Application Document Review, Approval, and Execution. Conservation Partners expedites the final reviews and approvals of all parts of the Form LPC-1 tax credit application by donors and their tax advisors. Once the donor and tax advisor have approved the application, Conservation Partners will circulate the application documents for signature by the donor, holder, appraiser, and any other necessary parties.
- Compile and Submit the Application. The Form LPC-1 application package must include the applicable documents listed above along with a copy of the Deed of Gift showing the recordation information and a copy of the final appraisal report. Conservation Partners will compile the package and submit it to the Tax Department. If final DCR verification and approval are required, we will expedite the additional steps.
- Application Processing. The Tax Department will process the application and determine whether to issue a registration number for the tax credit. Depending on the time of year, the Tax Department’s process can take several weeks or longer. Conservation Partners, with donor’s approval, will receive a copy of the donor’s tax credit registration letter, which will allow us to market the donor’s tax credit quickly.
Marketing and Transferring the Land Preservation Tax Credit:
- Tax Credit Marketing and Sales Contracts. Simultaneously with the drafting and compilation of the Form LPC-1 application package, the donor works with Conservation Partners to finalize contracts that address the marketing and sale of the donor’s tax credit.
- Marketing the Tax Credit. Once the Tax Department issues the tax credit registration number, and the donor has determined their selling schedule, Conservation Partners will offer the tax credit for sale.
- Selling the Tax Credit. Once buyers have been located, Conservation Partners will complete the steps necessary for each sale of a portion of the donor’s tax credit, listed below. For the donor working with Conservation Partners, these steps are seamless. We manage each step of the process and forward you the proceeds from the sale as well as copies of the closing documents once the transfers are complete.
a) In a typical transaction, the donor will enter into a formal agreement with the buyer, and once payment is made and cleared, the Virginia Tax Department Form LPC-2 will be completed and signed by the donor and filed with the Tax Department.
b) To reduce transaction costs and delays, Conservation Partners’ system provides our donors the means to authorize certain Conservation Partners personnel to sign standardized agreements and Forms LPC-2 on their behalf, which accelerates the completion of the transfer process and subsequently the disbursement of the sales proceeds.
c) The Tax Department imposes a five percent (5%) transfer fee on transfers of land preservation tax credits. Conservation Partners automatically advances this transfer fee, subject to reimbursement after the transfer is complete.
d) Conservation Partners offers a one-of-a-kind automated transfer system that makes it easier than ever for Virginia taxpayers to purchase tax credits. Our system allows us to manage a high volume of tax credit purchases quickly and securely. This means our donors receive their tax credit sales proceeds in a timely manner.
4. Sales Proceeds. Conservation Partners works with our wholly-owned subsidiary, Conservation Escrow Services, LLC, to streamline and simplify the settlement process. This new settlement program facilitates quicker payment of net proceeds to sellers, and significantly simplifies sellers’ accounting for tax and other purposes.
Conservation Escrow Services, LLC receives the various buyers’ checks for each credit sale and periodically issues payments to the donor after Conservation Partners’ fee and the transfer fee paid to the Virginia Department of Taxation have been deducted. Any costs advanced on the donor’s behalf through the Advance Funding Program also will be deducted prior to issuing the donor’s check.
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