By TIM THORNBERRY
Kentucky Correspondent

FRANKFORT, Ky. — It is no secret to farmers that much of the rural land across the country has been transformed into housing developments and shopping centers through the years.

According to the National Resources Inventory (NRI), in Kentucky an estimated 47,400 acres of farmland were converted to non-agricultural uses each year from 1992-97. That equates to about 130 acres per day; and if that rate continues, another 10 percent of the state’s total farmland will be lost by the year 2020.

Since 1994, however, the state has had a program in place to help conserve rural and farm land for future generations.

The Purchase Agricultural Conser-vation Easements (PACE) was established by the Kentucky General Assembly to purchase agricultural conservation easements so that land currently being used for agricultural purposes would remain that way.

The program is administered by the Kentucky Department of Agriculture (KDA).

Since the program began, PACE has purchased agricultural conservation easements on 88 farms, totaling 20,927 acres, for $17,873,444 – averaging $854 per acre.

Additionally, the program has received 32 donated easements totaling 4,219 acres. KDA has received 801 applications from 75 counties statewide, totaling more than 156,000 acres since the program’s inception.

While participants won’t get rich, there are many advantages to “selling into” the plan. First, the program is strictly voluntary and enables landowners to realize a portion of the equity in their land without having to sell it.

Second, proceeds from the sale of an easement can be used for any purpose – including paying off a mortgage, starting a new business, the purchase of new land or equipment, helping with farm diversification or expansion or aiding in the transition of one generation of farmers to the next.

Those choosing to donate land are eligible for tax benefits through the program. The donation is considered a tax-deductible gift, so long as it is perpetual and donated for conservation purposes only.

According to KDA’s Office of Agricultural Marketing and Product Promotion, which oversees the Farmland Preservation Program, “the landowner is eligible to deduct an amount equal to 30 percent of adjusted gross income each year for a total of six years or until matching the value of the gift.”

For example, if a landowner has an annual federal adjusted gross income of $100,000, they may deduct $30,000 a year for the next six years if that income does not change. Six years at $30,000 amounts to a $180,000 total federal tax deduction.

In 2006-07, federal tax incentives of the program were expanded when legislation was passed and signed into law last August making conservation easements more attractive and accessible to family farmers, ranchers and other moderate income landowners.

Changes included raising the maximum tax deduction a landowner can take for donating an easement from 30 percent of adjusted gross income to 50 percent.

Also, qualifying full-time farmers and ranchers may now deduct up to 100 percent of their adjusted gross income from their federal taxes, and the carry-forward period for a donor to take tax deductions for a voluntary conservation agreement was extended from 5-15 years, or until the value of the gift is exhausted. If the value of the gift is met in 10 years, then that is the end of the deduction.

Kentucky Agriculture Commissioner Richie Farmer has advised potential participants those increased incentives have a time limit.

“These incentives are scheduled to expire at the end of the year,” Farmer said. “They enable Kentucky’s many family farmers and moderate-income landowners to conserve the land they love, while obtaining a significant tax benefit for making the charitable donation of a conservation easement.”

Brent Frazier, program manger for PACE, hopes the expanded incentives will become the rule rather than the exception.

“We hope these changes become permanent,” he said. “Preservation groups like the Land Trust Alliance and American Farmland Trust are currently expressing their wishes to legislators to make these expansions permanent. But right now, time is of the essence, and we need to have the applications from those wishing to get into the program into my office as soon as possible.”

Frazier encourages anyone who wishes to participate to contact their financial counselor or accountant first because different situations create different results for the tax benefits.

A total of 655 applications are currently pending for more than 126,000 acres with an estimated easement value of more than $100 million.

For more information on PACE, contact Brent Frazier at 502-564-4696, by e-mail at brent.frazier@ky.gov or visit www.kyagr.com/ marketing/farmland/index.htm