Gross Conservation Easement Credit
Regulation 39-22-522
1)	Qualified Taxpayer
a) 	Taxpayers qualified to claim the gross conservation easement credit (including transferees of these credits) are:
i)	Colorado residents, 
ii)	C corporations, 
iii)	trusts, 
iv)	estates, 
v)	partners, shareholders or members of pass-through entities who receive the credit from such entity, regardless of whether such individuals are Colorado residents. 
b) 	Joint tenancy, tenancy in common, pass through entity such as a partnership or S corporation, or other similar entity or group that makes a donation that generates a gross conservation easement credit must allocate the credit to the entity’s owners, partners, shareholders or members in proportion to their distributive shares of income or ownership percentage from such entity or group.
c) 	A limited liability company with only one member will generally be disregarded for federal tax purposes (I.R.S. Regulation 301.7701-3) as well as state tax purposes. Therefore, the sole member does not qualify as a "member of a pass-through entity" and does not qualify for the conservation easement credit unless the member is a Colorado resident.
d) 	Individuals who are not residents of Colorado cannot claim the gross conservation easement credit for a donation they make or for a credit they purchase. Part-year residents may claim the credit, but only if they make the donation while they are a Colorado resident. Only a credit apportioned to nonresident partners, shareholders or members of a pass-through entity can be claimed by the nonresidents. Nonresident owners included in a joint tenancy, tenancy in common, and similar groups cannot claim the gross conservation easement credit.
2)	Claiming the Gross Conservation Easement Credit
a)	Donations made on or after January 1, 2000 but prior to January 1, 2003.
i)	A credit is generated from the donation of a single perpetual conservation easement in gross.
ii) 	The credit cannot exceed $100,000.
iii) 	A taxpayer can claim only one tax credit per income tax year.
iv) 	A taxpayer cannot claim a tax credit on a donation made during a tax year if:
A)	the taxpayer has a carryover gross conservation easement credit from a prior tax year, or
B)	another taxpayer that has purchased a gross conservation easement credit from the taxpayer is carrying all or part of the purchased credit to the tax year.
b)	Donations made on or after January 1, 2003 but prior to January 1, 2007.
i)	A credit is generated from the donation of a single perpetual conservation easement in gross.
ii)	The credit cannot exceed $260,000 (100% of the first $100,000 plus 40% of any amount in excess of $100,000).
iii)	A taxpayer can claim only one tax credit per income tax year that is generated by the donation of a perpetual conservation easement in gross by the taxpayer, either directly or by a pass-through entity in which the taxpayer is a partner, shareholder or member. A taxpayer cannot earn multiple credits in one year from multiple donations even if the donations are made by different pass-through entities. [See §39-22-522(6), C.R.S.]
iv)	A taxpayer cannot claim a tax credit on a donation made during a tax year if:
A)	the taxpayer has a carryover gross conservation easement credit from a prior tax year, or 
B)	another taxpayer that has purchased a gross conservation easement credit from the taxpayer is carrying all or part of the purchased credit to the tax year. 
c)	Donations made on or after January 1, 2007.
i)	A credit is generated from the donation of a single perpetual conservation easement in gross.
ii)	The credit cannot exceed $375,000 (50% of the first $750,000).
iii)	A taxpayer can claim only one tax credit per income tax year that is generated by the donation of a perpetual conservation easement in gross by the taxpayer, either directly or by a pass-through entity in which the taxpayer is a partner, shareholder or member. A taxpayer cannot earn multiple credits in one year from multiple donations even if the donations are made by different pass-through entities. [See §39-22-522(6), C.R.S.]
iv)	A taxpayer cannot claim a tax credit on a donation made during a tax year if:
A)	the taxpayer has a carryover gross conservation easement credit from a prior tax year, or 
B)	another taxpayer that has purchased a gross conservation easement credit from the taxpayer is carrying all or part of the purchased credit to the tax year.
d)	Transferred Credits.
i) 	A taxpayer cannot purchase a tax credit during a tax year beginning on or after January 1, 2000, but prior to January 1, 2003, if:
A)	the taxpayer claimed a credit generated from the donation of a single perpetual conservation easement in gross made during the tax year, or 
B)	the taxpayer has a carryover gross conservation easement credit available during the tax year from a prior year, or 
C)	another taxpayer that has purchased a gross conservation easement credit from the taxpayer is carrying all or part of the purchased credit to the tax year. 
ii) 	A taxpayer cannot purchase a tax credit during a tax year beginning on or after January 1, 2003 if:
A)	the taxpayer claimed a credit generated from the donation of a single perpetual conservation easement in gross made during the tax year, or 
B)	the taxpayer has a carryover gross conservation easement credit available during the tax year from a prior year, except that this paragraph B will not apply if the carryover credit is a result of an unused purchased credit from a prior year, or 
C)	another taxpayer that has purchased a gross conservation easement credit from the taxpayer is carrying all or part of the purchased credit to the tax year. 
iii)	During tax years beginning on or after January 1, 2000, but prior to January 1, 2003, a taxpayer can purchase and claim one gross conservation easement credit each tax year subject to the limitations in paragraph i.
iv)	During tax years beginning on or after January 1, 2003, a taxpayer can purchase and claim an unlimited number of credits subject to the limitations in paragraph ii. The total value of the purchased credits claimed in any tax year is not limited to the $260,000 or $375,000 amounts.
e)	The total amount of credit a married couple can generate in a year, regardless of whether they file jointly or separately, is $100,000 for tax years 2000 through 2002, $260,000 for tax years 2003 through 2006, and $375,000 for tax year 2007 and after. Similarly, the sum total of credits that all partners, shareholders or members of a pass-through entity, which makes a donation, can generate is $100,000 for tax years 2000 through 2002, $260,000 for tax years 2003 through 2006, and $375,000 for tax year 2007 and after.
f)	Tenants in Common, Joint Tenancy, and Similar Ownership Groups.
The total credit generated by the donation of a perpetual conservation easement in gross by tenants in common, joint tenants, and similar ownership groups is limited to $100,000 for tax years 2000 through 2002, $260,000 for tax years 2003 through 2006, and $375,000 for tax year 2007 and after.

3)	Transfer of credits.
a)	A taxpayer can transfer all or part of a credit to a transferee who meets the qualifications of a taxpayer who can claim the credit. The portion of the credit being transferred must not be claimed by the transferor to offset tax or to claim a refund on any income tax return.
b) 	A credit can be transferred only once. A transferee, to whom a credit is transferred, cannot thereafter transfer the credit to another taxpayer.
c) 	For donations made during tax years beginning prior to January 1, 2003, the minimum amount of credit that can be transferred to any one taxpayer is $20,000. For donations made during tax years beginning on or after January 1, 2003, the donor can transfer all or any pro-rated portion of the credit. Credits transferred after January 1, 2003 that arise from donations made prior to that date are subject to the $20,000 limit.
d) 	A transferred credit claimed by a transferee can never exceed the net tax liability reported on the tax return.
e) 	Transfer Timing.
i)	For transfers completed prior to June 7, 2005, a transferee of a conservation easement credit must purchase the credit prior to the end of the tax year to be able to claim the credit during that tax year. A purchased credit cannot be claimed or carried back to a tax year that ended prior to the day the credit was purchased.
ii)	For transfers completed on or after June 7, 2005, a transferee of a conservation easement credit must purchase the credit by the due date of the income tax return, not including extension of time for filing, on which the credit will be claimed. However, the donation of the conservation easement must occur prior to the end of the transferee’s tax year.
f)	If a taxpayer sells a conservation easement credit to another taxpayer and that credit is later disallowed in an audit, the transferee will be held liable for the disallowed credit that was claimed plus any applicable penalty and interest.

g)	A pass through entity can directly transfer a credit if:
i)	Each partner, shareholder or member consents to the transfer, and
ii) 	Each partner, shareholder or member could, under the restrictions of the law and this regulation, have claimed and transferred their pro rata share of the credit directly.
h)	A pass through entity can not qualify as the transferee of a credit.
i)	Upon the death of a taxpayer, a gross conservation easement credit passes to the decedent’s estate. If the decedent is the donor of the easement, the estate may use the credit to offset income tax owed by the estate or may transfer some or all of the credit according to the transfer rules. If the decedent is a transferee of the credit, the estate may use the credit to offset income tax owed by the estate but can not transfer the credit.
j)	Tax Matters Representative. The tax matters representative (TMR) is the person who donates the conservation easement and/or transfers the credit. A pass-through entity that donates the easement and passes the credit to, or sells the credit on behalf of, its partners, shareholders or members, is the TMR, unless the entity’s status as the TMR is otherwise revoked or changed in accordance with subsections iv and v below. 
i)	Representation. The value and validity of a gross conservation easement credit held by a transferee is derived from, and dependent on, the credit generated and/or transferred by the TMR. Therefore, an adjustment of a credit, to the extent such adjustment is based on a Transfer Item (“Transfer Item Adjustment”), made by the Department against the TMR shall also be binding on the transferee. Final resolution of disputes between the Department of Revenue and the TMR shall be binding on transferees of the credit.
(1)	Notice to TMR and Transferee. The Department shall initiate a Transfer Item Adjustment to a credit by issuing to the TMR a notice, which shall set forth the proposed adjustment, regardless of whether the state tax liability of the TMR is affected by the proposed adjustment. The Department shall also send to the transferee a notice of the Department’s proposed Transfer Item Adjustment of the transferee’s credit. However, because the Department cannot release confidential tax information regarding the TMR’s credit, the transferee must contact the TMR for details of the Transfer Item Adjustment.
(2)	Multiple Transferees. If there is more than one transferee of a credit, the Department will generally allocate proportionally the Transfer Item Adjustment based on the percentage of the overall credit originally transferred to the transferees. However, the Department may allocate the adjustment among and between the transferees in any manner it deems appropriate.
(3)	Request for Hearing. A request pursuant to §§39-21-103 or 104, C.R.S. for hearing on a Transfer Item Adjustment, including a Transfer Item Adjustment that results in the denial or modification of the transferee’s credit, can be made only by the TMR. A transferee does not have a right to protest the Notice of Deficiency or refund change issued to the transferee (including the allocation of the adjustment between or among transferees) to the extent the adjustment is based on a Transfer Item Adjustment. The Department will issue pursuant to §39-21-103, C.R.S. a notice of final determination regarding the Transfer Item Adjustment. The TMR, not the transferee, may appeal the determination in accordance with §39-21-105, C.R.S.
(4)	Notification. Notification of the results of the hearing and appeal process to the transferees will be the responsibility of the TMR.
ii)	Gross Conservation Easement Transfer Items (“Transfer Items”). Transfer items include, but are not limited to:
(1)	the conservation easement appraisal and credit valuation, 
(2)	validity of the donation under article 30.5 of title 38, C.R.S., 
(3)	compliance of the donation to the requirements of §170(h) IRC, and 
(4)	other such matters of the donation and/or credit that affect both the donor and transferees.
iii)	Effective Date. The rights and responsibilities of the TMR and transferee, including the right to a hearing, appeal, notification, and limitations of action set forth in 39-22-522(7)(i) and (j), C.R.S. apply to Transfer Item Adjustments initiated by the Department on or after June 7, 2005.
iv)	Changing the TMR Designation. The TMR designation can be changed upon a written request by a transferee if the TMR:
(1)	is incarcerated;
(2)	is residing outside the United States, its possessions, or territories;
(3)	is deceased or, if the representative is an entity, is liquidated or dissolved;
(4)	is under eighteen years of age at the time the Transfer Item Adjustment is initiated by the Department, or a court determines the person to be legally incompetent; or
(5)	Cannot be located or cannot perform the functions of a TMR for any reason, except that lack of cooperation with the Colorado Department of Revenue by the representative is not a basis for finding that the representative cannot perform the functions of a TMR.
v)	Criteria for Representation. The Department of Revenue will determine the appropriate person to serve as TMR and whether a request to change the designation of a TMR is valid. Criteria to be considered when determining who will serve as the TMR includes:
(1)	The general knowledge of the donor or transferor regarding the gross conservation easement transfer items at issue.
(2)	The donor’s or transferor’s access to the records of the conservation easement.
(3)	The views of the transferee’s involved in the transaction.
vi)	Statute of Limitations. Any extension to the statute of limitations agreed to by the TMR will also apply to the transferees of the credit, but only to the extent that it applies to Transfer Item Adjustments.
4)	Refundable credit.
a)	Taxpayers, but not transferees of such credits, can claim a refund of the conservation easement credit if State revenues are in excess of the limitation on state fiscal year spending imposed by section 20(7)(a) of article X of the state constitution. See Regulation 39-22-120 for years in which the subtraction is available.
b) 	For credits arising from donations made during tax years beginning on or after January 1, 2000, but before January 1, 2003, the maximum credit that can be claimed if a portion is being refunded is $20,000 per year. This limit increases to $50,000 for credits arising from donations made in tax years beginning on or after January 1, 2003. The maximum credit includes the aggregate credits utilized by both donors and transferees generated by the conservation easement donation.
c) 	The credit a married couple can claim each tax year, regardless of whether they file jointly or separately, is $20,000 ($50,000 for donations made in 2003 and after) if either or both of them claim a refund created by this credit. Similarly, the total of all credits claimed in any given tax year by members of a pass-through entity, tenants in common, joint tenancy, or similar ownership group which makes a donation, is $20,000 ($50,000 for donations 2003 and after) if one or more such partners, shareholders, members or owners claim a refund based on this credit. 
5)	Qualifying Donation.
To qualify for the gross conservation easement credit, a donation must:
a)	be a donation of a perpetual conservation easement in gross on real property located in Colorado,
b)	be made to a governmental entity or a charitable organization that is exempt under section 501(c)(3) of the Internal Revenue Code of 1954, as amended,
c)	qualify as a charitable contribution for federal income tax purposes under the Internal Revenue Code.
6)	Credit Carry Forward.
a) 	Once a credit is claimed by a Colorado resident, any excess credit may be carried forward by that taxpayer for up to twenty years from the year the perpetual conservation easement in gross that generated the credit was originally donated.
b) 	A taxpayer who later moves to another state remains eligible to claim this carry forward credit during the carry forward period despite being a nonresident of Colorado.
c)	A taxpayer may elect to abandon and not carryover a credit and, thereby, avoid the prohibition in subparagraphs (2)(a)(iv), (2)(b)(iv) and (2)(c)(iv), above, against claiming a new credit. The abandonment of a credit should be stated on the income tax return, original or amended, in lieu of the statement of the amount of credit carryforward to the following tax year.