Senate Finance Hears of Land Use Alternatives

June 13, 2001

The president of Delta Land & Farm Management Co. told the Senate Finance Committee Tuesday that without adequate funding for farmer conservation incentives, producers will not be able to afford putting land to alternative uses. Elton Kennedy, Mer Rouge, LA, said many such USDA programs are unfunded, and the current tax deduction for qualified agricultural producers does not provide meaningful incentives for landowners to donate an easement.

As a result, "tremendous conservation benefits are missed, and we continue to support marginal agricultural operations on lands that are far better suited to conservation," Kennedy said. "I urge you to provide adequate incentives for all landowners to protect existing wildlife habitat and to restore marginal farmland that was once part of our Mississippi Alluvial Plain. It will provide for a cleaner environment, provide habitat for wildlife, reduce the hypoxic zone in the Gulf of Mexico, and reduce the tax payers burden by reducing crop insurance, disaster payments and other associated costs for keeping marginal farmland in production."

Kennedy told the panel that like many farmers, he tries to use his land for its "highest and best use in order to make it economically viable." However, he realized years ago that the highest and best use "was not always crop production."

He added, "Due to a high recreational demand by the public and the compatibility with rice farming, many of us in northeast Louisiana and other parts of the Lower Mississippi Valley have found that waterfowl hunting offers an alternative that can be economically rewarding. Waterfowl hunters are willing to pay for hunting in rice or other flooded agricultural fields."

Chase Hibbard of the Montana Land Reliance said most small towns and rural communities depend on agriculture, and the economic prosperity of the state is closely linked to the prosperity of agriculture. "Unfortunately, it is in trouble," he said. Over the past 25 years, more than 3 million acres of agricultural land have been lost to development in Montana alone. "Many of these acres were lost when family farms, hit hard by tough times, chose to give-up their generations old farming operations and sold to developers in order to pay their outstanding debts," Hibbard added.

He said a Senate bill titled the "Rural Heritage Conservation Act," will expand the current conservation easement tax incentive program to make the system work better "for the bulk of real, working farmers and ranchers who would like to preserve their land for future generations but for whom the current system does not provide any meaningful incentive."

The bill, S. 701, is an expanded deduction that will allow qualified farm and ranch filers to donate a conservation easement to a qualified land trust. "Put simply, the current limitations on deductions from gross income provide little real incentive for working farm and ranch households to place a conservation easement on their property," Hibbard said. "The issue is income. Too often, farmers and ranchers do not have an income level that allows them to use the current statutory deduction."

This is not generally a problem for more affluent taxpayers, who are able to fully utilize an equivalent deduction amount within the existing carry-forward period. "The relatively small deduction that working farmers and ranchers can currently obtain by donating a conservation easement does not in any way equate to either the potential income they have forfeited by not selling their land for development or the value the public has gained from the donation," he said.