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85–675 2003

TAX INCENTIVES FOR LAND USE, CONSERVATION,

AND PRESERVATION

HEARING

BEFORE THE

SUBCOMMITTEE ON SELECT REVENUE MEASURES

OF THE

COMMITTEE ON WAYS AND MEANS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

APRIL 30, 2002

Serial No. 107–93

Printed for the use of the Committee on Ways and Means

(

ii

COMMITTEE ON WAYS AND MEANS

BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

AMO HOUGHTON, New York 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

JENNIFER DUNN, Washington 

MAC COLLINS, Georgia 

ROB PORTMAN, Ohio 

PHIL ENGLISH, Pennsylvania 

WES WATKINS, Oklahoma 

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

SCOTT MCINNIS, Colorado 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

ROBERT T. MATSUI, California 

WILLIAM J. COYNE, Pennsylvania 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

GERALD D. KLECZKA, Wisconsin 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

KAREN L. THURMAN, Florida 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

Allison Giles, Chief of Staff

Janice Mays, Minority Chief Counsel

SUBCOMMITTEE ON SELECT REVENUE MEASURES

JIM MCCRERY, Louisiana, Chairman

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

MICHAEL R. MCNULTY, New York 

RICHARD E. NEAL, Massachusetts 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

iii

C O N T E N T S 

Page 

Advisory of April 23, 2002, announcing the hearing ............................................ 2

WITNESSES 

U.S. Department of the Treasury, Pamela F. Olson, Acting Assistant Secretary for Tax Policy ............................................................................................ 26

American Forest & Paper Association, and Temple-Inland Forests Products 

Corporation, Jim DeCosmo .................................................................................. 63

Blumenauer, Hon. Earl, a Representative in Congress from the State of 

Oregon ................................................................................................................... 18

Dunn, Hon. Jennifer, a Representative in Congress from the State of Washington .................................................................................................................... 13

Evergreen Forest Trust: 

Charles W. Bingham ............................................................................................ 53

Eugene G. Duvernoy, Cascade Land Conservancy ............................................ 56

Isakson, Hon. Johnny, a Representative in Congress from the State of Georgia .......................................................................................................................... 22

Johnson, Hon. Nancy L., a Representative in Congress from the State of 

Connecticut ........................................................................................................... 10

Land Trust Alliance, Rand Wentworth .................................................................. 59

Portman, Hon. Rob, a Representative in Congress from the State of Ohio ........ 7

Sawyer, Christopher Glenn, Atlanta, GA .............................................................. 38

Nature Conservancy, Steven J. McCormick .......................................................... 44

Real Estate Roundtable, and Lowe Enterprises, Inc., Timothy Brazell .............. 48

Weller, Hon. Jerry, a Representative in Congress from the State of Illinois ..... 16

SUBMISSIONS FOR THE RECORD 

American Farm Bureau Federation, statement .................................................... 74

American Farmland Trust, Ralph Grossi, statement ........................................... 76

Chesapeake Bay Foundation, Inc., Annapolis, MD, Lee R. Epstein, statement . 77

Ducks Unlimited, Memphis, TN, Scott Sutherland, letter ................................... 47

Houghton, Hon. Amo, a Representative in Congress from the State of New 

York, statement .................................................................................................... 73

Montana Land Reliance, Helena, MT, statement ................................................. 75

Neal, Hon. Richard E., a Representative in Congress from the State of Massachusetts, statement .............................................................................................. 5

Trust for Public Land, San Francisco, CA, Alan Front, statement ..................... 78

(1)

TAX INCENTIVES FOR LAND USE, 

CONSERVATION, AND PRESERVATION 

TUESDAY, APRIL 30, 2002

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SELECT REVENUE MEASURES, 

Washington, DC.

The Subcommittee met, pursuant to notice, at 2:05 p.m., in room 

1100 Longworth House Office Building, Hon. Jim McCrery (Chairman of the Subcommittee) presiding. 

[The advisory announcing the hearing follows:]

2

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

FOR IMMEDIATE RELEASE CONTACT: (202) 226–5911

April 23, 2002

No. SRM–5

McCrery Announces Hearing on Tax Incentives

for Land Use, Conservation, and Preservation

Congressman Jim McCrery (R–LA), Chairman, Subcommittee on Select Revenue 

Measures of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on tax incentives for land use, conservation, and preservation. The hearing will take place on Tuesday, April 30, 2002, in the main 

Committee hearing room, 1100 Longworth House Office Building, beginning at 2:00 p.m.

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND:

The Internal Revenue Code includes a number of incentives to encourage responsible stewardship of the land, including the deductibility of gifts of land to charitable institutions, the deductibility of gifts of conservation easements, and the expensing of environmental remediation costs. The hearing will examine proposals designed to improve upon those incentives and further encourage the preservation of 

open spaces.

In announcing the hearing, Chairman McCrery stated: ‘‘Across America, once-pristine natural resources are giving way to the spread of urban areas. In many cases, 

the estate tax’s valuation rules have forced family farms to be sold to developers. 

This hearing will give the Committee a better handle on the challenges facing communities working to preserve open spaces and the ways in which the tax code might 

help those efforts.’’

FOCUS OF THE HEARING:

The focus of the hearing will be to examine several proposals which expand the 

tax incentives available to individuals and groups seeking to preserve open spaces 

and promote conservation. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note: Due to the change in House mail policy, any person or organization 

wishing to submit a written statement for the printed record of the hearing should 

send it electronically to hearingclerks.waysandmeans@mail.house.gov, along with a 

fax copy to (202) 225–2610, by the close of business, Tuesday, May 14, 2002. Those 

filing written statements who wish to have their statements distributed to the press 

and interested public at the hearing should deliver their 200 copies to the Subcommittee on Select Revenue Measures in room 1135 Longworth House Office 

Building, in an open and searchable package 48 hours before the hearing. The U.S. 

Capitol Police will refuse unopened and unsearchable deliveries to all House Office 

Buildings. 

FORMATTING REQUIREMENTS:

Each statement presented for printing to the Committee by a witness, any written statement 

or exhibit submitted for the printed record or any written comments in response to a request 

for written comments must conform to the guidelines listed below. Any statement or exhibit not 

in compliance with these guidelines will not be printed, but will be maintained in the Committee 

files for review and use by the Committee.

3

1. Due to the change in House mail policy, all statements and any accompanying exhibits for 

printing must be submitted electronically to hearingclerks.waysandmeans@mail.house.gov, along 

with a fax copy to (202) 225–2610, in Word Perfect or MS Word format and MUST NOT exceed 

a total of 10 pages including attachments. Witnesses are advised that the Committee will rely 

on electronic submissions for printing the official hearing record.

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee.

3. Any statements must include a list of all clients, persons, or organizations on whose behalf 

the witness appears. A supplemental sheet must accompany each statement listing the name, 

company, address, telephone and fax numbers of each witness.

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov.

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226–

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.

Good afternoon, everyone. 

Chairman MCCRERY. The Subcommittee will come to order. 

f Today, the Subcommittee on Select Revenue Measures will learn 

more about the issue of urban sprawl and whether the tax code can 

encourage conservation through responsible land use. We are fortunate to have a distinguished group of witnesses today, including 

many of our colleagues in Congress whose efforts have landed this 

issue onto our Subcommittee’s agenda. 

I am also pleased to welcome later Ms. Pam Olson, who is the 

Acting Assistant Secretary for Tax Policy. She is attempting to fill 

the very large shoes of our friend, Mark Weinberger, who has left 

U.S. Department of the Treasury. We look forward to Ms. Olson’s 

testimony about the conservation proposals in President Bush’s 

budget. 

Across the country, economic progress has been marked by the 

urbanization of America. In many parts of our country, cities seem 

to have grown steadily outward until they meet their nearest 

neighbor. In this area, it is becoming difficult to tell when one 

leaves the Washington metropolitan area and enters the Baltimore 

metropolitan area. 

Land which has been farmed for generations is being converted 

to golf courses, housing developments, and shopping centers. Small 

towns once thought to be far from the nearest urban area now find 

themselves becoming bedroom communities and home to thousands 

of commuters who seem to spend as much time getting to and from 

their work as they actually spend in their office. 

In some ways, this march of progress is a sign of our economic 

strength. Farmers are able to grow more food on less land, while 

the offices and factories of America turn out new and better products for consumption here and across the globe. 

This transformation of America’s land and its use does not come 

without a price, though. Swimming holes are giving way to swimming pools and open spaces are being leveled to make room for 

open houses. Stands of trees are being replaced by nurseries where 

one can buy a tree or a shrub for his new house. It is becoming 

more difficult to take a stroll in the woods with your family, though 

4

there might be a designated walking path around the artificial lake 

in the middle of your housing development. 

In some ways, the tax code contributes to the urbanization of 

America. Today, we will hear about how the cost of remediating 

brownfields discourages developers from locating in and helping to 

rebuild blighted urban areas. We will hear how pressures of the estate tax can force estates to sell family farms to developers in order 

to pay Uncle Sam. We will also hear about proposals which help 

local governments and nonprofit groups raise funds necessary to 

prevent over-development in their communities. 

In a free market, land holders must be allowed to enjoy the appreciation in the value of their land. Accordingly, I think Congress 

must proceed very carefully on any proposal which would deprive 

them of the freedom to dispose of their land as they choose. 

The proposals being discussed today generally do not suffer from 

that flaw. Rather than handcuffing landowners, they use various 

tools to encourage voluntary transactions in which property owners 

dedicate their land to conservation purposes. Some of the proposals 

achieve that goal by increasing the deductions available to landowners for preserving open spaces for future generations. Others 

make it easier for nonprofits and government organizations to raise 

the money necessary to purchase lands for conservation purposes. 

Underlying each proposal is a belief that the loss of open spaces 

and the conversion of farms to freeways comes at some cost to the 

community, a so-called negative externality. These proposals attempt to act as a counterweight so local communities will not have 

to view the loss of their natural surroundings as an inevitable consequence of progress. 

[The opening statement of Chairman McCrery follows:]

Opening Statement of the Hon. Jim McCrery, Chairman, and a 

Representative in Congress from the State of Louisiana 

The Subcommittee will come to order. I ask our guests to please take their seats. 

Good afternoon. Today, the Subcommittee on Select Revenue Measures will learn 

more about the issue of urban sprawl and whether the tax code can encourage conservation through responsible land use. We are fortunate to have a distinguished 

group of witnesses today, including many of our colleagues in Congress whose efforts have landed this issue onto the Subcommittee’s agenda. 

I am also pleased to welcome Ms. Pam Olson, who is the Deputy Assistant Secretary of Tax Policy and who is stepping into the very large shoes left behind by 

Mark Weinberger. We look forward to Ms. Olson’s testimony about the conservation 

proposals in President Bush’s budget. 

Across the country, economic progress has been marked by urbanization of America. In many parts of America, cities seem to have grown steadily outward until they 

meet their nearest neighbor. In this area, it is becoming difficult to tell where the 

Washington metropolitan area ends and Baltimore’s begins. 

Land which had been farmed for generations is being converted to golf courses, 

housing developments, and shopping centers. Small towns once thought to be far 

from the nearest urban area now find themselves becoming bedroom communities 

and home to thousands of commuters who seem to spend as much time getting to 

and from work as they actually spend in the office. 

In some ways, this march of progress is a sign of our economic strength. Farmers 

are able to grow more food on less land, while the offices and factories of America 

turn out new and better products for consumption here and across the globe. 

This transformation of America’s land and its use does not come without a price. 

Swimming holes are giving way to swimming pools, and open spaces are being 

leveled to make room for open houses. Stands of trees are being replaced by nurseries, where one can buy a tree or a shrub for the new house. It is becoming more 

difficult to take a stroll in the woods with your family, though there might be a desVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00008 Fmt 6633 Sfmt 6621 E:\HR\OC\85675A.XXX 85675A
5

ignated walking path around the artificial lake in the middle of the housing development. 

In some ways, the tax code contributes to the urbanization of America. Today, we 

will hear about how the costs of remediating brownfields discourages developers 

from locating in and helping to rebuild blighted urban areas. We will hear how pressures of the estate tax can force estates to sell family farms to developers in order 

to pay Uncle Sam. 

We will also hear about proposals which help local governments and non-profit 

groups raise funds necessary to prevent over-development in their communities. 

In a free market, landholders must be allowed to enjoy the appreciation in the 

value of their land. Accordingly, I think Congress must proceed very carefully on 

any proposal which would deprive them of the freedom to dispose of their land as 

they choose. 

But the proposals being discussed today generally do not suffer from that flaw. 

Rather than handcuffing landowners, they use various tools to encourage voluntary 

transactions in which property owners dedicate their land to conservation purposes. 

Some of the proposals achieve that goal by increasing the deductions available to 

landowners for preserving open spaces for future generations. Others make it easier 

for non-profits and government organizations to raise the money necessary to purchase lands for conservation purposes. 

Underlying each proposal is a belief that the loss of open spaces and the conversion of farms to freeways comes at some cost to the community, a so-called negative 

externality. These proposals attempt to act as a counter-weight, so local communities will not have to view the loss of their natural surroundings as an inevitable 

consequence of progress. 

Before introducing our first witnesses, I yield to my friend from New York for an 

opening statement.

panel of witnesses, I yield to my good friend from New York for his 

Chairman MCCRERY. Before introducing our first distinguished 

f opening statement. Mr. McNulty? 

Mr. MCNULTY. Thank you, Mr. Chairman. In the interest of 

time, I would like to submit my entire statement for the record and 

briefly summarize. Also, I would ask permission, since Congressman Neal cannot arrive in time to testify in person, that his statement be submitted for the record. 

Chairman MCCRERY. Without objection. 

[The statement of Mr. Neal follows:]

Statement of the Hon. Richard E. Neal, a Representative in Congress from 

the State of Massachusetts 

Thank you, Mr. Chairman and Mr. McNulty, for the opportunity to testify before 

the Subcommittee today. This Subcommittee has the unique opportunity to provide 

tax incentives for smart growth, brownfields redevelopment, and endangered species 

habitat, among other important land use issues. With such a responsibility, I urge 

the Subcommittee to draw from legislative efforts showing a broad base of support. 

I come before the Subcommittee to express my full support for H.R. 2290, the 

Conservation Tax Incentives Act of 2001. I would like to recognize the outstanding 

leadership of Representatives Rob Portman and Bob Matsui on this important bill. 

Later in this hearing, the Subcommittee will be hearing from Steven McCormick, 

the President of the Nature Conservancy, who supports this bill and happens to be 

accompanied by Philip Tabas, the Director of the Land Protection program, from the 

Boston office of the Nature Conservancy. 

The bill allows a 50 percent exclusion from gain on the sale of land or water 

rights to an eligible conservation entity for conservation purposes. This bill would 

benefit all states across the nation by helping protect land and natural resources. 

In my own district in Massachusetts, there is a great need to prevent unplanned 

sprawl along the Connecticut River Valley, a precious and beautiful landscape. Local 

and state conservation groups have been able to do this by utilizing state money 

to purchase conservation easements from local farmers along the river valley, who 

are faced with the tough economic decision of either selling a conservation easement 

(and preserving an agricultural use) or selling the land altogether. With this legislation, the conservation easement would win more often in that battle as the tax incentive would mean a great deal to these small farmers. 

6

Further, these limited dollars in the state program could be stretched much farther and utilized for many other important projects, such as the Quinebaug River 

Heritage corridor, yet another land conservation priority in my district. Since 1945, 

Massachusetts has been steadily losing thousands of acres of farmland per year. 

However, just during the last year, this inventive state program was able to save 

50 farms and over 4,700 acres. Providing tax incentives to those who want to conserve land is good tax policy, and I hope the Subcommittee will support H.R. 2290. 

Another bill I hope the Committee will consider is H.R. 4579, the Endangered 

Species Recovery Act of 2001, introduced by Rep. George Miller. This bill uses tax 

incentives to encourage endangered species conservation agreements between private landowners and the government regulators, while also providing certainty to 

these landowners under the Endangered Species Act. In my home State of Massachusetts, it has been estimated that there are 427 identified species of plants and 

animals designated as endangered, threatened, or of special concern. I am hopeful 

that the Subcommittee will consider legislation that draws the appropriate balance 

between landowner rights and environmental protections, through tax and other financial incentives. 

Finally, I am pleased that the Subcommittee will be hearing from our colleagues, 

Representatives Bill Coyne and Jerry Weller, on legislation to make permanent the 

expensing of brownfields remediation costs. Tax incentives to encourage land remediation has been supported by commercial developers and environmental groups 

alike. As co-chair of the Congressional Real Estate Caucus, I am fully aware of how 

important this issue is to the real estate industry and I hope the Subcommittee will 

consider these legislative priorities as well. 

land is of great importance to every American. This Subcommittee, 

Thank you again for the opportunity to address the Subcommittee today.

Mr. MCNULTY. Conservation and preservation of our open space 

f on a bipartisan basis, supports tax incentives to encourage donation of land for conservation purposes and to protect our environment through the clean-up of toxic sites. I look forward to the testimony of our distinguished colleagues and all of those who will testify on this important topic today. Thank you, Mr. Chairman. 

[The opening statement of Mr. McNulty follows:]

Opening Statement of the Hon. Michael R. McNulty, a Representative in 

Congress from the State of New York 

Today, the Ways and Means Select Revenue Measures Subcommittee will hold a 

hearing to review current tax law incentives and pending legislation designed to improve land use conservation and preservation. 

Conservation and preservation of our open-space land is of great importance to 

every American. The Committee, on a bipartisan basis, supports tax incentives to 

encourage the donation of land for conservation purposes and to protect our environment through clean-up of toxic sites. In tandem with state and local efforts, Federal 

tax incentives have proven to be effective tools in support of private and public sector efforts to maintain and preserve critical features of our environment. 

Hearing testimony scheduled for this afternoon will focus on bills that would use 

the tax laws to achieve important environmental and conservation goals. Importantly, these bills have been developed on a bipartisan basis, with many Committee 

Democrats and Republicans joining as cosponsors. With Earth Day 2002 celebrations having just ended, it is appropriate that the Select Revenue Measures Subcommittee take the lead and consider how these proposals would contribute to land 

use preservation and conservation. 

I join Subcommittee Chairman McCrery in emphasizing the importance of this review and look forward to the possibility of moving the proposals to the full Committee for further consideration. 

of witnesses is comprised of our colleagues from the House. Mr. 

Thank you.

Chairman MCCRERY. Thank you, Mr. McNulty. Our first panel 

f Portman has expressed a desire to go first because he has an urgent engagement away from the hearing room, and so without obVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\85675A.XXX 85675A
7

jection from any other panel Member, I will recognize first our good 

friend from the Committee on Ways and Means, Mr. Rob Portman. 

Mr. Portman? 

STATEMENT OF THE HON. ROB PORTMAN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Mr. PORTMAN. Thank you, Mr. Chairman. I appreciate the indulgence of my colleagues. I really thought your opening statement 

outlined the issues well, Mr. Chairman, and I appreciate Mr. 

Lewis, Mr. McNulty, and other Members of the panel who may join 

us for hearing us out. 

I do believe that conserving open spaces, as one of our Nation’s 

greatest natural resources, is extremely important, and I look forward to working with my colleagues on this panel with me and 

with the Subcommittee to try to move legislation forward using the 

tax code to help encourage that. 

Mr. Chairman, open spaces are necessary to be sure that we are 

preserving our diversity of plants and wildlife in this country that 

are disappearing at an alarming rate. We are told, in fact, that 

every minute, another two acres of farmland in this country are 

lost to development. That translates, Mr. Chairman, to about one 

million acres a year. About the size of the State of Vermont is now 

being lost every year to development. 

Preserving some of our remaining open spaces will not only help 

maintain important natural habitat, but also improves our quality 

of life, as you noted in your opening statement, by slowing the 

growth of traffic, congestion, air and water pollution, maintaining 

areas for recreational use, and helping to keep productive farmland 

and ranch lands intact. 

The Federal and State Government cannot and should not have 

the sole responsibility for preserving these open spaces, and you 

have made that point well. In the United States, in fact, the vast 

majority of this land is held in private hands. Private landowners 

must be willing partners, thus, with the government in helping to 

conserve these open spaces and natural habitats for the public’s 

benefit. 

The Tax Code, of course, does provide some tax incentives already to encourage conservation. For example, taxpayers can take 

a deduction for charitable contributions of real property or an interest in property for qualified conservation purposes. In fact, the Federal estate tax also provides for a partial exclusion for gifts of conservation easements. These are valuable tools for conservation, and 

they are used but they do not work in all instances and that is one 

of the focuses of my testimony today. 

As we all know, there has been a great appreciation in these 

rural land values, certainly in my district, and I am sure in all the 

districts of those represented today. It is particularly true where 

metropolitan areas, as you said, are moving outward to meet what 

were previously strictly rural areas and these farmers and ranchers in these areas found they have very few financial assets other 

than their land. The income from farming and ranching is still relatively modest, so these are land-rich and cash-poor property owners who are generally unable to take advantage of the existing 

charitable donation incentives because their annual incomes and 

8

their tax liabilities just are too low to use the tax benefit to declare 

the deduction. 

The legislation that I am promoting today, which is H.R. 2290, 

Conservation Tax Incentive Act, would address this problem by focusing on another tax, which is the capital gains tax. I am pleased 

that this proposal was included in President Bush’s fiscal year 

2003 budget. The bill excludes 50 percent of the gain on sales of 

land or interest in land or water where the sale is made to a qualified conservation entity for conservation purposes. 

Now, that sounds like a lot of new language, but it is really not, 

because qualified conservation entities is already in the tax code. 

This could include publicly supported conservation charities, governmental conservation agencies. In my district, for example, the 

Southern Ohio Farmland Preservation Association would be a 

qualified purchaser, and so could a city park or a county park, the 

State. Conservation purposes in the Act would include, and again, 

this is in the tax code, the preservation of land for outdoor recreation by the general public and the protection of natural habitats 

of fish wildlife or plants or the preservation of open space, including farmlands or forest. The bill uses the definitions for conservation entities and the test for conservation purposes that are, again, 

already in the tax code and well understood. 

It is a fiscally conservative, private citizen-based approach to 

land conservation that will help preserve these open spaces from 

sprawl and development while avoiding any onerous new land use 

regulations. It also enables conservation organizations and State 

and local governments to stretch their limited resources so they 

can focus on acquiring the most environmentally sensitive tracts of 

land. 

My district offers a great example of how this bill could be very 

helpful. Like a lot of other big cities, Cincinnati has expanded out 

into the rural areas and a lot of family farmers in my area are just 

getting by financially. They do not have the income and, thus, the 

tax liability. A lot of them want to keep their land in agriculture, 

but it is getting harder and harder to do it all the time. 

The State of Ohio does have a new program that provides for the 

purchase of development rights. However, a lot of farmers have 

purchased their land before the property escalated in value, and 

they would have huge capital gains taxes if they were to sell their 

development rights. With such a hefty portion of the payment from 

the transaction going to Federal taxes, many just are unable or unwilling to participate in the program. 

Under this bill, again, the capital gains on the sale of these development rights could be substantially reduced. The resulting increase in the net after-tax return, of course, means that more farmers would be able to afford to keep their land in productive use. 

That is one example. 

The bill is supported, Mr. Chairman, by a wide range of interests, the American Farm Bureau, Ducks Unlimited, Defenders of 

Wildlife, Association of State Foresters, the Nature Conservancy, 

who helped us in putting this bill together the last several years. 

It will encourage conservation, again, through voluntary private, 

market-based sales at a very modest cost to the government. The 

current cost estimate we have from the Joint Committee on TaxVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 E:\HR\OC\85675A.XXX 85675A
9

ation, Mr. Chairman, is $66 million per year. Again, I think that 

is a small cost that will yield lasting and very important benefits 

for generations to come. 

Again, thank you for allowing me to explain my proposal. I look 

forward to working with you and Members of the Subcommittee 

and colleagues here on the panel to move some of these ideas forward. 

[The prepared statement of Mr. Portman follows:]

Statement of the Hon. Rob Portman, a Representative in Congress from the 

State of Ohio 

Mr. Chairman and Members of the Subcommittee, I appreciate your holding this 

hearing and giving me the opportunity to appear before you today to talk about the 

importance of conserving one of our Nation’s greatest natural resources—open 

spaces. I also would like to acknowledge my colleagues who are on the panel with 

me today. They have been very active in legislative efforts to preserve and improve 

the environment, and their leadership is to be commended. 

Mr. Chairman, the open spaces necessary to preserve our Nation’s rich diversity 

of plant and wildlife are disappearing at an alarming rate. Every minute, two acres 

of farmland in this country are lost to development. That translates to a loss of 

more than one million acres every year. Preserving some of our remaining open 

spaces will not only help to maintain important natural habitats, but will also improve our quality of life by slowing the growth of traffic congestion and air and 

water pollution, maintaining areas for recreational use, and helping to keep productive farm and ranch lands intact. 

The Federal and State Governments cannot, and should not, have sole responsibility for preserving open spaces. In the United States, the vast majority of threatened habitats are privately owned. Thus, private landowners must be willing partners with the government in helping to conserve open spaces and natural habitats 

for the public benefit. 

The tax code does provide some tax incentives to encourage conservation of open 

spaces. For example, taxpayers may take a deduction for charitable contributions of 

real property or interests in property for qualified conservation purposes. In addition, the Federal estate tax provides for a partial exclusion for gifts of conservation 

easements. These tax benefits are valuable tools for encouraging conservation, but 

they don’t work in all instances. As we all know, there has been great appreciation 

in rural land values in recent years, particularly where metropolitan areas have expanded outward to meet rural areas. Farmers and ranchers in such areas often have 

few financial assets other than their land, and income from farming and ranching 

is still relatively modest. Thus, land rich, cash poor property owners are generally 

unable to take advantage of the existing charitable donation incentives because 

their annual incomes and tax liability are too low to use the tax benefit of a deduction. 

My bill, H.R. 2290, the Conservation Tax Incentive Act, would address this problem by focusing on the capital gains tax. I am pleased that this proposal was included in President Bush’s Fiscal Year 2003 budget. H.R. 2290 would exclude 50 

percent of the gain on sales of land or interests in land or water where the sale 

is made to qualified conservation entities for conservation purposes. Qualified conservation entities include publicly-supported conservation charities and governmental conservation agencies. Conservation purposes include: (1) the preservation 

of land for outdoor recreation by the general public; (2) the protection of natural 

habitats of fish, wildlife or plants; and (3) the preservation of open space (including 

farmland and forests). The bill uses definitions for conservation entities and tests 

for conservation purposes that are already in the tax code, and are well understood. 

The Conservation Tax Incentives Act is a fiscally-conservative private citizenbased approach to land conservation that will help preserve open spaces from 

sprawl and haphazard development while avoiding onerous new land use regulations. It will also enable conservation organizations and state and local governments 

to stretch their limited resources to acquire the most environmentally-sensitive 

tracts of land. 

My district in Southwest Ohio offers a classic example of where the bill would be 

helpful. Like other major cities, the metropolitan areas of Cincinnati have expanded 

out to meet rural areas. Many small family farms in the rural areas outside Cincinnati are just getting by financially. They want to continue to keep their land in 

production agriculture, but it’s getting tougher all the time. 

10

The State of Ohio has implemented a new program that provides for the purchase 

of development rights to recognize the public interest in maintaining farmland. 

However, many farmers purchased their land before the recent escalation in property values, and they would experience substantial capital gains taxes on a sale of 

their development rights. With such a hefty portion of the payment from the transaction going to Federal taxes, many have been unable to participate in the program. 

Under my bill, capital gains taxes on the sale of such development rights would be 

substantially reduced. The resulting increase in the net after-tax return means that 

more farmers could afford to keep their land in productive use. 

The bill is supported by a wide range of interests, including the American Farm 

Bureau, Ducks Unlimited, Defenders of Wildlife, the Association of State Foresters, 

and The Nature Conservancy. H.R. 2290 will encourage conservation through private, voluntary, market-rate sales at a modest cost to the Federal Government—approximately $66 million per year according to the last estimate we have from the 

Joint Committee on Taxation. This is a small cost that will yield important benefits 

for future generations. 

Thank you for allowing me to explain this proposal. Of course, I would be happy 

to try to respond to any questions you may have.

on the Committee on Ways and Means, the Chairman of the SubChairman MCCRERY. Thank you, Mr. Portman. Our colleague 

f committee on Health, Mrs. Nancy Johnson. Mrs. Johnson? 

STATEMENT OF THE HON. NANCY L. JOHNSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CONNECTICUT 

Mrs. JOHNSON. Thank you very much, Mr. Chairman, and 

thanks to all of your colleagues on your Subcommittee on Select 

Revenue Measures for being here this afternoon. 

I am going to build on what my colleague from Ohio has said, 

but before I do, let me just welcome Rand Wentworth, who is the 

President of the Land Trust Alliance, whom you will hear from 

shortly. Mr. Wentworth and his organization have been really national leaders in promoting conservation across the country and his 

organization’s membership have strong representation in Connecticut. I am proud that the Land Trust has devoted clear resources to developing the leadership and the literal resources for 

land preservation in many, many counties throughout America. 

Over the past 20 years, many landowners have protected the 

value that they place on their land by donating it for conservation 

or adopting an easement that permanently protects the land they 

love. The continued rise in land prices, coupled with the rising cost 

of retirement, has greatly undermined the existing income tax incentives for open space protection and forces people to choose between retirement security and land protection in a way they have 

not had to in the past. 

In addition, States have developed quite impressive programs to 

buy either land or development rights. Since they are appropriated 

programs and actually involve buying the land, they are very costly 

and States, too, are limited in their ability to address their own 

land preservation needs. 

It is my belief that while the tax code has in the past thought 

about this, its provisions are inadequate and its provisions are particularly inadequate for the kind of person of modest means that 

Mr. Portman referred to. Many of my constituents have modest incomes, but they look rich when you look at the now value of their 

land. The tax code could really be a far more powerful agent in 

land preservation if we could enable these people to donate their 

11

land, thus avoiding some of the capital gains problems that Mr. 

Portman alluded to. 

Our bills are actually complementary, because his deals with situations where there is a sale. Mine deals with situations when 

there is a donation. The primary provision of my bill, H.R. 1309, 

would increase the current income tax deduction for the donation 

of land for conservation purposes from 30 to 50 percent of income 

until the full value of the land was realized, rather than limiting 

those deductions to up to 6 years. 

So, it would enable the people in my part of Connecticut, the 

Northwest corner, who own only 10 acres or 20 acres but who live 

next to people who also own 10 or 20 acres and would like to see 

this reserve in the valley preserved, each of them to be able to donate and, in a sense, develop a reverse income through this deduction and reduction of tax liability. So, it is kind of like reverse 

mortgages, and it really minimizes the cost to the government 

while maximizing the opportunity to preserve land that is important to us to protect open spaces. 

In my part of the country, protecting open spaces is important 

so you have fields that you can lease to support the working farms 

in existence, because if those fields go out of protection and are developed, you lose the farms as a secondary impact. 

Allowing families to deduct 50 percent of the value of their land 

from their income for as many years as it takes to recoup the value 

of the donated land creates an income stream through reduced tax 

liability that allows them both to be secure in their retirement and 

protect the land that they so love. 

It is kind of interesting to note that if you have a very high in- come and you donate a $1-million picture, you can deduct the 

whole $1 million, which may bring, in the first year, the tax liability down very low. So, in a sense, we are saying to the person who 

does not have a $1-million picture by a famous artist but does have 

20 acres they would like to donate to conservation that they cannot 

ever deduct the whole value of that. So, there is a disparity in our 

tax code, how we are valuing the donation of art objects to art museums versus how we are valuing the donation of land to environmentally friendly uses that will serve the public interest. 

I am going to skip the rest of my testimony out of deference to 

my colleagues, but I am very excited about this hearing. I think 

that if we really look thoroughly at this issue of sales and donation, 

that the Federal Government could be a far better partner to the 

States now that the States are keenly aware that the parcels that 

are left are rising rapidly in price and we need to act in the next 

decade, not in decades ahead. 

So, I think we have an opportunity to make a very significant 

contribution at minimal public cost and with maximum flexibility 

and maximum respect for the fact that there are many important 

pieces of public land owned by small landowners who really profoundly value their land and the preservation of the quality of life 

of their small town and know that only an easement or some other 

means of preservation will preserve that quality of life that they 

enjoy and hope to will to their children. Thank you for your attention. 

[The prepared statement of Mrs. Johnson follows:]

12

Statement of the Hon. Nancy L. Johnson, a Representative in Congress 

from the State of Connecticut 

Mr. Chairman and Members of the Subcommittee: 

Thank you for convening this important hearing on tax incentives for the conservation of land. I want to welcome Rand Wentworth, President of the Land Trust 

Alliance (LTA), who you will hear from shortly. Mr. Wentworth, and his organization, has been a national leader in promoting land conservation across the country 

and his organization’s membership has a strong presence in Connecticut. I am 

proud that the Land Trust Alliance has endorsed my bill, H.R. 1309, about which 

I have come to testify today, and appreciate the leadership and resources LTA has 

provided in representing more than 1,200 non-profit, grass-roots land trusts nationwide. 

While Congress often uses the tax code to promote certain activities, I do not believe we have used it effectively enough to promote land conservation. Connecticut, 

like most of its fellow New England states, is known for its historical beauty. However, like so some many communities across the country, we have seen an alarming 

amount of farmland and green spaces lost to development. More and more strip 

malls, shopping plazas and housing complexes are replacing productive farms and 

precious open spaces. 

Today, in many places with important value for their wildlife habitat, scenic beauty, outdoor recreation, and open space, land prices have risen far faster than the 

incomes of the farmers, ranchers and other landowners whose stewardship has protected and enhanced those values. Over the past twenty years, many landowners 

have protected such values on their land by donating it, or by donating a conservation easement that legally protected those values permanently. But the continued 

rise in land prices has greatly undermined the existing income tax incentive for 

such. 

Connecticut has embarked on major initiatives to either buy, or provide grants for 

the purchasing of land for conservation or recreation. In addition to popular state 

initiatives and current tax incentives, more must be done to encourage those who 

are land rich, but of modest means, to donate their land for conservation purposes. 

The primary provision of my bill, H.R. 1309, would increase the current income tax 

deduction for the donation of land for conservation purposes, from 30 percent to 50 

percent of income until the full value of the land is realized, rather than a deduction 

for no more than 6 years. 

Allowing families to deduct 50 percent of the value of their land from their income 

for as many years as it takes to recoup the value of the donated land essentially 

creates an income stream while their land is permanently protected from development. In the absence of improved conservation tax incentives, more and more land 

owners will succumb to the highest bidder and sell their valuable land for development. This will diminish preservation efforts and urban sprawl will become an even 

greater problem throughout the country. We need to find better ways to protect and 

preserve open spaces and I believe the tax code can further promote environmentally-friendly uses of our lands. 

I also want to mention one other bill before the committee which complements my 

legislation. Mr. Portman’s bill, H.R. 2290, would allow landowners to exclude from 

tax 50 percent of the gain on sales of land or easements to public or private conservation entities for conservation purposes. His bill would allow landowners to protect the ecological value of their land without forfeiting the lands’ economic value. 

We both share the same goal of preserving land, but our respective bills seek to 

achieve this goal in slightly different ways. 

I will continue to strongly advocate for proposals to enhance tax incentives for the 

conservation of land so those who are land rich, but cash poor, can afford to make 

this income sacrifice and help us all preserve our rural landscapes. My legislation, 

and others before the committee, promote this goal. It is my hope that the committee will act as soon as possible to put in place greater incentives for the conservation of land.

witness is another Member of the Committee on Ways and Means, 

Chairman MCCRERY. Thank you, Mrs. Johnson. Now, our next 

f the gentlelady from Washington, Ms. Jennifer Dunn. Ms. Dunn, 

welcome. 

13

STATEMENT OF THE HON. JENNIFER DUNN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON 

Ms. DUNN. Thank you very much, Mr. Chairman. Mrs. Johnson 

put her finger on it. We are talking about partnership. I think it 

shows that you are, indeed, a panel of vision to be letting us have 

these hearings because we think we may have some solutions that 

will create good partnerships and result in the preservation of our 

Nation’s beautiful forests at the same time. 

One of our most important roles as elected officials is to serve as 

stewards of our environment. We have a responsibility to future 

generations to care for our environment so that they will be able 

to experience and enjoy our natural resources. 

I believe there is broad support within Congress and in America 

for sound, consistent environmental policy. Sadly, it seems whenever a discussion moves beyond general goals to actual policies, it 

becomes rancorous and often bitter. The lingering distrust between 

the environmental community and private property advocates has 

proven to be a very difficult obstacle to overcome. Clearly, we need 

some new thinking. 

For this reason, I am so pleased to be speaking on behalf of H.R. 

1711, the Community Forestry and Agriculture Conservation Act. 

This legislation presents an innovative solution to one of the most 

vexing challenges facing policy makers, conserving our land while 

ensuring that it remains a source of economic activity. This bill 

achieves an important balance by promoting a public good without 

impinging on private property rights. 

The bill has 25 cosponsors, including six Members of the Committee on Ways and Means. I want to recognize two Members of 

the Subcommittee, Mr. Tanner and Mr. Foley, for their support. 

Here is how the concept works. A community citizens group or 

a local government with a desire to protect a piece of land as a 

working greenbelt creates a nonprofit entity that includes a balanced membership of landowners, environmentalists, financial 

leaders, local officials, and forest professionals. The nonprofit group 

develops a management plan for the land that conforms to the relevant State and Federal environmental standards. Under the plan, 

a large portion of the land will be dedicated for stream and habitat 

protection and another area will be identified for logging. 

The State agency responsible for bond authority issues tax-exempt revenue bonds on behalf of the nonprofit group, who purchases the land from the private owner at a fair market value. The 

nonprofit group takes title of the land. The nonprofit group harvests appropriate amounts of timber to pay off the debt while preserving the bulk of the forestland from future development. 

To make this concept a reality, Congress needs to change our tax 

law to allow nonprofit groups to access tax-exempt bonds. By doing 

so, we can employ a collaborative model to preserve natural resources. 

Although we began to write this legislation several years ago, 

Mr. Chairman, a recent example has allowed us to show how this 

concept could be applied in other areas around the country. The recent example of the partnership is the Snoqualmie Tree Farm in 

my district in Washington state. Last January, the Weyerhaeuser 

Corporation agreed to sell 104,000 acres of the Snoqualmie Tree 

14

Farm to the Evergreen Forest Trust. The parcel is only 40 miles 

from downtown Seattle and is under imminent threat of development. The tree farm, which is nearly twice the size of the city of 

Seattle, is too valuable to remain as forest. Vast tracts would eventually be sold to developers. By accessing tax-exempt bonds, the 

trust can preserve the integrity of the tree farm. 

Once the trust takes ownership, it will accommodate the various 

needs of the community. It will protect vital habitats and watershed areas. It will continue to allow residents of the Puget Sound 

area to use wilderness lands for recreational purposes. Perhaps 

most significantly, it will keep the mills working and retain jobs for 

timber workers. 

In Washington state, we are blessed with stunning natural beauty, but as the population continues to grow, pressure to conserve 

the land often collides with the desires of the landowners. In the 

past, the government has further complicated matters through 

heavy-handed regulation. A typical result leaves one side victorious 

and the other side contemplating a long, costly court battle. H.R. 

1711 demonstrates that environmental policy does not have to be 

a zero-sum game. We can satisfy both sides. 

Our problem in the Pacific Northwest is acute, but not unique. 

Communities all over the Nation are struggling with the competing 

demands of property owners and preservationists. I hope the Evergreen Trust can be a national example of a new, constructive effort 

to achieve the widely accepted goal of environmental preservation. 

Proof exists in the diverse group of supporters of this bill, including 

environmental organizations like the Nature Conservancy and timber companies like Weyerhaeuser and Plum Creek, two of whom 

you will hear from later on on the second panel. 

Privately-held forestland is disappearing throughout the United 

States. Since 1997, 10.6 million acres of private forestland have either been sold or are currently under contract for sale. One of the 

reasons for the reduction is the disparate tax treatment of private 

forestland. Hopefully, as we move forward with conservation measures, we can also devote some attention to how we tax timber assets. 

I have many fond memories of hiking through the woodlands 

around Puget Sound with my family. I want to ensure that families 

in the future will enjoy our forests just as much as we have. H.R. 

1711 offers an opportunity to fulfill that promise. Thank you, Mr. 

Chairman. 

[The prepared statement of Ms. Dunn follows:]

Statement of the Hon. Jennifer Dunn, a Representative in Congress from 

the State of Washington 

One of the most important roles we have as elected officials is to serve as stewards of our environment. We have a responsibility to future generations to care for 

our environment so that they will be able to experience and enjoy our natural resources. I think that there is broad support within Congress and in America for sound, 

consistent environmental policy. Sadly, it seems whenever a discussion moves beyond general goals to actual policies it becomes rancorous and often bitter. The lingering distrust between the environmental community and private property advocates has proven to be a difficult obstacle to overcome. Clearly, we need some new 

ideas. 

For this reason I am so pleased to be speaking on behalf of H.R. 1711, the Community Forestry and Agriculture Conservation Act. This legislation presents an inVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 E:\HR\OC\85675A.XXX 85675A
15

novative solution to one of the most vexing challenges facing policymakers—conserving our land, while ensuring that it remains a source of economic activity. The 

bill achieves an important balance by promoting a public good without impinging 

on private property rights. 

The bill has 25 cosponsors, including six Members of the Ways and Means Committee. I want to recognize two Members of the Subcommittee, Mr. Tanner and Mr. 

Foley, for their support. 

Allow me to briefly explain how the concept works:

• A community citizens’ group or a local government with a desire to protect 

a piece of land as a ‘‘working’’ greenbelt creates a non-profit entity that includes a balanced membership of landowners, environmentalists, financial 

leaders, local officials, and forest professionals. 

• The non-profit group develops a management plan for the land that conforms 

to the relevant state and Federal environmental standards. Under the plan, 

a large portion of the land will be dedicated for stream and habitat protection 

and another area will be identified for logging. 

• The state agency responsible for bond authority issues tax-exempt revenue 

bonds on behalf of the non-profit group who purchases the land from the private owner at fair market value. The non-profit takes title of the land. 

• The non-profit group harvests small amounts of timber to pay off the debt 

while preserving the bulk of the forestland from future development.

To make this concept a reality, Congress needs to change our tax law to allow 

non-profit groups to access tax-exempt bonds. By doing so, we can employ a collaborative model to preserve natural resources. 

One example of this partnership is the Snoqualmie Tree Farm in my district in 

Washington State. Last January, the Weyerhaeuser Corporation agreed to sell the 

104,000 acre Snoqualmie Tree Farm to Evergreen Forest Trust. The parcel is only 

forty miles from downtown Seattle and is under imminent threat of development. 

The tree farm, which is nearly twice the size of Seattle, is too valuable to remain 

as forest. Vast tracts would eventually be sold to developers. By accessing tax-exempt bonds, the trust can preserve the integrity of the tree farm. 

Once the trust takes ownership it will accommodate the various needs of the community. It will protect vital habitats and watershed areas. It will continue to allow 

residents of the Puget Sound area to use wilderness lands for recreational purposes. 

And perhaps most significantly, it will keep the mills working and retain jobs for 

timber workers. 

In Washington State we are blessed with stunning natural beauty, but as the population continues to grow pressure to conserve the land often collides with the desires of landowners. In the past, the government has further complicated matters 

through heavy-handed regulation. A typical result leaves one side victorious and the 

other side contemplating a long, costly court battle. H.R. 1711 demonstrates that environmental policy does not have to be a zero-sum game. We can satisfy both sides. 

Our problem in the Pacific Northwest is acute, but it is not unique. Communities 

all over the nation are struggling with the competing demands of property owners 

and preservationists. I hope that the Evergreen Trust can be a national example 

of a new, constructive effort to achieve the widely accepted goal of environmental 

preservation. Proof exists in the diverse group of supporters of this bill, including 

environmental organizations like the Nature Conservancy and timber companies 

like Weyerhaeuser and Plum Creek. 

Privately-held forestland is disappearing throughout the United States. Since 

1997, 10.6 million acres of private forestland have either been sold or are currently 

under contract for sale. One of the reasons for the reduction is the disparate tax 

treatment of private forestland. Hopefully, as move forward with conservation measures we can also devote some attention to how we tax timber assets. I have introduced H.R. 1581, the Reforestation Tax Act, which would ameliorate some the tax 

problems faced by the timber industry. I am happy to see that it is part of today’s 

hearing. 

I have many fond memories of hiking through the woodlands around Puget Sound 

with my family. I would like to ensure that families in the future can enjoy our forests as much we have. H.R. 1711 offers an opportunity to fulfill that promise.

from the Committee on Ways and Means and a Member of our 

Chairman MCCRERY. Thank you, Ms. Dunn. Now, a colleague 

f Subcommittee, Mr. Jerry Weller from Illinois. Mr. Weller? 

16

STATEMENT OF THE HON. JERRY WELLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. WELLER. Thank you, Mr. Chairman, and Mr. McNulty, 

thank you, as well, for the opportunity to testify before our Subcommittee today on an issue that we all care very much about and 

an issue that carries strong bipartisan support and that is the 

issue of farmland and open space preservation. I commend you, Mr. 

Chairman, for conducting today’s hearing on looking at how the tax 

code can impact our goal of protecting valuable open space. 

One lesson I think we have always learned as we look at the various pieces of tax legislation that have gone through our Committee 

is the tax code does have consequences and the tax code does have 

incentives. How can we use that to achieve this goal? 

Since I joined the Committee in 1996, and Mr. Chairman, if I 

could, I would like to summarize my testimony and just ask that 

I could submit my full testimony and summarize it for you. 

Chairman MCCRERY. Without objection. 

Mr. WELLER. I have enjoyed working with my colleagues, Nancy 

Johnson and Bill Coyne and others on the issue of brownfields. 

Every one of us can think of a community in our district, if not our 

hometown, where there is a parcel of land on one side of town, an 

old industrial park or a strategic location, and you always wonder 

why someone does not redevelop that and put it to use. 

All too often, there are some environmental cleanup needs in 

that brownfield, and if it is an old industrial park, you already 

have the sewer, the water, the infrastructure, the streets the access 

to that industrial park already in place, but private investors are 

hesitant to purchase it. Of course, the cost of the environmental 

cleanup has been the roadblock there, and as I talk with economic 

development as well as environmental agencies, they raise that 

issue when they are trying to attract a private investor to purchase 

that particular property. 

Now, why is it important that we revitalize brownfields? Well, if 

you are a private investor looking to develop an industrial park, 

you have a choice. You can take an existing, old, unused industrial 

park which already has the sewer, the water, the infrastructure, or 

you can purchase a cornfield in Illinois, a greenfield site, and statistics will show you that if the developer makes the choice of purchasing the greenfield site, they will probably consume anywhere 

from four to six times as much open space and land for that new 

industrial park as they would for an existing industrial park if they 

would just revitalize that. 

So, the question has been, how can we motivate and encourage 

those private investors to purchase that old industrial park, do the 

environmental cleanup, and revitalize it, and in turn, revitalize the 

community? 

We worked to provide, in a team effort, Nancy Johnson, Bill 

Coyne, and myself, over the last several years, provide an expensing provision for environmental cleanup of brownfields. In the 1997 

Balanced Budget Act, we were successful in obtaining bipartisan 

support for a targeted provision that was targeted to low-income 

census tracts, the areas around them as well as Federal empowerment zones. Two years ago in the Community Renewal Tax Relief 

Act of 2000, we were successful in removing that targeting proviVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 E:\HR\OC\85675A.XXX 85675A
17

sion so every community in America, whether rural or suburban or 

urban or middle class or low income, would have the opportunity 

for this tax incentive to recover the costs of environmental cleanup, 

and it is working. 

In the district that I represent on the South side of Chicago as 

well as the South suburbs, we have brownfield sites currently being 

cleaned up in LaSalle County, Kankakee County, the city of Ottawa, Chicago’s 10th ward, and in Joliet. In my district, considering the fact that there are 2,000 brownfields in the Chicago region alone, represents the two largest brownfields in the State of 

Illinois, the former Joliet arsenal, which is under redevelopment 

today, and, of course, land adjacent to the Ford plant in the 10th 

ward of Chicago, which is also under redevelopment. This tax incentive is helping make that happen. 

What we are asking the Subcommittee to consider and ask for 

the full Committee’s support as well as continued bipartisan support for expensing of environmental cleanup on brownfields is to 

make this provision permanent. We have introduced H.R. 2264, 

legislation which would make permanent the existing provisions for 

expensing of environmental cleanup of brownfield sites. The current provisions expire June 30, 2004. 

This is important. If you think about it, permanency of a tax provision causes greater investment in that. Business decisionmakers 

making decisions on millions of dollars in investments, if they 

know that the tax consequence is permanent, they are more likely 

to make a decision of greater magnitude, and I believe that making 

permanent the brownfields tax incentive will make a big difference. 

There are 400,000 brownfields across this country. The U.S. Conference of Mayors estimates that in 187 cities, estimated that if the 

21,000 existing brownfield sites within the municipal limits of 

those cities were redeveloped, it would generate tax revenues for 

those cities of $2.4 billion and create up to 550,000 new jobs and 

revitalizing those communities. 

I would also like to touch briefly on an additional provision that 

was added to H.R. 2264 to expand the type of cleanup that would 

be eligible to benefit from this tax provision. Our provision would 

broaden the type of hazardous substances that are eligible for the 

treatment to include petroleum and pesticides, lead paint, and asbestos. Why do I mention that? Think of that gas station in your 

hometown that is on that strategic corner that needs to be cleaned 

up. This would help take care of that and achieve that goal. 

These type of contaminants are regularly found at brownfield 

sites. Our current law does not allow individuals cleaning up these 

sites with these substances the ability to use this tax incentive. We 

wish to expand it to include these because we believe it will help 

expedite the environmental cleanup and revitalization of more 

brownfields across this country. 

Mr. Chairman, thank you for the opportunity to testify. We believe this is an important environmental initiative as well as an 

economic development initiative and we ask the Subcommittee as 

well as the full Committee’s consideration of making permanent 

the expensing of brownfields cleanup. So, thank you, Mr. Chairman. 

[The prepared statement of Mr. Weller follows:]

18

Statement of the Hon. Jerry Weller, a Representative in Congress from the 

State of Illinois 

Mr. Chairman: 

As you may know, I have been interested in the cleanup of brownfields since I 

first joined this Committee in 1996. Two years ago, Nancy Johnson, Bill Coyne and 

I worked to include provisions into the Community Renewal Tax Relief Act of 2000 

which extended and expanded existing tax incentives to all brownfield sites. Prior 

to the 2000 legislation, the tax incentives were available only to brownfield cleanups 

in low income areas. Our legislation made brownfield cleanups in all communities 

across the nation eligible for the tax incentives. 

Now, I believe it is important that we make these tax provisions permanent. To 

that end, on June 21, 2001, I introduced H.R. 2264, a bill to make the brownfield 

tax incentives permanent. Currently, without action by this Committee, the existing 

provisions will expire June 30, 2004. 

Brownfield sites exist throughout all of our districts—abandoned eyesores that 

blight our communities and drag down local economies. Many brownfield properties 

are located in prime business locations near critical infrastructure, including transportation, and close to a productive workforce. These sites need to be put back into 

productive use, contributing to the economy and producing good paying jobs where 

they are needed most. 

The first step towards doing this is to remediate these sites environmentally. This 

U.S. Conference of Mayors estimates that there are over 400,000 brownfields sites 

across the country. Development of these sites will help restore many blighted 

areas, create jobs where unemployment is high and ease pressure to develop beyond 

the fringes of communities. Small, urban centered businesses often benefit most directly by this redevelopment. There are important economic and environmental benefits to brownfields cleanup. The U.S. Conference of Mayors recently completed a 

survey of 187 large and small cities throughout the nation, including Chicago, Houston, New York and Miami. According to the responses to this survey, the 187 cities 

estimated that if their 21,000 existing brownfield sites were redeveloped, this would 

bring additional tax revenues of up to $2.4 billion annually and could create up to 

550,000 jobs. In Chicago alone, developing 2,000 brownfield sites would mean $78 

million in additional tax revenue to the city and 34,000 new jobs. 

At a time when we are looking for opportunities to jump-start our state, local and 

national economies, making the brownfields tax incentive permanent would be a big 

step in the right direction. 

Before I conclude my testimony, I would like to touch briefly on an additional provision included in H.R. 2264. This provision would broaden the types of hazardous 

substances that are eligible for the treatment to include petroleum and pesticides, 

and lead paint and asbestos. As you know, these contaminants are regularly found 

at brownfields sites, but current law does not allow individuals cleaning up sites 

with these substances the ability to use the tax incentives to cleanup these items. 

Given the toxic nature of these substances, I believe it is the best interest of our 

communities to ensure that these hazardous substances are cleaned up. I would encourage the Committee to broaden the definition of hazardous substance at the next 

available opportunity. 

Mr. Chairman, I appreciate the opportunity to testify before the Subcommittee on 

the issue of Brownfields. I look forward to continuing to work with you and other 

Members of the Subcommittee on this issue. I would be happy to answer any questions.

from our colleague from the State of Oregon, Earl Blumenauer. Mr. 

Chairman MCCRERY. Thank you, Mr. Weller. Now, we will hear 

f Blumenauer? 

STATEMENT OF THE HON. EARL BLUMENAUER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate 

your courtesy in allowing me to join with my distinguished colleagues here for this critical discussion. 

I appreciate your opening statement, which really captured part 

of the dilemma that we are facing, and Mr. Portman talking about 

losing a million acres per year to development. Actually, it is worse 

19

than that. In the 1990s, there were some 17 million acres that were 

lost, an area roughly the size of the State of West Virginia. This 

has had profound impacts on the way that our communities are organized, the pressures that we are facing, the problems in the long 

term, and I appreciate your encapsulating that. 

It is not just that we are expanding the development area, but 

we have found that over the years 1960 to 1990, we were expanding almost three times faster than the increase in population. Development rates have gone up exponentially. 

Mr. Weller’s metropolitan area increased 11 times faster than 

the population; a 4-percent increase in population and a 46-percent 

increase in creation of developed land area. We are finding in Mr. 

Isakson’s area the expansion of Atlanta, the most rapid development in the history of human settlement, that has caused that city 

to grow from 65 miles to 110 miles, north to south, in a 10 year 

period. 

Our citizens know that we cannot continue moving in this direction, paying for the infrastructure expansion and losing these precious resources, and luckily, we are seeing people starting to process this at the State and local level. When Maine finds that despite 

a decline of almost 30,000 students, they are paying a third-of-abillion dollars more for school facilities because of the dislocation, 

we are finding that people are starting to react. 

I appreciate the panel that you have following us, with some of 

the key partners at the State and local level, local government, private business, and the nonprofit land trust community, for instance, that are looking at creative ways of doing that. 

Our citizens are voting at home. We have had over 550 initiatives in the last election cycle that have produced billions of dollars 

of investment. They cannot do it by themselves, and looking at the 

tax code is an important place for us to begin. 

You have four excellent proposals before you. I have cosponsored 

a couple of them. I have been working with Representative Johnson 

for several years, trying to think through this. 

I would hope that the Subcommittee would consider three things. 

First, putting together a comprehensive package of tax incentives 

that would help us coax the types of behaviors that we want. You 

have got four good proposals before you. There are others that are 

floating around, and clearly, the Committee has some great ingenuity. This would be the sort of thing that people would move forward and look forward to being a part of, and you would find broad 

bipartisan support across the political spectrum for protection of 

farmland, open space, brownfield cleanup in ways that could lead 

to exciting partnerships in the future. 

I hope that the Committee would think about nudging some 

other things that are within the jurisdiction of the Committee on 

Ways and Means. Congressman Shaw sponsored H.R. 1172, the 

Historic Homeowner Tax Preservation Credit. This is something 

any of us in mature cities, large or small, could support. Whether 

it is Atlanta or St. Louis or Chicago or the smallest communities 

in the South and the North, there are historic structures that individual homeowners cannot afford to maintain, but this tax credit 

would make a huge difference in moving things forward. 

20

I would hope that the Committee would think about using its influence in finding a tax-free instrument that the farmers, for instance, that get payments from the sale of development rights or 

conservation easements could use not unlike a rollover for a 401(k) 

plan, a tax-deferred annuity, or an IRA. As a number of your witnesses have already said, land provides the retirement funds for individuals who do not necessarily want to lose control of their property. If they could have the opportunity for these payments to be 

in a tax-free instrument, you would find that there would be a lot 

more people that would step forward and take advantage of it. 

I appreciate the Committee’s leadership and foresight in bringing 

together the panels and look forward to working with you in any 

way that I can to further this important work. 

[The prepared statement of Mr. Blumenauer follows:]

Statement of the Hon. Earl Blumenauer, a Representative in Congress from 

the State of Oregon 

I want to thank Chairman McCrery, Ranking Member McNulty and the Committee for hosting this hearing that touches on an issue of concern for people everywhere—protecting land for agriculture, recreation, natural resource management, 

and environmental protection. 

My focus in Congress is to find ways in which the Federal Government can help 

localities create their vision of livable communities. A livable community is one 

where people are safe, healthy and economically secure. How the elements of land 

use and conservation fit together have a tremendous impact on our communities. 

I applaud the work of my colleagues whose legislative proposals we are hearing 

about today. I am supportive of each of these bills, which together represent the 

wide range of interests that understand the importance of land use and conservation 

decisions.

• Representative Rob Portman introduced H.R. 2290, the Conservation Tax Incentives Act of 2001. This legislation allows the exclusion of 50 percent of 

gains on land or water sales for conservation purposes. I am pleased to hear 

that this legislation is supported by groups as diverse as the American Farm 

Bureau, environmental groups, and the Administration. 

• H.R. 1309, introduced by Representative Nancy Johnson amends the tax code 

to encourage the contribution of property or easements for conservation purposes. 

• Representative Jennifer Dunn’s Community Forestry and Agriculture Conservation Act of 2001, H.R. 1711, gives tax-exempt status to bonds issued to 

acquire renewable resources on lands subject to conservation easements. I am 

a cosponsor of this bill that helps to preserve farmland and forestry economies 

that are important in my Congressional district. 

• Representative Jerry Weller introduced H.R. 2264. This legislation amends 

the Internal Revenue Code with respect to environmental remediation cost expensing, making such provision permanent and widening the definition of 

‘‘hazardous substance’’ and ‘‘qualified contaminated site’’ so that more 

brownfield type sites will be developed and given a new economic life.

Why has land use, conservation and preservation become such an important issue 

nationwide? No matter where we live, even in areas with little to no population 

growth, we have witnessed the loss of important farmland and open space. Some 

of the facts are startling:

• Sprawling development uses land more inefficiently than before, eating up 

land at twice the rate of population growth. From 1960 to 1990, urban and 

suburban areas almost tripled, while average population density fell by more 

than one third. 

• More than 90 million acres of farmland across the nation are threatened by 

sprawl and we lose more than 2 million acres every year to urban development. 

• Farms are threatened by sprawl, but also are our frontline against urban 

sprawl. Farms located near urban centers serve as the primary source of 

fresh, locally grown food—79% of our fruit, 69% of our vegetables, and 52% 

21

of our dairy goods are produced on high quality farmland threatened by 

urban growth.

What makes the tax incentives being discussed today so important is that Federal 

programs and state and local initiatives cannot make it alone. Currently, the Department of Agriculture’s Federal Farmland Protection Program is oversubscribed 

by 600%. If funds were available, more than 4,000 farmers would sell development 

rights on their land. 

Citizens and voters across the country have declared open space preservation a 

priority through their voting records. In 2001, voters in 17 states approved state and 

local ballot measures that generated $1.2 billion for conservation measures aimed 

at protecting recreational lands, farmland, parks and water supplies. Over 70 percent of these types of ballot measures passed. 

I support these tax incentive bills because it is another way in which the Federal 

Government can be active on this important issue. There are a couple of ways in 

which the Federal Government can make a difference and we must provide the resources necessary to do this. 

First, the Federal Government can help through direct funding. In the case of 

open space preservation, there are programs such as the Farmland Protection Program and Land and Water Conservation Fund that are extremely important. However, budgetary constraints limit the overall effectiveness of these programs. 

Second, the Federal Government must be a good partner to state and local governments. These tax incentives are one way we can help. These incentives create a tool 

for the private sector to create opportunities that will preserve lands that Federal 

dollars and local and state initiatives cannot protect alone. 

I would like to take the opportunity to touch on a few other pieces of legislation 

that are important to this whole discussion. There are many factors that have an 

effect on development and land use and Federal funding and tax incentives alone 

will not protect the resources and lands integral to our communities. 

It is important that states and regions are able to consider a wider view of the 

manner in which transportation infrastructure, employment centers, and housing 

are connected, or disconnected as the case may be. How these developments are coordinated and where they are built dictates the nature of our communities, the resources consumed, and the tax dollars it will take to maintain and service them. 

I believe that when regions give forethought to and coordinate the manner in which 

they invest in infrastructure and protect farmland and water resources, taxpayers 

can save billions of dollars. 

The Community Character Act, H.R. 1433, provides modest grants to states so 

that outdated planning statutes can be updated and comprehensive planning undertaken. A key reason for the Community Character Act and a primary obstacle to 

state comprehensive planning stems from the outdated statutes in place at the state 

level. Roughly half of the states rely on a model for land-use planning legislation 

created by the Department of Commerce over 70 years ago. The transformation of 

America’s landscape and settlement patterns since the 1920s has changed drastically. Updated state planning statutes are necessary to create the framework that 

will allow states and regions to address the modern world and adequately plan for 

the future. 

Another bill that touches on transportation’s influence is the Bike Commuter Act, 

H.R. 1265. This legislation aims to include bicycling in the Transportation Fringe 

Benefit that employers are allowed to give employees for commuting to work. Currently, parking, vanpooling, and transit commuters are the only ones eligible for a 

benefit. By leveling the playing field for bike commuters we eliminate an incentive 

for people to live further from work, which is what leads to the development pressures we are now attempting to protect. 

Communities across the nation are seeking to reduce traffic congestion, improve 

air quality, and make neighborhoods safe. The Federal Government can assist in 

those efforts by promoting bicycling use through the existing Transportation Fringe 

Benefit of the tax code. 

Another important bill that utilizes tax credits is the Historic Homeownership Assistance Act, H.R. 1172. This legislation, introduced by Clay Shaw, Jr. Amends the 

Internal Revenue Code to allow a limited tax credit for rehabilitation of a qualified 

historic home. This is a bill important to directing development and investment 

away from outlying areas and back to the existing infrastructure of our communities. 

All of these legislative proposals are important pieces in helping people and localities create the types of communities they want to live in. These are incentives and 

grants that allow the Federal Government to be a good partner with state and local 

22

governments, so that they are able to create livable communities that are safe, 

healthy, and economically secure.

colleague from Georgia, a good friend who has been, I think, a leadChairman MCCRERY. Thank you, Mr. Blumenauer. Now, our 

f er in the effort to get a hearing in the Congress on this issue, my 

friend from Georgia, Johnny Isakson. Mr. Isakson? 

STATEMENT OF THE HON. JOHNNY ISAKSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. ISAKSON. Chairman McCrery, Ranking Member McNulty, 

thank you for letting me be here today and thank you for calling 

this important hearing. I have submitted my written testimony for 

the record, but for the sake of these 5 minutes, I would like to 

speak to you from the heart. 

The Sixth Congressional District of Georgia lies in the greater 

metropolitan Atlanta area. It is known for two great things. It is 

the most rapidly growing urban area in America, and it is also the 

home for the largest protected natural waterway and greenway of 

any urban city in America, the Chattahoochee National River Forest. 

I somewhat represent those two characteristics. For 34 years 

prior to coming to Congress, I was a real estate broker and a developer, and my first act after coming to Congress was to sponsor legislation to expand the Chattahoochee National River Park. 

I am not claiming the original thought of H.R. 882. The late Senator Coverdell from Georgia introduced it a few years ago. Mr. 

Chris Sawyer of Atlanta, Mr. Carl Knoblauch, and others who are 

the real thinkers and engineers behind what I believe is the solution to the problem that has been restated five times already 

brought it to me and I fell in love with it because I know tax policy 

drives economic policy and I know that public/private partnerships 

work when one side or the other driving the train normally does 

not. 

Mr. Chairman, if you think about it for a second, this Congress 

exempted home mortgage interest and allowed it to be a deduction 

on taxes. Therefore, America has the largest homeownership of any 

country in the world. We decide to allow municipal bond interest 

to be tax-free and we raised more capital to build more infrastructure in our cities and our counties, to have the finest quality of life 

of anyone. A decade ago, when public housing had fallen apart, we 

used the tax code and we used tax credits for low- and moderateincome housing to revolutionize both the capital investment and 

the quality of that. H.R. 882 simply does this. It creates a 5-year, $20 billion tax 

credit program to raise the capital to fund the purchase of conservation easements by approved not-for-profit organizations. Unlike depending on the gift of specific land or the exemption of the 

tax for one estate, this allows a coordinated effort where private 

ownership is maintained, but controlled and coordinated conservation easements may be purchased so as to manage our riverways, 

migratory habitat, our farms and ranches in the West. 

Mr. Chairman, I believe in this passionately because it has 

worked in other examples approved by this Committee in other 

23

areas. There is no greater need than creating a public/private partnership to pass on the legacy of our environment and its quality. 

Once destroyed, we can never pass it on. 

In my last business act in Atlanta, Georgia, I was the developer 

of a subdivision called Wild Timber, a unique piece of land on the 

Chattahoochee River that I referred to earlier. Early on in that development, we made an investment in the land and an investment 

in our environment. We sold the river frontage to the Trust for 

Public Lands and then we preserved 20 percent of the remaining 

acreage for greenways throughout the neighborhood to accentuate 

the streams, the topography, and the other natural assets. 

Mr. Chairman, instead of investing in acres of tennis courts, multiple swimming pools, and clubhouses, we preserved what God gave 

us, and an interesting thing happened. People came to our subdivision not to see what we had built, but to appreciate what we had 

not destroyed. In my entire career, it was the most popular, most 

rapidly absorbed development we ever did. 

I believe passionately that the public and private sector can work 

together. I believe concretely that conservation easements purchased and coordinated nationwide can preserve our riverways, our 

migratory habitat pathways between national parks, and preserve 

individual ownership and the family passing of ranches and farms. 

With the leadership of this Subcommittee and the consideration of 

this initiative, I believe we can make a major step forward for my 

children, for your children, and for the heritage we would all like 

to pass on to them, and I thank the Committee for giving me this 

opportunity. 

[The prepared statement of Mr. Isakson follows:]

Statement of the Hon. Johnny Isakson, a Representative in Congress from 

the State of Georgia 

Mr. Chairman and ladies and gentlemen of the Subcommittee, I want to express 

my thanks to you for allowing us the opportunity to discuss H.R. 882. 

Mr. Chairman, I represent the 6th Congressional District of Georgia, which lies 

in the heart of the greater metropolitan Atlanta area. My district has been developing rapidly over the last 20 years, and is the home to many of America’s major 

corporations. It is also the home of the most significant urban river park and greenway in America. To a certain extent, I reflect both of these characteristics of my 

district because prior to my election to Congress I was the president of a major real 

estate and development company, and upon my election to Congress, the very first 

accomplishment I committed myself to was the expansion of the Chattahoochee 

River Greenway Program, which Congress passed in the 106th Congress. 

I am one who firmly believes that all of us have a responsibility to preserve our 

environment and our quality of life. I am also one who believes that tax policy has 

a major influence on the way the American people and American business invests 

and spends their money. United States tax policy allows the American people to deduct the cost of interest on their home mortgage on their income tax return, and 

in turn, American home ownership is the highest of any country in the world. The 

United States tax policy exempts from taxation the interest in municipal bond debt, 

and because of that the capital investment in America’s cities and counties provides 

us with the best quality of life and services of any country in the world. United 

States tax policy created the tax credit program for moderate and low income housing, and brought to America’s poorest and less fortunate, better opportunities and 

better neighborhoods. House Resolution 882 makes the statement that a change in 

United States tax policy can, and will, have the same type of positive influence on 

our environment as each of these examples have had on other facets of American 

life. 

Mr. Chairman, the Committee will hear later today from Mr. Christopher Sawyer, 

an Atlanta attorney recognized nationally as a leader in preserving the quality of 

our environment and finding creative ways for government and the private sector 

24

to work together to preserve sensitive environmental lands and family farms and 

ranches. Mr. Sawyer is one of those who was principally responsible for creating the 

Chattahoochee River Greenway program which to date has raised $105 million in 

private funds and gifts to match a $25 million dollar Federal appropriation, which 

resulted in an expansion of the size of the Chattahoochee National Recreation Area 

and added an additional 60 miles of river frontage to the park. I urge the Committee to pay close attention to Mr. Sawyer and his observations, for his knowledge 

comes from experience, not theory, because he understands that the business community and the environmental community can work together for the entire community which we all share equally. 

Mr. Chairman, I must admit that this legislation does not represent my original 

thought. This legislation is the work of many people who believe as I do that our 

environment is important, and that good policy can result in positive changes. The 

legislation was originally drafted by the late United States Senator Paul Coverdell. 

Paul came to believe, as I have come to believe, that there is a role for government 

to play to be a catalyst for positive change in environmental protection. 

Mr. Chairman, I come from the southeastern portion of our great country, and we 

face, as much of America faces, severe water problems. We recognize how critical 

our rivers are, and how essential water quality is. This legislation would provide 

an unbelievable incentive for the formation of dollars used to purchase conservation 

easements along critical shorelines and river banks to protect the river, reduce erosion and preserve the environment that surrounds it. Conservation easements do 

not take the land from its owner, but do restrict the use of the area upon which 

the easement rests. In my last major development as a businessman before elected 

to Congress, I recognized the growing appreciation for green space and river corridors in our last development in Atlanta known as Wild Timber. We made the conscious decision to sell our river frontage to the Trust for Public Land, and to preserve 20% of the land area of the development in green space for common buffers 

behind houses and along streams. In essence, we banked on making the environment our amenity package, rather than multiple swimming pools, acres of tennis 

courts and houses built up against a riverbank. The result of that experience was 

gratifying as the subdivision set all records in absorption and popularity. People 

came as much to see what we had preserved as what we had built. I am confident 

the vision of Mr. Sawyer and countless others of our citizens is a vision that is right 

for America. Using tax policy as a catalyst for the raising of capital to purchase 

easements to protect sensitive areas makes sense. We all know there isn’t enough 

money to buy, through parklands and wilderness areas, everything that is critical 

to the quality of our environment. The money just doesn’t exist. But through the 

use of conservation easements funded by the tax credits recommended in House 

Resolution 882, we leverage every dollar spent or invested to protect the environment by ten-fold, while maintaining the ownership of those lands upon which the 

easement lies in the name of the families, many of whom are third or fourth generation owners of a beautiful ranch, a magnificent farm or countless acres of 

timberland. 

Finally, Mr. Chairman, I am completely aware of the arguments that abound on 

the Floor of the Congress with regard to tax reductions, tax credits and tax rates. 

I also know the truth, and that is that tax policy drives people’s decisions and people’s investments. While this bill proposes a $20 billion tax credit program over five 

years, it’s result will be a savings of far more money than it would cost to acquire 

the lands we need to preserve or reclaim the lands that have been damaged. It is 

time in this country that we encourage the investment of private capital in the preservation of our environment and use our tax policy, as we have in the past, to cause 

good decisions to be made for the common good and the betterment of our country. 

Mr. Chairman, I thank you and the Committee for allowing us this time. I express 

my appreciation in advance for all the testimony you will hear from Mr. Sawyer and 

his years of work on behalf of my State of Georgia and our country.

you. I know that there are witnesses in the last panel today that 

Chairman MCCRERY. Thank you, Mr. Isakson. I thank all of 

f will touch on every piece of legislation that you all have talked 

about, so I am going to reserve my questions for those witnesses 

when they come, but I would yield to my friend from New York, 

Mr. McNulty. 

Mr. MCNULTY. Thank you, Mr. Chairman. I just have a couple 

of brief questions. First, to Congressman Isakson, I notice your bill 

25

has a State cap and I was just wondering if you could describe how 

that would be determined on a State-by-State basis and how it 

would be administered within the States as far as who could take 

advantage of it. 

Mr. ISAKSON. I thank you for the question. In the testimony 

submitted by Mr. Sawyer, in the backup documentation, there is a 

chart that shows that allocation, which basically, and I am going 

on my memory here, goes from the highest cap allocation of $200 

million in the largest State to one that was somewhere in the area 

of, I believe, $47 million in terms of the lowest allocation in the 

lowest State. It is basically a ratio of the farms and land and 

timberland in that State as a percentage of the land available in 

that State and allocated on that basis. 

Mr. Sawyer is going to discuss in his testimony, and at length 

in the written part, the allocation. The cap—did I answer your 

question? 

Mr. MCNULTY. Well, then a subpart of that question would be, 

once you determine the cap, how do you determine the administration of who gets to apply for the credits in order to get up to that 

cap. 

Mr. ISAKSON. Well, ultimately——

Mr. MCNULTY. That sounds like that would be hard to administer. 

Mr. ISAKSON. Well, I think not hard to administer, but ultimately, one of the things the Committee will do will be to work 

through that project. Although I understand the difficulty, we had 

no problem obtaining from the United States Government the number of acres in each State that fell in those categories, and I think 

you will find through both the U.S. Department of Agriculture 

(USDA) and other departments a pretty good monitoring of the use 

of land in the country. 

One other point that I want to make, each year, if a State does 

not utilize up to its cap, then the remaining funds can be allocated 

over other States who have. So, this is a type of situation where 

the incentive is to use conservation easements to conserve vital 

lands and see to it the money is used by those that are truly 

partnering and taking initiative. If one State did not for one reason 

or another, the money would be reallocated across the others based 

on the formula. 

Mr. MCNULTY. Thank you Congresswoman Dunn, in H.R. 1711, 

what types of entities would issue the bonds and is there a Federal 

revenue cost? 

Ms. DUNN. Thank you for the question, Mr. McNulty. It would 

be a State public agency would administer the bonds, and the revenue cost would be $6 million in 2003 and over 10 years it would 

be $487 million. You might wonder about the Payments in Lieu of 

Taxes. They would be included in the purchase of the property. 

Mr. MCNULTY. Thank you. That is all I have, Mr. Chairman. 

Chairman MCCRERY. Thank you all very much. We appreciate 

your taking your time to share with us your ideas on how we can 

conserve open spaces and green areas in our country. 

Chairman MCCRERY. Now, I would like to call forward Ms. Pam 

Olson, who is the Acting Assistant Secretary for Tax Policy, U.S. 

Department of the Treasury. 

26

Ms. Olson, thank you very much for coming today. We assume 

you are going to share with us the proposals in the President’s 

budget with respect to today’s topic, and know that your full written testimony will be entered into the record and we would like for 

you to summarize that orally in about 5 minutes. You may begin. 

STATEMENT OF PAMELA F. OLSON, ACTING ASSISTANT 

SECRETARY FOR TAX POLICY, U.S. DEPARTMENT OF THE 

TREASURY 

Ms. OLSON. Thank you, Mr. Chairman, Mr. McNulty. I appreciate the comment about the size of the shoes that I am attempting 

to fill. Please bear with me to the extent I fall short from time to 

time. 

I do appreciate the opportunity to appear before you today. As 

you know, the President has made a firm commitment to conservation and the environment. I would like to begin by commending you 

and the Subcommittee for holding today’s hearing focusing on tax 

incentives to encourage responsible stewardship of the land and 

proposals designed to improve upon those incentives and further 

encourage the preservation of open spaces. 

I also commend the Members of the Committee on Ways and 

Means, Ms. Dunn, Mrs. Johnson, Mr. Neal, Mr. Portman, Mr. 

Weller, as well as Mr. Blumenauer and Mr. Isakson for their 

thoughtful comments and for their leadership in introducing legislation to encourage responsible stewardship of America’s land. 

The Internal Revenue Code includes a number of conservation 

incentives, including brownfields deductions to encourage the 

cleanup of abandoned or under-utilized contaminated properties by 

allowing expensing of environmental remediation costs, a charitable deduction for the contribution of qualified real property for 

conservation purposes, an estate tax exclusion for qualified conservation easements, and a proposal to allow State and local governments to issue tax-exempt bonds for land conservation and preservation. 

The Administration has included several tax-related proposals in 

the President’s fiscal year 2003 budget that I will expand on later 

in my testimony. However, I would note that the President’s commitment to advance policies to encourage land conservation and 

preservation extends well beyond the tax code. A description of the 

Administration’s proposals to encourage land conservation and 

preservation is included in my written testimony. 

The tax code includes a number of incentives to encourage responsible stewardship of the land. The President has included a 

number of proposals in his budget designed to improve on those incentives and further encourage the preservation of open spaces. We 

look forward to working with this Subcommittee as it considers 

those initiatives. 

First, brownfields. The Administration’s budget includes $200 

million, twice the fiscal year 2002 level of funding, for the Environmental Protection Agency’s brownfields program, $171 million of 

which is for grants for States and local communities. Moreover, the 

President proposes making the brownfields tax incentives permanent. This incentive is currently scheduled to expire on December 

31, next year. 

27

Brownfields are abandoned or under-utilized properties, the expansion, redevelopment, or reuse of which may be complicated by 

the presence or potential presence of a hazardous substance, pollutant, or contaminant. Since lenders, investors, and developers fear 

the high and uncertain costs of cleanup, they avoid developing contaminated sites. Blighted areas of brownfields hinder the redevelopment of affected communities and create safety and health risks 

for residents. 

The obstacles in cleaning these sites, such as regulatory barriers, 

lack of private investment, and contamination and remediation 

issues, are being addressed through a wide range of Federal programs, including the tax incentive for brownfields remediation. To 

encourage the cleanup of contaminated sites, the brownfields tax 

incentives permits the current deduction of certain environmental 

remediation costs. The brownfields tax incentive applies to expenditures paid or incurred before January 1, 2004. 

The Administration believes that encouraging environmental remediation is an important national goal. The brownfields provision 

encourages the cleanup of contaminated brownfields, thereby enabling them to be brought into productive use in the economy and 

mitigating potential harms to public health. 

The current law incentive was made temporary to encourage 

faster cleanup of brownfields. Experience has shown, however, that 

many taxpayers are unable to take advantage of the incentive because environmental remediation often extends over a number of 

years. For that reason, the President’s budget proposed a permanent extension of the brownfields tax incentive. Extending this special treatment accorded to brownfields on a permanent basis would 

remove doubt among taxpayers as to the future deductibility of remediation expenditures and would promote the goal of encouraging 

environmental remediation. 

The Administration’s proposal, as has been noted, was introduced by Mr. Weller and Mr. Coyne as H.R. 1439 and we appreciate their support of that provision. 

The revenue cost of the proposal, we have estimated to be $1.1 

billion over fiscal years 2003 through 2007. We estimate that the 

$300 million annual cost will leverage approximately $2 billion in 

private investment and return 4,000 brownfields to productive use 

each year. 

The second item I want to mention is conservation sales. The Administration has also proposed to provide an exclusion for 50 percent of the gain when land or an interest in land or water is sold 

for conservation purposes. The proposal would apply to land sales 

after December 31, 2003. Some landowners may want their land to 

be protected for conservation purposes but cannot afford simply to 

donate either the land or an easement on the land, especially if the 

land is the landowner’s primary salable asset. 

By adding an incentive for sales to qualified conservation groups, 

the President’s budget complements the existing provisions that encourage charitable donations. This proposal would encourage the 

sale of appreciated environmentally sensitive land and land rights 

to qualified conservation groups, thus achieving conservation goals 

through voluntary sales of property rather than imposing government regulation on land use. 

28

Mr. Chairman, we believe that the Administration’s proposed tax 

initiatives represent sound tax policy that can produce significant 

environmental benefits for decades to come. This concludes my prepared testimony. I would be pleased to answer any questions that 

you or Members of the Subcommittee may have. Thank you. 

[The prepared statement of Ms. Olson follows:]

Statement of Pamela F. Olson, Acting Assistant Secretary for Tax Policy, 

U.S. Department of the Treasury 

Mr. Chairman, Mr. McNulty, and Members of the Subcommittee: 

I appreciate the opportunity to discuss with you today the Administration’s proposed tax incentives for improving the environment. I would like to start by thanking the Subcommittee for holding a hearing on this important issue. I also commend 

Ms. Dunn, Ms. Johnson, Mr. Neal, Mr. Portman, and Mr. Weller of this Committee, 

as well as Mr. Blumenauer and Mr. Isakson, for their thoughtful comments and for 

their leadership in introducing legislation to encourage responsible stewardship of 

America’s land. This is a goal the President shares. 

Reflecting the President’s firm commitment to conservation and the environment, 

the President’s Budget for FY 2003 includes a number of proposals that will encourage land conservation and preservation. The budget includes the following initiatives for environmental conservation and stewardship: (1) over $910 million to fully 

fund the Land and Water Conservation Fund to support natural resource conservation and outdoor recreation, including $200 million for State grants—this proposal 

recognizes that Federal land acquisition is not the only way to conserve land and 

other natural resources, and allows funds to be used for conservation easements; (2) 

$665 million for the National Park Service to address the park maintenance backlog; (3) $67.5 million for Natural Resource Challenge, a science-based initiative to 

strengthen natural resource management throughout the National Park System; (4) 

$376 million for wildlife protection and public use opportunities at our National 

Wildlife Refuges; (5) $100 million for a new Cooperative Conservation Initiative to 

protect and conserve the environment by awarding challenge grants to landowners, 

environmental groups, land-user groups, communities and State and local governments; (6) $50 million for the Landowner Incentive Program, which provides funds 

to States, tribes and territories to make cost-sharing grants for the protection of 

habitat for endangered, threatened or other at-risk species on private or tribal 

lands; (7) $70 million for the Forest Legacy program to protect against the loss of 

forests from development; (8) $10 million for the Private Stewardship grant program 

to provide technical and financial assistance to landowners engaged in local, private 

and voluntary conservation efforts for the benefit of Federally listed or other imperiled species; and (9) $200 million—twice the FY 2002 level of funding—for the Environmental Protection Agency’s brownfields program, $171 million of which is for 

grants to States and local communities. 

The Budget proposes making the brownfields tax incentive permanent. Under current law, this incentive is scheduled to expire on December 31, 2003. The revenue 

cost of a permanent extension is estimated to be $1.1 billion over five years. The 

Administration also proposes to provide an exclusion for 50 percent of the gain when 

land (or an interest in land or water) is sold for conservation purposes. The proposal 

would apply to land sales after December 31, 2003, and its revenue cost is estimated 

to be $328 million over five years. 

The President’s Budget includes other proposals that will benefit the environment. These proposals are part of an overall environmental policy aimed at encouraging economic growth in ways that protect the environment. In February, the 

President announced the Clear Skies Initiative to cut power plant emissions of the 

three worst air pollutants—nitrogen oxides, sulfur dioxide, and mercury—by 70 percent. This initiative will improve air quality using a proven, market-based, cap-andtrade approach. The Budget also provides $4.5 billion for activities related to global 

climate change, including the first year of funding for a five-year, $5.0 billion commitment to tax incentives to encourage energy efficiency, reduce greenhouse gas 

emissions and develop renewable energy sources. 

Thanks in large part to the leadership shown by the Ways and Means Committee, 

many of the Administration’s tax proposals have been enacted or are included in 

legislation that the House passed last summer. We look forward to working with 

this Subcommittee as it considers the remainder of the Administration’s environmental initiatives. 

The remainder of my testimony will provide a more detailed discussion of the Administration’s tax proposals. 

29

LAND-RELATED INCENTIVES 

Current law tax incentives for land conservation

As the Chairman noted in announcing this hearing, the Internal Revenue Code 

currently includes a number of incentives to encourage responsible stewardship of 

the land. They include the deductibility of brownfields remediation costs, special 

rules for qualified conservation contributions, an estate tax exclusion for qualified 

conservation easements, an exclusion for certain conservation cost-sharing payments, and rules permitting the issuance of tax-exempt bonds for land conservation 

and preservation purposes.

Brownfields remediation costs

A brownfield site is real property, the expansion, redevelopment, or reuse of which 

may be complicated by the presence or potential presence of a hazardous substance, 

pollutant, or contaminant. Because lenders, investors, and developers fear the high 

and uncertain costs of cleanup, they avoid developing contaminated sites. Blighted 

areas of brownfields hinder the redevelopment of affected communities and create 

safety and health risks for residents. The obstacles in cleaning these sites, such as 

regulatory barriers, lack of private investment, and contamination and remediation 

issues, are being addressed through a wide range of Federal programs, including the 

tax incentive for brownfields remediation. 

To encourage the cleanup of contaminated sites, the brownfields tax incentive permits the current deduction of certain environmental remediation costs. Environmental remediation costs qualify for current deduction if the expenditures would 

otherwise be capitalized (generally costs incurred to clean up land and groundwater 

that increase the value of the property) and are paid or incurred in connection with 

the abatement or control of hazardous substances at a qualified contaminated site. 

A qualified contaminated site generally is any property (1) that is held for use in 

a trade or business, for the production of income, or as inventory; (2) at or on which 

there has been a release, threat of release, or disposal of a hazardous substance; 

and (3) that is certified by the appropriate State environmental agency as to the 

release, threat of release, or disposal of a hazardous substance. Sites that are identified on the national priorities list under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) do not qualify as qualified contaminated sites. The brownfields tax incentive applies to expenditures paid 

or incurred before January 1, 2004.

Qualified conservation contributions

To encourage charitable donations, tax law provides a charitable contribution deduction not only for outright gifts but also in certain cases where the property is 

sold to a charity for less than its fair market value (that is, a ‘‘bargain sale’’). In 

general, however, a charitable deduction is not allowed for income, estate, or gift 

tax purposes for a contribution of less than the donor’s entire interest in property. 

There is an exception, however, for qualified conservation contributions. A qualified 

conservation contribution is a contribution of a qualified real property interest to 

a governmental unit or public charity exclusively for any of the following conservation purposes: (1) the preservation of land areas for outdoor recreation by, or for the 

education of, the general public; (2) the protection of a relatively natural habitat of 

fish, wildlife, or plants, or similar ecosystem; (3) the preservation of open space (including farmland and forest land) where such preservation is (i) for the scenic enjoyment of the general public or (ii) pursuant to a clearly delineated Federal, State, 

or local governmental conservation policy; or (4) the preservation of an historically 

important land area or a certified historic structure. A real property interest is 

qualified for this purpose only if it is (1) the donor’s entire interest other than a 

retained interest in subsurface oil, gas, or other minerals and the right of access 

to such minerals, (2) a remainder interest, or (3) a perpetual restriction on the use 

that can be made of the property.

Estate tax exclusion for qualified conservation easements

For Federal estate tax purposes, up to 40 percent of the value of land subject to 

a qualified conservation easement may be excluded from a decedent’s estate at the 

election of the executor. The maximum exclusion permitted for qualified conservation easements is $500,000. In addition, if the value of the conservation easement 

is less than 30 percent of the value of the land (determined without regard to the 

value of the easement and reduced by the value of any retained development right), 

the exclusion percentage is reduced by two percentage points for each percentage 

30

point (or fraction thereof) by which the value of the qualified conservation easement 

is less than 30 percent of the value of the land. 

A qualified conservation easement must meet the following requirements: (1) the 

land must be located within the U.S. or a possession of the U.S.; (2) the land must 

have been owned by the decedent or a member of the decedent’s family at all times 

during the three-year period ending on the date of the decedent’s death; and (3) a 

qualified conservation contribution of a qualified real property interest (see above) 

must have been granted by the decedent, a member of the decedent’s family, the 

executor of the decedent’s estate, or the trustee of a trust holding the land no later 

than the date of the executor’s election. For this purpose, preservation of a historically important land area or a certified historic structure does not qualify as a conservation purpose. In addition, the qualified real property interest must include a 

prohibition on more than a de minimis use for a commercial recreational activity. 

Property financed with acquisition indebtedness is eligible for the exclusion only 

to the extent of the net equity in the property, and the exclusion does not extend 

to the value of any development rights retained by the decedent or donor. To the 

extent the value of the land acquired at death is excluded from the decedent’s estate 

under the qualified conservation easement rule, the land will receive a carryover 

rather than a stepped-up basis.

Cost-sharing payments

To further conservation, Federal and State governments implement a number of 

programs to share in taxpayers’ costs of making improvements to land. These costs 

do not normally improve the income-producing capacity of the property. To encourage participation in these programs, taxpayers may exclude certain payments received under these programs from their gross income. To qualify for exclusion, the 

payments must be made primarily for the purpose of conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a 

habitat for wildlife and may not increase substantially the annual income derived 

from the property. Taxpayers claiming the exclusion may not increase the basis of 

the improved property by the excluded amount and may not claim any deduction 

or credit for any expenditure associated with the excluded payment.

Tax-exempt bonds

States and local governments may issue tax-exempt bonds for land conservation 

and preservation purposes so long as: (1) no more than ten percent of the bond proceeds is used by private entities in a trade or business if payments or security associated with that use are available to pay principal or interest on the bonds; and (2) 

no more than five percent of the bond proceeds is loaned to private businesses or 

individuals. If these private activity requirements are not met, tax-exempt private 

activity bonds may nonetheless be issued, subject to per-State volume limits, for the 

following land conservation and preservation purposes: water, sewage, solid waste 

disposal, and hazardous waste facilities; and redevelopment infrastructure in blighted areas if the bonds are supported by incremental property taxes. 

Administration budget proposals

The President’s Budget for FY 2003 includes two proposals to improve upon these 

tax incentives and further encourage the restoration and preservation of America’s 

land.

Brownfields remediation costs

The Administration believes that encouraging environmental remediation is an 

important national goal. The brownfields provision encourages the cleanup of contaminated brownfields, thereby enabling them to be brought into productive use in 

the economy and mitigating potential harms to public health. The current-law incentive was made temporary to encourage faster cleanup of brownfields. Experience 

has shown, however, that many taxpayers are unable to take advantage of the incentive because environmental remediation often extends over a number of years. 

For that reason, the President’s budget proposed a permanent extension of the 

brownfields tax incentive. Extending the special treatment accorded to brownfields 

on a permanent basis would remove doubt among taxpayers as to the future deductibility of remediation expenditures and would promote the goal of encouraging environmental remediation. The Administration’s brownfields proposal was introduced 

by Mr. Coyne and Mr. Weller as H.R. 1439. 

The revenue cost of the proposal is estimated to be $1.1 billion over FY 2003–

2007. Treasury estimates that the proposal, at a $300 million annual cost, will leVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00034 Fmt 6633 Sfmt 6621 E:\HR\OC\85675A.XXX 85675A
31

verage approximately $2 billion per year in private investment and will return 4,000 

brownfields per year to productive use.

Conservation sales

Some landowners may want their land to be protected for conservation purposes 

but cannot afford simply to donate either the land or an easement on the land, especially if the land is the landowner’s primary salable asset. By adding an incentive 

for sales to qualified conservation groups, the President’s Budget complements the 

existing provisions that encourage charitable donations. This proposal would encourage the sale of appreciated, environmentally sensitive land and land rights to qualified conservation groups, thus achieving conservation goals through voluntary sales 

of property, rather than imposing government regulation on land use. The proposal 

would achieve this goal by strengthening the ability of conservation groups to compete with other potential buyers of appreciated, environmentally sensitive land. 

Under the Administration proposal, when land (or an interest in land or water) 

is voluntarily sold for conservation purposes (as defined below), only 50 percent of 

any capital gain would be included in the seller’s income. The 50-percent exclusion 

is based on what the gain would have been without taking improvements into account (that is, the taxpayer may exclude 50 percent of the excess of (a) the purchase 

price allocable to the property other than improvements, over (b) the basis allocable 

to the property other than improvements). To be eligible for the partial exclusion, 

the sale must be to a qualified conservation organization. A qualified conservation 

organization is either a governmental unit or a charity that is a qualified organization under section 170(h)(3) and that is organized and operated primarily for conservation purposes. Conservation purposes are the preservation of land areas for 

outdoor recreation by, or the education of, the general public; the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem; or the preservation of open space where the preservation is for the scenic enjoyment of the general public or pursuant to a clearly delineated Federal, State, or local governmental 

conservation policy. 

The buyer must provide a written statement representing that it is a qualified 

conservation organization and that it intends to hold the property exclusively for 

conservation purposes and not to transfer it for valuable consideration other than 

to a qualified conservation organization in a transaction that would qualify for this 

50 percent exclusion if the buyer/transferor were taxable. The partial exclusion 

would not be available for sales pursuant to a condemnation order but would apply 

to any gain recognized in a sale that is made in response to the threat or imminence 

of such an order. If the property sold is less than the taxpayer’s entire interest in 

the property, it must satisfy requirements like those applicable to qualified conservation contributions under section 170(h). In addition, the taxpayer or a member 

of the taxpayer’s family must have owned the property sold for the three years immediately preceding the date of the sale. 

Similar proposals were introduced by Mr. Kolbe as H.R. 960 and by Mr. Portman 

(with a number of cosponsors) as H.R. 2290. 

The provision would be effective for sales taking place on or after January 1, 

2004. The revenue cost of the proposal is estimated to be $328 million over FY 

2003–2007. 

ENERGY-RELATED INCENTIVES

Current law tax incentives for energy efficiency and alternative fuels

Tax incentives currently provide an important element of support for energy-efficiency improvements and increased use of renewable and alternative fuels. Current 

incentives are estimated to total approximately $800 million for fiscal years 2003 

through 2007. They include a tax credit for electric vehicles and expensing for cleanfuel vehicles, a tax credit for the production of electricity from wind or biomass, a 

tax credit for certain solar energy property, and an exclusion from gross income for 

certain energy conservation subsidies provided by public utilities to their customers.

Electric and clean-fuel vehicles and clean-fuel vehicle refueling property

A 10-percent tax credit is provided for the cost of a qualified electric vehicle, up 

to a maximum credit of $4,000. A qualified electric vehicle is a motor vehicle that 

is powered primarily by an electric motor drawing current from rechargeable batteries, fuel cells, or other portable sources of electric current, the original use of 

which commences with the taxpayer, and that is acquired for use by the taxpayer 

and not for resale. The full amount of the credit is available for purchases prior to 

32

1For a more detailed description, see General Explanations of the Administration’s Fiscal Year 

2003 Revenue Proposals, Department of the Treasury, February 2002.

2004. The credit begins to phase down in 2004 and does not apply to vehicles placed 

in service after 2006. 

Certain costs of qualified clean-fuel vehicles and clean-fuel vehicle refueling property may be deducted when such property is placed in service. Qualified electric vehicles do not qualify for the clean-fuel vehicle deduction. The deduction begins to 

phase down in 2004 and does not apply to property placed in service after 2006.

Energy from wind or biomass

A 1.5-cent-per-kilowatt-hour tax credit is provided for electricity produced from 

wind, ‘‘closed-loop’’ biomass (organic material from a plant that is planted exclusively for purposes of being used at a qualified facility to produce electricity), and 

poultry waste. The electricity must be sold to an unrelated person and the credit 

is limited to the first 10 years of production. The credit applies only to facilities 

placed in service before January 1, 2004. The credit amount is indexed for inflation 

after 1992.

Solar and geothermal energy

A 10-percent investment tax credit is provided to businesses for qualifying equipment that (1) uses solar energy to generate electricity, to heat or cool or provide hot 

water for use in a structure, or to provide solar process heat or (2) is used to 

produce, distribute, or use energy derived from a geothermal deposit.

Ethanol and renewable source methanol

An income tax credit and an excise tax exemption are provided for ethanol and 

renewable source methanol used as a fuel. In general, the income tax credit is 53 

cents per gallon for ethanol and 60 cents per gallon for renewable source methanol. 

As an alternative to the income tax credit, gasohol blenders may claim an equivalent gasoline tax exemption for ethanol and renewable source methanol that is 

blended into qualifying gasohol. 

The income tax credit expires on December 31, 2007, and the excise tax exemption 

expires on September 30, 2007. In addition, the ethanol credit and exemption are 

each reduced by 1 cent per gallon in 2003 and by an additional 1 cent per gallon 

in 2005. Neither the credit nor the exemption applies during any period in which 

motor fuel taxes dedicated to the Highway Trust Fund are limited to 4.3 cents per 

gallon. Under current law, the motor fuel tax dedicated to the Highway Trust Fund 

will be limited to 4.3 cents per gallon beginning on October 1, 2005.

Energy conservation subsidies

Subsidies provided by public utilities to their customers for the purchase or installation of energy conservation measures are excluded from the customers’ gross income. An energy conservation measure is any installation or modification primarily 

designed to reduce consumption of electricity or natural gas or to improve the management of energy demand with respect to a dwelling unit. 

Administration budget proposals

The Administration’s budget for FY 2003 proposes a number of tax incentives for 

renewable energy and more efficient energy use. The budget also proposes to modify 

the tax treatment of nuclear decommissioning funds. The Administration’s budget 

proposals are described below.1

Electricity from wind and biomass

The President’s Budget proposed to extend the credit for electricity produced from 

wind and biomass for three years to facilities placed in service before January 1, 

2005. This proposal has since been enacted, in part, by the Economic Security and 

Worker Assistance Act of 2002, which provides a two-year extension of the credit. 

In addition, the President’s Budget proposes to expand eligible biomass sources to 

include certain biomass from forest-related resources, agricultural sources, and 

other specified sources. Special rules would apply to biomass facilities placed in 

service before January 1, 2002. Electricity produced at such facilities from newly eligible sources would be eligible for the credit only from January 1, 2002, through December 31, 2004. The credit for such electricity would be computed at a rate equal 

to 60 percent of the generally applicable rate. Electricity produced from newly eligible biomass co-fired in coal plants would also be eligible for the credit only from 

33

January 1, 2002, through December 31, 2004. The credit for such electricity would 

be computed at a rate equal to 30 percent of the generally applicable rate.

Residential solar energy systems

The President’s Budget proposes a new tax credit for individuals who purchase 

solar energy equipment used to generate electricity (photovoltaic equipment) or heat 

water (solar water heating equipment) for use in a dwelling unit that the individual 

uses as a residence. The credit would be available only for equipment used exclusively for purposes other than heating swimming pools. The proposed credit would 

be equal to 15 percent of the cost of the equipment and its installation. The credit 

would be nonrefundable and an individual would be allowed a lifetime maximum 

credit of $2,000 per residence for photovoltaic equipment and $2,000 per residence 

for solar water heating equipment. The credit would apply only to solar water heating equipment placed in service after December 31, 2001, and before January 1, 

2006, and to photovoltaic systems placed in service after December 31, 2001, and 

before January 1, 2008.

Fuel from landfill methane

The President’s Budget proposes to extend the section 29 credit for fuel produced 

from landfill methane produced at a facility (or portion of a facility) that is placed 

in service after December 31, 2001. Fuel produced at such facilities would be eligible 

for the credit through December 31, 2010. The proposal would also expand the credit by permitting the credit for fuel used by the taxpayer to produce electricity. The 

credit for fuel produced at landfills subject to EPA’s 1996 New Source Performance 

Standards/Emissions Guidelines would be limited to two-thirds of the otherwise applicable amount. In the case of landfills with facilities that currently qualify for the 

section 29 credit, this limitation would not apply until after 2007.

Ethanol and renewable source methanol

The President’s Budget proposes to extend the income tax credit and excise tax 

exemption for ethanol and renewable source methanol through December 31, 2010. 

The current law rule providing that neither the credit nor the exemption applies 

during any period in which motor fuel taxes dedicated to the Highway Trust Fund 

are limited to 4.3 cents per gallon would be retained. As under current law, the 

credit and the exemption would each be reduced by 1 cent per gallon in 2003 and 

by an additional 1 cent per gallon in 2005.

Hybrid and fuel cell vehicles

The President’s Budget proposes to provide temporary tax credits for certain hybrid and fuel cell vehicles. 

A credit of $250 to $4,000 would be available for purchases of qualifying hybrid 

vehicles after December 31, 2001, and before January 1, 2008. A hybrid vehicle is 

a vehicle that draws propulsion from both an on-board internal combustion or heat 

engine using combustible fuel and an on-board rechargeable energy storage system. 

To qualify for the minimum credit, a hybrid vehicle would be required to derive at 

least 5 percent of its maximum available power from the rechargeable energy storage system. Larger credits would be available for vehicles that derive larger percentages of power from the rechargeable energy storage system and for vehicles that 

meet specified fuel economy standards. 

A credit of $1,000 to $8,000 would be available for the purchase of qualifying fuel 

cell vehicles after December 31, 2001, and before January 1, 2008. A fuel cell vehicle 

is a motor vehicle propelled by power derived from one or more cells that convert 

chemical energy directly into electricity by combining oxygen with on-board hydrogen (including hydrogen produced from on-board fuel that requires reformation before use). To qualify for the minimum credit, a fuel cell vehicle would be required 

to meet a minimum fuel economy standard for its weight class. Larger credits would 

be available for vehicles that achieve higher fuel economy standards.

Combined heat and power systems

To encourage more efficient energy usage, the President’s Budget proposes to provide a 10-percent investment credit for qualifying combined heat and power (CHP) 

systems. CHP systems are used to produce electricity (and/or mechanical power) and 

usable heat from the same primary energy source. To qualify for the credit, a system would be required to produce at least 20 percent of its total useful energy in 

the form of thermal energy and at least 20 percent in the form of electrical and/

or mechanical power and would also be required to satisfy an energy efficiency 

34

standard. The credit would apply to CHP equipment placed in service after December 31, 2001, and before January 1, 2007.

Nuclear decommissioning funds

The President’s Budget proposes to repeal the current law provision that limits 

deductible contributions to a nuclear decommissioning fund to the amount included 

in the taxpayer’s cost of service for ratemaking purposes. Thus, unregulated taxpayers would be allowed a deduction for amounts contributed to a qualified nuclear 

decommissioning fund. The Administration also proposes to permit funding of all decommissioning costs (including pre-1984 costs) through qualified nuclear decommissioning funds. Contributions to fund pre-1984 costs would be deductible except to 

the extent a deduction (other than under the qualified fund rules) or an exclusion 

from income has been previously allowed with respect to those costs. The Administration’s proposal would clarify that any transfer of a qualified nuclear decommissioning fund in connection with the transfer of the power plant with which it is associated would be nontaxable and no gain or loss will be recognized by the transferor or transferee as a result of the transfer. In addition, the proposal would permit 

taxpayers to make deductible contributions to a qualified fund after the end of the 

nuclear power plant’s estimated useful life and would provide that nuclear decommissioning costs are deductible when paid. 

SAFE Act

The Administration is pleased that the House, following the lead of this Committee, has passed H.R. 4, the Securing America’s Future Energy Act of 2001. The 

Administration said, when the House was considering H.R. 4, that it was an important step in ensuring the Nation’s energy security. We should also note that the inclusion in H.R. 4 of incentives from the President’s budget to encourage conservation, energy efficiency, and the use of renewable and alternative energy sources advances vital elements of the Administration’s environmental initiatives. 

CONCLUSION

Mr. Chairman, we believe that the Administration’s proposed tax initiatives represent sound policy that can produce significant environmental benefits for decades 

to come. While this concludes my prepared testimony. I will be pleased to answer 

array of incentives in the tax code currently and those which the 

any questions you or other members of the Subcommittee may have.

Chairman MCCRERY. Thank you, Ms. Olson. In looking at the 

f Administration and Members of Congress might be proposing, did 

you consider the effect of the alternative minimum tax on some of 

these incentives, and if so, can you describe what those effects 

might be and if they would have any effect on the conservation incentives themselves? 

Ms. OLSON. Yes, we did. The Alternative Minimum Tax (AMT) 

generally allows charitable contributions to be deducted to the 

same extent as the regular tax. The AMT taxpayers generally face 

different marginal tax rates than if the AMT did not exist. Those 

marginal rates can be higher or they can be lower than regular tax 

marginal rates. If the AMT marginal rate is higher, then the AMT 

may increase the incentive to make charitable conservation contributions. If the AMT marginal rate is lower, the AMT may decrease the incentive. 

Chairman MCCRERY. Again, in looking at the array of incentives to encourage conservation, did you consider the estate tax and 

the effect that the estate tax has on conserving land? As you know, 

the House just recently voted to make permanent the repeal of the 

estate tax. Can you tell us what effect that might have on the use 

of land generally and conservation of land in particular? 

Ms. OLSON. Well, Treasury has estimated that the repeal of the 

estate tax would have some disincentive effects on charitable conVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00038 Fmt 6633 Sfmt 6602 E:\HR\OC\85675A.XXX 85675A
35

tributions, but those disincentive effects are offset to some extent 

by the fact that individuals with the repeal of the estate tax have 

more cash available for purposes such as charitable contributions. 

In addition to that, we believe that the proposal for the exclusion 

in the President’s budget would offset some of the effects of the repeal of the estate tax. If I might elaborate just a little bit——

Chairman MCCRERY. Sure. 

Ms. OLSON. Part of the repeal of the estate tax includes a carryover basis, and so an heir would take the property with the same 

basis as the decedent and would, therefore, have the same builtin gain and at some point in the heir’s life might have the same 

incentive to make a charitable contribution with respect to that 

property. 

Chairman MCCRERY. What about the effect on conservation of 

that land posed by the burden placed on the heirs of the estate tax 

itself and having to come up with the cash to pay the estate tax? 

Ms. OLSON. Well——

Chairman MCCRERY. If they are land-rich and cash-poor, what 

is the result? 

Ms. OLSON. Well, I think if they are land-rich and cash-poor, 

they are sometimes put in a position of being compelled to sell 

something in order to raise the cash to pay the estate tax. If there 

is no compulsion to sell the property to pay the estate tax because 

there is not an estate tax anymore, they are left with more money 

in their pockets, which might ultimately mean that they have got 

a greater ability to make a charitable contribution. 

Chairman MCCRERY. They might also keep their land, might 

they not? 

Ms. OLSON. They might also keep their land, that is right. 

Chairman MCCRERY. They might also continue to farm the 

land. 

Ms. OLSON. That is right. 

Chairman MCCRERY. To grow trees on it or whatever. 

Ms. OLSON. That is right, which might go a long ways, as well, 

to conserving open space. 

Chairman MCCRERY. Thank you, Ms. Olson. Mr. McNulty? 

Mr. MCNULTY. Thank you for your testimony, Ms. Olson. I was 

wondering, why does your proposal to permanently extend the expensing of brownfields remediation costs not also include an expanded list of deductible expenses, such as those relating to petroleum, asbestos, and pesticide contaminations? 

Ms. OLSON. With respect to items such as asbestos that are generally found inside of buildings, we have not suggested it should be 

expanded to items that are inside of buildings. I think that keeping 

the focus on the current list of items ensures that the most resources are devoted to cleanup of those kinds of items on contaminated sites. If you are looking at a contaminated site and you are 

trying to do the land cleanup, if it is not deductible under the 

brownfields remediation provision, it is going to go into the basis 

of that land and that cost is not going to be recovered at all until 

the land is disposed of. If it is something that goes into the building, then it does become depreciable or recoverable cost as part of 

the building. So, there is less of a critical need for that question 

to be answered with respect to things that are inside of buildings. 

36

Another point is just administerability. Right now, the way that 

the provision works, taxpayers who want to do a cleanup and claim 

the 198 deduction go to a State agency that regulates, keeps track 

of the brownfields site and certifies the expenses. If we expand it 

beyond the current list, we have lost that bit of administerability 

that goes along with it. 

Mr. MCNULTY. In your proposal to exclude 50 percent of the 

capital gains from the sale of property for conservation purposes, 

how do you define conservation purposes and what entity makes 

that determination? 

Ms. OLSON. We would follow some of the proposals that have 

been followed in the past, where you have got organizations that 

are currently permitted under the tax code as conservation entities, 

and so it would be those same kinds of entities that would be making the decision about what to acquire in terms of the land that 

is offered for sale. 

Mr. MCNULTY. That is all I have, Mr. Chairman. Thank you. 

Chairman MCCRERY. Mr. Weller? 

Mr. WELLER. Thank you, Mr. Chairman, and Ms. Olson, welcome. It is good to have you before the Subcommittee today and I 

very much appreciate the Bush Administration’s commitment on 

brownfields cleanup and embracing the need to make permanent 

the brownfields expensing provision that we have all worked together on over the last several years. 

Let me ask this. Based on your knowledge of brownfields cleanup 

and the data that you have and just looking at it from a national 

perspective, how do you feel that this expensing provision acts as 

a motivation for a private investor to be more inclined to purchase 

that old industrial site on the edge of town rather than a cornfield 

further out on the edge of town, which from the standpoint of just 

cost of the land, without having to do the environmental cleanup, 

they might be able to save money on. What do you see as a motivating factor as a result of this tax provision? 

Ms. OLSON. Well, I think it has a significant effect. There is a 

big difference between taking the costs of cleanup and putting it 

into the basis of the land than having it just hang there for an indeterminate amount of time as a cost that cannot be recovered 

versus being able to deduct those out-of-pocket expenses up front. 

So, if you were comparing two parcels of land of equal value except 

that one had to be cleaned up considerably before it could be used, 

it is obviously significantly increased cost, and the fact that the 

taxpayer can deduct the costs of cleanup would give him an incentive to do that. 

Mr. WELLER. Okay. You have interesting numbers there. You 

indicated that you feel that making permanent this provision 

would generate at least $2 billion worth of investment and over the 

next 5 years would clean up an additional 2,000 brownfields. From 

the standpoint of the Chicago area that I represent, that represents 

our entire current inventory of brownfields in the Chicago metropolitan area. I think there are about 400,000 brownfields nationwide, so we have a lot of work to do. 

Ms. OLSON. That is right. We do have a lot of work to do. Our 

estimate is actually 4,000 per year, so——

Mr. WELLER. Four thousand per year would be——

37

Ms. OLSON. Yes. 

Mr. WELLER. I need to correct that, but that would be a tremendous investment. I do want to thank the Administration for 

your commitment on this. I look forward to working with you. 

I do wish that the Administration would take a look at expanding the types of materials that would benefit from this tax incentive when it comes to what types of materials can be cleaned up. 

Obviously, as we have experimented with how to make this tax incentive work, it has been quite evident that there is a need for expansion of the type of cleanup that would succeed in our goal of 

revitalizing brownfields, so I would very much like to work with 

you on identifying ways that we can expand the type of cleanup 

that would be eligible for this tax incentive, as well as making it 

permanent. 

Ms. OLSON. We would be happy to give that further study. 

Mr. WELLER. Thank you, Mr. Chairman. Thank you for holding 

this hearing. 

Chairman MCCRERY. Thank you, Mr. Weller. I have not asked 

or advised Ms. Dunn or Mr. Blumenauer, but if you would like to 

ask the Administration’s witness anything, feel free to do that. Ms. 

Dunn? 

Ms. DUNN. Thank you very much, Mr. Chairman. I did not expect to have a chance to ask the Administration witness a question, 

but I would simply say that we have sat down and had a good 

briefing with Mark Weinberger on H.R. 1711 and I am hopeful that 

we can sit with you, Ms. Olson, and go through this in detail. Do 

you have any sense of what the position would be in general on 

this type of legislation? 

Ms. OLSON. I would be happy to sit down with you and discuss 

it. We have been through the legislation and we do have some suggestions that we have discussed with some of the folks who are interested in your proposal that we think would make it a little bit 

tighter and make it work a little bit better, make it more administrable, because we do have a few administerability concerns. We 

also have some ideas that might help bring the cost of it down, as 

well. 

Ms. DUNN. That is great, and that is exactly the sort of feedback 

we are looking for, so we will look forward to making that meeting 

happen. 

Ms. OLSON. Thank you. 

Ms. DUNN. Thank you, Mr. Chairman. 

Chairman MCCRERY. Thank you, Ms. Dunn. Ms. Olson, thank 

you very much. We look forward to seeing you again and again and 

again in the future. 

Ms. OLSON. Thank you. 

Chairman MCCRERY. Now, I would like to call our third and 

final panel, Mr. Chris Sawyer, Mr. Steven McCormick, Timothy 

Brazell, Charles Bingham, Eugene Duvernoy, Rand Wentworth, 

and Jim DeCosmo. 

Thank you, gentlemen, for coming today to share with us your 

views on some of the legislation that we have already heard discussed today and some other ideas for us to consider. 

Our first witness on this panel is Mr. Chris Sawyer, who is 

President of the West Hill Foundation for Nature, Inc., in Atlanta, 

38

Georgia. Mr. Sawyer, welcome. Note, all of you, that your written 

testimony will be incorporated into the record and we would like 

for you to summarize orally in about 5 minutes. Mr. Sawyer?

STATEMENT OF CHRISTOPHER GLENN SAWYER, ATLANTA, 

GEORGIA 

Mr. SAWYER. Thank you very much, Mr. Chairman. Thank you 

and your Members for the invitation and opportunity to appear before your Subcommittee. You are considering a number of important and thoughtful bills today, but my focus will be on H.R. 882. 

My name is Chris Sawyer and I am from Atlanta, Georgia. I also 

work with real estate companies across America relating to issues 

of development and institutional real estate investment. For over 

a decade, I have also been active with land conservation issues 

throughout America, serving at both the State and national volunteer leadership levels with the Nature Conservancy and the Trust 

for Public Land. 

While I am here today as a private citizen and not as a representative of these various organizations, these experiences with 

both the profit and nonprofit sectors have certainly informed and 

shaped my opinions. My fundamental perspective is that America 

is now in the middle of an insidiously devastating land use crisis 

that without immediate and dramatic action guarantees a greatly 

degraded and irrevocably altered natural estate for all generations 

to come. While I have offered much more extensive support for this 

assertion in materials that I have submitted with this testimony, 

let me briefly offer support here. 

Over our 225-year history, the lower 48 States have lost 52 percent of their original wetland areas and continue to lose these 

areas at the rate of 109,000 acres per year. This is costing us billions of dollars annually, which annual cost compounds each successive year. Of the 14 major living groups of organisms, including 

all vertebrates and vascular plants in the United States, one-third 

of them are either extinct, imperiled, or significantly vulnerable. Of 

the 76 ecoregions in the 48 contiguous States, only 9 are considered 

not to be critical, endangered, or in a vulnerable condition as habitat for the species that they contain. 

These statistics do report the critical condition of our natural 

state, but it is not just our natural state. It is also our culture and 

our quality of life. For example, from 1982 to 1997, we converted 

over 21 million acres of farmland to residential and other development uses. In the last two decades, over one million acres of rangeland in the greater Yellowstone area alone have been split into 

plots of 200 acres or less. In the 5-year period from 1992 to 1997, 

the United States created 15 percent of its total urban footprint 

while the other 85 percent took 225 years. 

As a nation, we have simply worked our land and natural estate 

hard for 225 years, a fact that would stress any system. This stress 

is greatly exacerbated today by the fact that we now have 281 million people and it is anticipated that that number will increase by 

at least 58 million, or 21 percent, by 2020, only 18 years away. 

Collectively, this is an extraordinarily disturbing picture. When 

we fully admit that this is also the picture of the physical platform 

for the future strength, power, and wealth of our great Nation, it 

39

becomes simply unacceptable. It demands a national response 

today that guarantees dramatic, immediate, and permanent improvements in the condition of our natural estate. 

H.R. 882 offers a national response that includes just that guarantee. It does so by building a plan around those elements that will 

be necessary to achieve this critical national goal on the most financially efficient basis, consistent with our heritage of private 

property rights. Those elements include the participation of every 

State, public/private partnerships, use of conservation easements 

for the purchase of development rights, allocation of capital that 

scales to the problem, specific deadlines that will motivate States 

and landowners alike, the participation of everyone, and the use of 

tax credits to involve more citizens directly and to provide for a 

much more immediate and locally driven response. 

Through this plan, H.R. 882 will direct and empower all levels 

of government, land trust, taxpayers, and landowners to work in an 

aligned partnership, focused at the local level to conserve and restore our natural infrastructure for all generations to come, and 

the investments made through H.R. 882 will also bear economic results. They will filter our water and protect it. They will clean our 

air. They will keep our fisheries and foodstocks healthy and productive. They will help assure genetic diversity. They will provide 

the much needed relief of greenspace for all of us while simultaneously allowing us to avoid the costs of artificially replacing these 

same services. These savings and returns will significantly lower, 

if not, in fact, exceed the entire cost of this program. 

These are complex issues, but given what we have lost, what we 

are losing, and what we urgently need, we must embrace an administratively and financially efficient plan that honors private 

property rights and guarantees immediate, dramatic, and permanent improvements to our Nation’s natural state. H.R. 882 is just 

such an opportunity. Thank you for your consideration. 

Chairman MCCRERY. Thank you, Mr. Sawyer, for being so concise and getting just in your 5 minutes. Very well done. 

Mr. SAWYER. Thank you, sir. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Sawyer follows:]

Statement of Christopher Glenn Sawyer, Atlanta, Georgia 

Mr. Chairman: Thank you and your Members for the invitation and opportunity 

to appear before your Committee. 

My name is Christopher Glenn Sawyer. I reside in Atlanta, Georgia, where I have 

practiced law for 24 years. 

During this period of time, I have had a unique experience with land usage in 

America. As a lawyer, I have advised and represented real estate companies across 

America relating to issues of development and institutional real estate investment. 

In addition to the experience of this legal practice, I also represent and serve today 

as a member of the Board of Directors of one of the largest, privately held development companies in America. I have also been nominated to serve on the Board of 

Trustees of the Urban Land Institute. 

Over the last twelve years, I have also been active with land conservation issues 

throughout the United States. In addition to serving on the Georgia boards of the 

Trust for Public Land and The Nature Conservancy, I have also served as chairman 

of the National Real Estate Advisory Board of The Nature Conservancy, as current 

President of the West Hill Foundation for Nature in Wyoming, and currently and 

for the last six years as the National Chairman of the Trust for Public Land 

headquartered in San Francisco. 

While these experiences have certainly exposed me to the broad issues of our environment, I have also worked on specific projects. Most notably, five years ago I 

40

1See, e.g., the attached article: ‘‘The Value of Conservation Easements: The Importance of 

Protecting Nature and Open Space,’’ by Amanda Sauer, World Resources Institute, April 9, 

2002. 

helped start the Chattahoochee River Greenway Program, an effort to create a 

greenway along the banks of the Chattahoochee River from Helen to Columbus, 

Georgia, a linear distance of approximately 180 miles. As part of that effort, we 

came to Congress and received an appropriation of $25 million to increase significantly the size of the Chattahoochee River National Recreation Area. Since that 

time, we have taken those funds and, through creating an active partnership among 

Federal, state and local governments, a number of nonprofits, and many businesses 

and individuals, we have not only essentially doubled the size of the Chattahoochee 

River National Recreation Area, but by leveraging those Federal dollars we have 

also raised over $130 million in addition to the Federal grant and, now four years 

later, have acquired by gift or acquisition a total of 60 miles of river frontage. As 

founding and current chairman of the Chattahoochee River Coordinating Committee, the organizing body of this effort since its inception, I have learned a lot 

about our environmental needs and what we, I believe, must do to respond to them. 

This work, as well as work with other national organizations, has required me to 

travel 40,000 to 60,000 miles a year within the United States over the last ten years 

working on, and learning about, land use and environmental issues. While I wish 

to make it clear that I am here today as a private citizen and not as a formal representative of these various organizations, these experiences have certainly informed and shaped the opinions that I wish to share with you this afternoon. 

My fundamental perspective as a result of these experiences is that America has 

a very significant land use crisis that threatens the bounty of our natural resources 

and the rich diversity of our culture. This crisis poses an immediate threat to us 

today and the promise, without immediate and dramatic action that scales to the 

true needs of our country, of a greatly degraded and irrevocably altered natural estate for all generations to come. 

While I have offered more extensive support for this assertion in materials that 

I have submitted with this testimony, let me offer some support here for this position, as well as a sense of the current pace of this degradation and depletion.

• Over our history, the lower 48 states have lost 52% of their original wetland 

areas and they continue to lose these areas at the rate of 109,000 acres per 

year; because each acre of wetland provides significant annual economic benefits,1 this continuing annual loss of 109,000 acres amounts to a loss of billions 

of dollars each year, losses that continue and compound with new losses year 

after year. Geologically significant grasslands have and are disappearing at 

similar rates. 

• When one surveys the environment regionally, the loss seems, if possible, 

even greater: the Central Valley of California has lost 95% of its original wetlands and 90% of its riparian corridors have been lost or severely degraded; 

50% of the forest and wetlands have been cleared and drained around the 

Chesapeake Bay, severely deteriorating the quality of its water; 80% of the 

original 24,000,000 acres of forested wetlands in the Mississippi Aleuvial Valley are gone; 96% of the original 167,000,000 of the tallgrass prairies in the 

Midwest are gone; 98% of the formerly dominant long-leaf pine in the Southeast region are gone; and the Pacific Northwest has lost 90%, or 25,000,000 

acres, of its ancient forests. 

• Of the 14 major living groups of organisms, including all vertebrates and vascular plants in the United States, 1⁄3 of them are graded of ‘‘conservation concern,’’ meaning that they are either extinct, imperiled or significantly vulnerable. Similarly, of the 76 eco-regions in the 48 contiguous states, only nine 

are considered not to be critical, endangered or in a vulnerable condition as 

habitat for the species they contain. Indeed, an astounding 30% or more of 

the natural communities in areas such as Hawaii, Oregon’s Willamette Valley, and vast portions of the Midwest and Southeast are in danger of vanishing from our natural landscape.

While it is easy to read these as statistics, these statistics report the condition 

of our natural estate. That estate has been the remarkable physical platform for our 

wealth and our strength, and it is obviously diminished and imperiled. But it is not 

just the natural estate; it is also our culture and our quality of life. For example:

• From 1982 to 1992, more than 1,000,000 acres of agricultural land across the 

United States was converted annually to residential and other development 

purposes, one-third of which was classified as prime and unique farmland. 

41

2See, e.g., the attached lecture: ‘‘The Cascading of Environmental Consequences: Are We Running Out of Time?’’, by James Gustave Speth, Dean, Yale School of Forestry & Environmental 

Studies, April 11, 2001. 

From 1992 to 1997, the conversion rate doubled, with 11.2 million acres converted from farmland to other purposes. 

• In the last two decades, over one million acres of rangeland in the Greater 

Yellowstone area have been split into plots of 200 acres or less, changing irrevocably those ranching communities and fragmenting the landscape that 

some say defines America. 

• From 1992 to 1997, the United States created 15% of its total urban footprint—the other 85% took approximately 220 years. 

• This development pattern is dependent on the automobile and the result of 

that is that the average American now spends approximately 445 hours in a 

car annually or the equivalent of 55 eight hour work days—all at a great cost 

to our land, our air, our water, our families, and our communities.

While we need economic growth, to continue to develop in this same pattern not 

only wastes our land base, but it also diminishes our water quality, our air quality, 

our sense of community, our natural habitat for plants and animals, and our culture. It is especially harmful to our ranching and farming communities because so 

much of their land is being irreparably lost to other land uses. 

Without dramatic change, the future bodes no better for the future of our beautiful country:

• For example, the scientists at Yellowstone National Park report that, unless 

development patterns are addressed in the three states surrounding the park, 

the large mammals within the park will no longer be able to exist naturally. 

They will, in effect, become museum pieces because they will no longer be 

able to follow their migratory trails in and out of those spectacular areas that 

their natural existence requires. 

• The demographers in the Southeast are now reporting that we should anticipate that there will be one metropolitan area that connects Birmingham to 

Atlanta to Greenville to Charlotte to Raleigh in the very near term. Not only 

will this change the culture of the Southeast forever, but it will obviously affect the natural communities as indicated above. 

• Recent flooding of the Mississippi reminds us of the astounding costs of channeling these great rivers and losing the wetlands that cushion and absorb the 

natural flood stages of our riparian systems. This will become an even greater 

problem throughout the nation. 

• If current development and population trends continue, it is estimated that 

by 2050 our farmers and ranchers will be required to produce food for 50% 

more Americans on 13% less land.

As a nation, we have simply worked our land and natural estate hard for 225 

years, a fact that would stress any system. This stress, however, is greatly exacerbated today by the fact that we now have 281,000,000 people, a 13% increase since 

1990, and it is anticipated that that number will increase by 58,000,000, or 21%, 

by 2020. 

Collectively this is a very difficult picture. It is the result of many causes and 

stresses and will require new and dramatic solutions that scale to the depths and 

breadth of these challenges to restore fully a balance that is worthy of this great 

land and nation that we share. 

It is, however, an especially disturbing picture, not just from the perspective of 

what we have lost, which is extraordinarily significant, but even more so when we 

fully realize that this is also the picture of the physical platform for our future 

strength. We are the beneficiary and the product of our natural estate. And just as 

it has been throughout our history, the strength, power and wealth of our nation 

in the future is absolutely dependent upon its condition. 

This disturbing conclusion is underscored by the fact that we no longer have any 

time left for wasted opportunity or misguided activity.2 It is the same as when we 

started the Chattahoochee River Greenway project. We simply looked at the aerial 

photographs and realized that unless we began that day to create our Greenway, 

we would lose the opportunity to create those parks and conserve and enhance those 

river and water resources forever. As one travels over our country, one knows that 

there are identical aerial photographs in every state. It certainly is so around Yellowstone National Park; as the South morphs into one metropolitan area from Birmingham to Washington, it is certainly true there; as one looks at development leap 

up the Hudson River or consume more of the desert of Arizona or as another ranch 

42

3This is more succinctly stated in the attached report published by the Western Governors’ 

Association, The Trust for Public Land, and National Cattlemen’s Beef Association, entitled 

‘‘Purchase of Development Rights: Conserving Lands, Preserving Western Livelihoods,’’ January 

2001: ‘‘[Purchase of development rights through conservation easements] makes economic sense 

or farm family elects to sell its land, we know that it is true in those places and 

elsewhere in America as well. 

As we consider all of this and wonder how we might effectively respond, we must 

admit one clear fact. We must acknowledge these statistics as a troubling report 

card at best on our generation’s stewardship of our natural estate. We must also 

agree that it is a report card that demands response today and a response that is 

predicated on the certain knowledge that we can no longer afford any course that 

does not begin to improve this report card dramatically, immediately and permanently. 

So the question is not, do we need to make a reinvestment, or when, it is simply 

what is the best way to do it? And even this question has its own urgency because 

we are at a point in our history where the economy is difficult, there is heightened 

turmoil in the world, and governmental dollars are especially precious. We need to 

make certain that every dollar we spend on conservation is wisely invested. And 

every dollar we spend, whether it is through direct appropriation or through tax policy, should be tested through the prism of whether or not that dollar best assures 

us of a significant and lasting improvement in our natural estate report card. 

This new course will require over time many things. There will be new conservation opportunities to seize, maintenance and operational issues to address, and new 

park needs to be met. But business as usual will clearly not by itself achieve our 

goal. 

We must begin today a thoughtful new national initiative, on a scale that is beyond any historical standard, that allows us to conserve and allow for the restoration of our natural estate. And it must be an initiative that gives all of us confidence 

that its inevitable result will be significant improvement in the protection of our rivers, conservation of our forests, the providing of sufficient habitat for the diversity 

of species that we need to survive, the setting aside of our precious farm and ranch 

land, and the enhancement of cities through appropriate ‘‘green space.’’ To fail to 

create such a program, or to create a new program that is not structured and coordinated to achieve these results nationally, will not work. 

The question then is how do we craft such an initiative that will best spend our 

dollars, most effectively and most expeditiously, with the greatest chance of success 

against our goal? 

While one can debate many of the details, my experiences have taught me that 

the following principles, strategies and values must be incorporated in any plan for 

us to be successful against this goal. Those include the following:

1. Hybrid land estate: We must recognize that our emphasis on land being either public or private has been too simple and a real part of the problem. 

A great deal of the required solution is coming to understand that we need 

a greater emphasis on the creation of a larger hybrid land estate throughout 

America that can achieve our conservation needs and in many instances connect our fully public land to our fully private and enhance them both. This 

hybrid land estate must remain privately owned and managed, but simultaneously must also be burdened with the loss of certain development rights 

that the public has acquired voluntarily from the owner at fair market value 

and holds in perpetuity for the benefit of all of us. These hybrid lands, while 

staying in private ownership and supporting private purposes, would also 

serve the public and its collective needs by protecting our water, cleaning the 

air, conserving habitat for our natural species, maintaining our farm and 

ranch lands, and by offering ‘‘green’’ space to all of us. Fortunately, we have 

a 25-year or more history of working with conservation easements, which is 

the legal tool that creates this hybrid estate. Funding conservation easements must therefore be at the center of any such program.

2. Leveraged Focus: The program’s focus must be sharp and it must be on reinvesting in, and thereby strengthening, our natural estate. The use of conservation easements would allow us to acquire from the landowner only that 

portion of the real estate necessary to accomplish our goals. Use of conservation easements would therefore offer the substantial advantage of allowing 

us to accomplish a great deal more conservation than we would with equivalent dollars expended for the full acquisition of the property. This strategy 

would also allow us to avoid the on-going costs associated with managing 

and operating the property.3

43

in the West: it is a compensatory approach to conservation that protects land from development 

pressure at prices that are more affordable for the public than outright purchase, and it helps 

keep farmers and ranchers on the land, providing essential stewardship and contributing to the 

tax base.’’ (Page 5) and ‘‘The dire need to create substantial, dedicated funding sources for state 

and local [Purchase of Development Rights] programs can hardly be overstated.’’ (page 12)

3. State Involvement: Every state must be involved and incented to participate 

in this program. While a portion of this reflects that every state has environmental stresses that must be addressed, this also recognizes that environmental systems, such as rivers, prairies, forests, and all of the species that 

they support, do not know state lines. To be successful over time, and to protect our overall investment, we must therefore have every state moving in 

a similar direction.

4. Partnerships: We must recognize that the most effective conservation has 

been the result of public/private partnerships and therefore any plan must 

put their creation at its center. Congress must set the strategic direction and 

must set both the importance and pace of the program by the amount of capital that it allocates to it; the states must be involved in coordinating the activities at their level and in helping to set local priorities; and the private 

sector must lead the execution. As part of this, we must understand and appreciate that conservation easements are bought and sold one family landowner at a time. The best and most expeditious way to negotiate and close 

those transactions will be to leverage the existing resources of the nonprofit 

conservation community, including the community leaders across America 

that serve on their board of directors. The nonprofit organizations therefore 

must also be at the center of any such plan.

5. Use and scale of capital: Use of capital under this program should be limited 

to the acquisition and requirements of conservation easements. By doing so, 

Congress would be putting specific restrictions on the use of the capital in 

accordance with existing law that happens to be consistent with our program’s objectives. The scale of the capital should reflect the deep needs of 

our country but should also be calibrated between what is possible to execute 

as well as what is needed to unlock the focus, imagination and energy of the 

most people to respond to this challenge.

6. Urgency: The dollars should be allocated to states pursuant to specific deadlines and, if the money is not spent within those deadlines, it should be redistributed to those parts of our country with more pressing needs and that 

also have the immediate capacity and desire to execute.

7. Equity: We must recognize that the conservation and restoration of our natural estate is everyone’s responsibility. Paying for it rather than simply accomplishing it through regulation or relying on the generosity of the few reflects this value. We should certainly keep our current donation system in 

place and encourage its generous use. But by creating a system that is based 

on acquisitions of conservation easements at fair market value, we can move 

to a program that not only allows everyone to participate, but also allows us 

to negotiate for clearer results, act more strategically, and establish our own 

pace of execution: all critically important to the success of our effort.

8. Tax credits: To be successful, we must get as many people involved in America as possible. The best way to achieve this is not through direct appropriations, which is a process involving relatively few people, but instead to use 

tax credits, which is a process that ultimately includes a lot of people. A program based on tax credits will invite and incent those organizations that 

wish to deploy the credits to get more individuals and businesses involved 

in these issues and their solutions. This will require a process of education 

and engagement that will result in much more attention, understanding, and 

commitment to the resolution of these issues. It will also allow us to move 

at the much quicker response pace that our natural estate crisis requires.

9. Strategic conservation: Because of the way in which we have financed a 

great deal of conservation in this nation, much of it has been done 

opportunistically as distinct from strategically. What this means by example 

is that we have acquired a site here and there as they have become available 

or as someone has been able to afford to give them, but collectively they do 

not necessarily support or maintain an ecosystem. In those instances, not 

only do they not fully accomplish a natural estate goal, but by failing to do 

so they devalue, in some instances, the investment or gift that has been 

made. The system that we establish must allow us to move to strategic conVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00047 Fmt 6633 Sfmt 6621 E:\HR\OC\85675A.XXX 85675A
44

servation. By allocating a set amount on an annual basis on a state-by-state 

basis with appropriate sunset provisions, we would allow and incent states 

and landowners to respond strategically to these issues. This is essentially 

what happened with our successful Chattahoochee River project.

These are the nine elements that I believe must be included to craft a plan that 

will dramatically improve our natural estate report card immediately and permanently. That is why I am here to urge consideration, and ultimately, passage of H.R. 

882. 

H.R. 882 prescribes a plan that reflects each of the nine values, strategies, and 

principles stated above. It is entirely centered on conservation easements; dollars 

are allocated to every state on a fair basis which assures the participation of every 

state; it puts a non-profit conservation organization at the center of the plan, but 

in the context of a direct working partnership with Federal and state government; 

the capital that it allocates may only be used for the acquisition and requirements 

of conservation easements; it proposes a spending level that scales to the need as 

well as communicates the importance of the need; there are specific deadlines that 

will motivate states and land owners alike; it allows each of us to participate in the 

conservation and restoration of our natural estate; it is centered on tax credits rather than direct appropriations; and it will allow strategic conservation planning and 

execution. 

While over time experience may require us to alter some of its provisions, all dollars spent in the interim will move us closer to our goal. The reason for this is that 

under H.R. 882 dollars can only be expended for the acquisition of conservation 

easements and their requirements. This will assure two results. Because of the current legal limitations on conservation easements, whatever dollars are spent during 

that period will have resulted in significant conservation goals having been met. In 

addition, because we can achieve a great deal more conservation for the equivalent 

dollar with conservation easements than through outright acquisition of property, 

we will have substantially leveraged all of the dollars that we have spent. 

It is also important to appreciate that this is not just an investment in ‘‘America 

the Beautiful.’’ While that might be reason enough to make such an investment, 

given the beauty and wonder of this great land, these investments will bear economic results: they will filter our water and protect it; they will clean our air; they 

will keep our fisheries and food stocks healthy and productive; they will help assure 

genetic diversity and a healthy array of species; and they will provide the much 

needed relief of ‘‘green space’’ to us all, while simultaneously allowing us to avoid 

the costs of artificially replacing these same services. These savings and returns will 

significantly lower the cost of this program if not pay for it altogether. 

These are complex issues, but, given what we have lost, and what we are losing 

and what we urgently need, this complexity should not keep us from taking dramatic action today. Where there is a sound idea with a certain promise of significant 

improvement in these critical issues, we must seize it and put it into place. H.R. 

882 is just such an opportunity. 

mick, who is President of The Nature Conservancy, from Arlington, 

[The attachments are being retained in the Committee files.]

Chairman MCCRERY. Our next witness is Mr. Steven J. McCorf Virginia. Mr. McCormick, welcome, and might I say thank you for 

all the work that your organization does in helping us in Louisiana 

and other places to conserve some of our wetlands and other areas 

which are vital to our future. Thanks. 

STATEMENT OF STEVEN J. MCCORMICK, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, NATURE CONSERVANCY, ARLINGTON, VIRGINIA 

Mr. MCCORMICK. Thank you very much, Mr. Chairman, and 

thank you for all your help in establishing, among other things, the 

Red River National Wildlife Refuge in your home State. Thank you, 

Members of the Subcommittee, for the opportunity to amplify on 

my written testimony and to speak from some personal experience. 

The Nature Conservancy, as the Chairman suggests, is an organization dedicated to protecting land that captures the rich natural 

45

heritage that enriches our life, and our natural heritage around the 

world. 

We are increasingly working at a much larger scale because we 

want to ensure that the impact of our work in protecting land really has a meaningful consequence for all people. As we work at that 

larger scale, we are finding that it is imperative that we embrace 

and include and engage local communities and people in those communities in our work because they derive their livelihood and certainly the quality of their life from that natural landscape. 

In many rural communities in which we and our colleague organizations are engaged, there are landowners who, as have been 

identified in earlier testimony, do not really have the wherewithal 

to make gifts of their property or gifts of conservation easements, 

the permanent restrictions that protect their lands. Yet, they really 

are terrific stewards of their property and in many cases would like 

to do the right thing. 

My testimony, therefore, focuses principally on support for H.R. 

2290, the Conservation Tax Incentives Act, and I want to acknowledge and thank Congresswoman Dunn for her cosponsorship of this 

legislation. This legislation would really be a profound and dramatic incentive for landowners who have properties that are exceedingly important from a biological perspective or a natural open 

space recreational perspective. 

Again, from my own experience, in many cases it is their concern 

about the financial consequences of selling fee title or partial interest in the form of a conservation easement that is an enormous inhibition. As we have talked with private landowners about the concept of a favorable capital gains treatment, it is quite clear that 

they would be very, very enthusiastic in embracing this idea and 

so motivated to sell their property for the right purpose. 

This would, therefore, provide an enormous solution to the impediment that many landowners face, and frankly, constitutes a 

terrific opportunity for a truly bipartisan legacy of natural lands in 

this country, a legacy that will grow in increasing value over time. 

So, we, as an organization which picks our political emphasis very, 

very carefully, are quite excited about the prospect of this legislation and very much appreciate your conducting a hearing on it 

today. Thank you. 

[The prepared statement of Mr. McCormick follows:]

Statement of Steven J. McCormick, President and Chief Executive Officer, 

Nature Conservancy, Arlington, Virginia 

Mr. Chairman and Members of the Committee, thank you for the opportunity to 

present testimony on the critically important issue of tax incentives for land conservation. I am speaking today on behalf of The Nature Conservancy, an international, science-based, non-profit organization that protects the land and water 

needed to protect the diversity of life on earth. The Conservancy has more than one 

million individual members and over 1,500 corporate members; we have programs 

in every state and in 27 nations. For half a century we have worked with the private sector, using business principles and the best available scientific information 

to conserve the special places that ensure the long-term survival of plant and animal species on earth. To date, our organization has protected more than 12 million 

acres in the United States and has helped local partner organizations preserve approximately 80 million acres internationally. Our experience working hand-in-hand 

with private landowners in diverse communities has convinced us that changes in 

the Federal Tax Code are necessary to more effectively encourage and reward private conservation actions. 

46

Just last week we celebrated Earth Day. Many of us visited and reflected on the 

many special places that have been saved since the first Earth Day 30 years ago. 

For example, thanks to the work of the Chairman, the Red River National Wildlife 

Refuge was established to preserve land critically important for neotropical migratory birds and waterfowl. We also contemplated the challenge ahead of us to protect 

those places essential for a thriving, healthy environment for our children. The Nature Conservancy’s science-based approach has led us to the understanding that we 

cannot accomplish our mission by saving isolated pockets for individual species. We 

now know that diversity of life thrives in larger, more complex, functioning landscapes that sustain natural processes and healthy land, water, flora and fauna. 

This approach means that we work in partnership with private landowners who 

are an essential component to ensuring the health of the larger landscape. In fact, 

half of the land essential to the conservation goals we have set for ourselves in the 

coming years is in private hands. Many of these special places are farms, ranches 

and forests. 

These landowners have a right to realize economic benefits of their private investment in land. The conservation and sustainability of such places could also provide 

a broad public benefit. Federal and state environmental laws and regulations such 

as the Endangered Species Act, the Clean Water and Clean Air Acts are important 

tools to help preserve the environmental quality of land, but they can place economic and regulatory burdens on individual landowners. 

Although current Federal tax law does provide some financial compensation to 

landowners for the conservation of their land, these provisions were not designed 

with the so-called land-rich, cash-poor landowners in mind. The tax code provides 

for tax-advantaged charitable contributions of conservation easements and land for 

those landowners who have enough income to make such gifts financially worthwhile. Wealthier landowners who are able to make charitable conservation contributions can realize tax benefits that make it possible for them to achieve both conservation and financial goals. 

Most farmers, ranchers and family timber operators on the other hand, lack sufficient income to take advantage of the current tax deductions. Moreover, for many 

of these landowners, most if not all of their financial assets are tied up in their land 

value and cannot be relinquished as a conservation contribution. For them, the sale 

of the land for development may be the only viable financial choice in order to realize the full economic return of the investment in their land. 

Unfortunately, under current tax laws, a sale—even for a conservation-related 

use—triggers a capital-gains tax and can severely reduce the landowner’s net return. If a tax reduction on the sale of land or a conservation easement were available, the farmer or rancher could realize the financial value of his or her land and 

at the same time achieve lasting conservation of importance to the community. 

In addition, a Federal capital gains tax conservation incentive would help leverage 

funds that state and local governments raise to protect open space, farm and ranchland. For example, in 2000 voters in the State of Ohio approved the expenditure of 

$25 million under the Clean Ohio bond program for the purchase of agricultural 

easements. If there were a conservation provision that reduced the capital gains tax 

that farmers have to pay on the sale of those easements and thus increased their 

financial return, it is likely that more farmers would remain on the land to protect 

important areas in Ohio. 

Thus, a new financial incentive is required to encourage protection of critically important lands that are in the care of some of the original and best conservationists—

the farmers, ranchers, foresters and others who work the land for a living. 

Congress now has before it several proposals that would create such incentives. 

The Nature Conservancy’s top priority is enactment of the Conservation Tax Incentives Act, H.R. 2290, sponsored by Representative Rob Portman, along with Representatives Jennifer Dunn, John Tanner, Robert Matsui, Richard Neal, Nancy 

Johnson, J.D. Hayworth, and others. In addition, President Bush included the proposal in the Administration’s FY 2003 budget. Moreover, the bill is supported by 

such diverse organizations as the American Farm Bureau Federation, Ducks Unlimited and Defenders of Wildlife. The Portman bill and companion Administration proposal would reduce the amount of capital gains tax if land or easements were sold 

for conservation purposes, thereby providing a landowner with a more attractive financial return from such sales and conserving the land in perpetuity. 

I would like to congratulate Representative Portman for his leadership on this 

issue. His legislation is a fiscally conservative, market-based approach to land conservation. It achieves environmental objectives without imposing new land use regulations. The provision is strictly voluntary, administratively simple, and uses definitions and tests for conservation purposes that are already contained in the tax code. 

It provides capital gains tax relief for sales of land for conservation to government 

47

agencies or qualified conservation nonprofits. The bill would allow landowners to 

preserve permanently their property’s environmental value without foregoing its financial value. It would exclude 50% of any gain realized from private, voluntary 

sales of land or interests in land for conservation. The land must be used to protect 

fish, wildlife or plant habitat or open space for agriculture, outdoor recreation or 

scenic beauty. 

Another worthy proposal is H.R. 1309, which would change the individual and 

corporate charitable giving laws to improve the tax benefits of conservation gifts. 

Because it would increase from 30% to 50% the amount of the taxpayer’s adjusted 

gross income that could be offset by a conservation donation, and allow the unused 

deduction to be carried forward indefinitely, it would be of particular benefit to the 

‘‘land-rich, cash-poor’’ taxpayer. The Conservancy supports this legislation and 

thanks Representative Johnson for her continuing role as a conservation leader. 

As we seek innovative, environmentally and economically compatible uses of land, 

creative solutions such as sustainable timber operations hold real potential. Representative Dunn’s Community Forestry and Agriculture Conservation Act would 

allow the issuance of tax-exempt, private activity bonds to finance the acquisition 

of land with renewable resources such as timber, crops and water rights, provided 

that the land is subject to a conservation easement. The Nature Conservancy endorses this proposal, H.R. 1711, and commends Representative Dunn for her leadership in this legislation. 

The public has a real interest in the health of private lands. These voluntary, incentive-based conservation proposals achieve meaningful, lasting results with modest investments and without new regulatory control of land. We appreciate your serious consideration of these proposals. By giving incentives to private landowners 

we can help ensure that our natural heritage is protected for future generations.

league organization, Ducks Unlimited, who unfortunately could not 

Mr. MCCORMICK. One last thing. I have been asked by our colf be here today, if I could submit for the record written testimony on 

their behalf. 

Chairman MCCRERY. Certainly, without objection. 

Mr. MCCORMICK. Thank you. 

[The statement of Ducks Unlimited follows:]

Ducks Unlimited 

Memphis, Tennessee 38120

April 29, 2002

House Committee on Ways and Means 

The Honorable Jim McCrery, Chairman, and 

The Honorable Michael McNulty, Ranking Member 

Subcommittee on Select Revenue Measures 

U.S. House of Representatives 

1135 Longworth House Office Building 

Washington, DC 20515

Dear Representatives McCrery, McNulty, and fellow Subcommittee Members:

On behalf of our one million supporters, we believe that providing tax relief on 

private lands that enjoy a protected conservation status is an effective and efficient 

way for the government to foster land conservation. Ducks Unlimited supports voluntary, incentive based approaches to encourage landowners to secure their lands 

for future generations. We have a long history of working with private and public 

landowners across the country and continent to achieve and secure conservation values on their lands. 

It would be incorrect to assume that the government can accomplish all the conservation that will be needed to assure the healthy continuation of North America’s 

wildlife resources by using their agencies and funding. While that effort is extremely 

important using that as the sole strategy for ensuring a conservation legacy would 

unfortunately leave us short of what will be needed. Measures like those being considered by you on April 30. The Nature Conservancy’s President Steve McCormick’s 

testimony mentions good examples of how your vision and leadership can help respond to this challenge. We appreciate the leadership shown by Representatives 

Portman, Johnson, Dunn and their cosponsors toward finding solutions. 

To acquaint you with who we are, Ducks Unlimited was formed over 65 years ago 

and is the world’s leading wetland and waterfowl conservation group. We have 

members, supporters and conservation projects in all 50 States and have contributed 

48

directly to the conservation of over 10 million acres of habitat in North America. 

Despite current conservation efforts, United States continues to lose more than 

100,000 wetland acres every year. 

Ducks Unlimited asks that this letter be placed in the record of the hearing to 

be held on April 30, 2002 considering proposals that will create new tax relief for 

landowners that wish to protect future use of their lands in ways that benefit wildlife conservation and hence the American public. 

Sincerely, 

Scott Sutherland 

fDirector of Governmental Affairs

Chairman MCCRERY. Our next witness is Mr. Timothy Brazell. 

He is the Tax Manager for Lowe Enterprises and he is here on behalf of the Real Estate Roundtable. Mr. Brazell? 

STATEMENT OF TIMOTHY BRAZELL, TAX MANAGER, LOWE ENTERPRISES, INC., LOS ANGELES, CALIFORNIA, AND MEMBER, 

REAL ESTATE ROUNDTABLE 

Mr. BRAZELL. Thank you, Mr. Chairman. I am a tax manager 

for a privately held real estate development firm in Los Angeles 

and it is interesting to be on the same panel with all these conservation—it is nice to be on the same side for once. 

[Laughter.] 

Mr. BRAZELL. I am also here today on behalf of the Real Estate 

Roundtable, which is a large organization of private real estate 

owners, developers, lenders, and they are the primary reason that 

I am here today. 

I want to thank Mr. Weller of Illinois for sponsoring this legislation. I am speaking of H.R. 2264. I am also happy to hear that 

President Bush is in support of at least a part of this legislation, 

the extension of the expensing part of it. 

I think as a tax manager, I cannot speak any more eloquently 

on this legislation than Mr. Weller did, but I can kind of tell you 

where the rubber hits the road. One of the things that Lowe Enterprises does is value-added development. We are not a big company 

and we do not have the resources to compete in large capital transactions. We look for infill transactions. We look for places where we 

can add value. One of those places is developments on so-called 

brownfields sites, inner-city developments, other types of developments where we can add value. 

When we look at a project, we look at the after-tax return of that 

project. It is very difficult to develop any kind of real estate project. 

You have to do a lot of planning. You have to get a lot of entitlements. You have to get a lot of financing. It all starts with, can you 

make the project work, and one of the things you do when you sit 

down and put the numbers down, you look at the after-tax returns. 

This bill, H.R. 2264, by allowing expensing of brownfield cleanup 

costs, increases the after-tax return to a developer and makes it 

more likely that these projects will happen. I think we all want 

these projects to happen because we have seen the sites that they 

are sitting at and they are not doing anybody any good if they are 

sitting fallow. 

So, the primary emphasis for us is to obviously get the tax benefit. We would like to see the expansion, also, of the definition of 

hazardous substances, which Ms. Olson alluded to. There are several substances that are not included in the current definition of 

49

hazardous substance, and that is because the original definition, I 

believe, was based on the Superfund liability cleanup legislation 

and was not very broad in scope. When you look at some of the 

items that are not included, like petroleum products, pesticides, 

lead paint, and asbestos, I think we can all agree that these are 

pretty commonly known to be hazardous substances. 

If you buy a building that is on a brownfields site and you want 

to recondition or you find that there is asbestos in the building, the 

fact that you are not able to expense those costs is a large cost to 

you. She did indicate that you could recover these costs over the 

life of the building. Unfortunately, the recovery period for commercial real estate is 40 years, so it is a pretty small recovery period. 

There is another portion to the bill, H.R. 2264, which deals with 

a recapture provision. The existing section 198 forces you to recapture the ordinary expense that you have taken when you made the 

cleanup costs when you sell the project. We think that this should 

be repealed, as well. 

You have expensed the costs but you have not increased your 

basis in the property. So, when you sell the property, you are going 

to have a gain, and that will be the same whether you recapture 

or not. This recapture portion of the existing tax code section simply forces you to treat it as ordinary income instead of capital gain. 

This impacts primarily individuals and partnerships, not corporations, because corporations do not have capital gains in the same 

sense that we do as individuals. So, we think that this repeal is 

consistent with the legislation to continue the brownfields expensing. 

In my own neighborhood in Los Angeles, we have seen a lot of 

aerospace companies that have packed up and moved out as times 

have changed. My own company is involved in redeveloping a large 

piece of property adjacent to Los Angeles airport. We know there 

is contamination there, but we have not, in 2 years, we have not 

even been able to quantify the amount of the cost yet. This provision to allow continuing expensing of brownfields costs would definitely give us some assurance that the tax risk will be minimized 

should we incur more costs than we presently think we are going 

to. 

In conclusion, I want to urge Congress and this Subcommittee to 

specifically enact H.R. 2264, along with all of its provisions. I think 

the result will be injection of new capital into these projects, as Mr. 

Weller said, potentially over 400,000 nationwide, and also benefits 

job creation and improving the infrastructure and the close infill 

property and not having to develop these properties on the outside, 

the greenfields. Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Brazell follows:]

Statement of Timothy Brazell, Tax Manager, Lowe Enterprises, Inc., Los 

Angeles, California, and Member, Real Estate Roundtable 

Introduction

Mr. Chairman and Members of the Subcommittee, my name is Timothy Brazell. 

I am Tax Manager of Lowe Enterprises, Inc. a Los Angeles based real estate company with offices across the country and in Europe. 

I am here today on behalf of The Real Estate Roundtable. The Real Estate Roundtable is the vehicle through which the leaders of the real estate industry come together to identify, analyze and advocate policy positions on capital, finance, environmental, investment and tax issues. Roundtable members are the Chairmen, PresiVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00053 Fmt 6633 Sfmt 6621 E:\HR\OC\85675A.XXX 85675A
50

dents or Chief Executive Officers of the nation’s 100 leading commercial, retail and 

multifamily real estate companies and the managing directors of major financial institutions. 

The Roundtable also includes the elected leaders of Washington’s major real estate trade organizations. Collectively, Roundtable members hold portfolios containing over 2.5 billion square feet of developed property valued at more than $250 

billion. The industry represents over one million people involved in virtually every 

aspect of the real estate business. 

Joining The Real Estate Roundtable in these comments are: American Institute 

of Architects; Building Owners and Managers Association International; International Council of Shopping Centers; Mortgage Bankers Association of America; 

National Association of Industrial and Office Properties; National Association of 

Real Estate Investment Trusts; National Association of Realtors; National Apartment Association; National Multi Housing Council; The Associated General Contractors of America. 

Over the past 30 years, Lowe has developed, acquired or managed more than $6 

billion of real estate assets. Lowe currently employs over 7,000 people, with a management team of approximately 250 men and women. 

The firm operates through three wholly owned divisions:

Lowe Enterprises Investment Group directs the company’s capital and investment activities, including more than $3 billion of fiduciary investments on behalf 

of nine public and private pension plans; 

Lowe Enterprises Real Estate Group oversees the development and property 

management of the firm’s commercial and residential projects throughout the U.S., 

including over 13 million square feet of commercial assets currently under management and more than 4 million square feet of commercial space currently being developed, and; 

Lowe Hospitality Group is responsible for its hotel and resort development and 

management activities. 

Lowe Commercial Development Company (‘‘LCDC’’) is a joint venture between Lowe Enterprises and Teachers Insurance Annuity Association, which was 

formed in August 1999 to pursue new commercial development opportunities. LCDC 

targets 100,000 to 500,000 square-foot office and industrial development opportunities in suburban and urban locations.

Mr. Chairman, I am here today to testify in strong support of H.R. 2264, a bill 

to extend and expand the expensing of environmental remediation costs. This bill 

is sponsored by Mr. Weller of this Subcommittee and is cosponsored by Ways and 

Means Committee Members Nancy Johnson and Bill Coyne. S. 1082 is the companion bill sponsored by Senator Torricelli. 

H.R. 2264 would do three things:

1. Make permanent Internal Revenue Code Section 198, which allows the expensing of brownfield clean up costs, but is currently scheduled to sunset 

January 1, 2004. 

2. Broaden the definition of ‘‘hazardous substances’’ in Section 198 so it covers 

petroleum, pesticides, lead paint and asbestos contaminants. 

3. Repeal the provision in the law requiring the recapture of the Section 198 

deduction when the property is sold. 

Making Section 198 Permanent

Redevelopment of existing sites and properties is an important component of any 

community’s development plans. The U.S. Conference of Mayors estimates that 

there are over 400,000 brownfields sites across the country. Development of these 

sites would help restore many blighted areas, create jobs where unemployment is 

high and ease pressure to develop beyond the fringes of communities. Small, urban 

centered businesses often benefit most directly by this redevelopment. Many 

brownfields properties are located in inner cities—precisely where many businesses 

want to be. The economics are often right. Critical infrastructure, including transportation, is already in place and the workforce is in close proximity. 

In 2000, the above listed real estate organizations backed the provision in the 

Community Renewal and Reinvestment Act of 2000 that removed the geographic 

targeting requirements of Internal Revenue Code Section 198. This allowed developers of ‘‘brownfields’’ to expense the clean up costs of brownfields wherever they 

are located. Prior to this change, these clean up costs had to be added to the purchase price of the land (‘‘capitalized’’) unless the contaminated site was located in 

an empowerment zone or other designated low-income area. 

Capitalization means there is no deduction for these expenses until the building 

is sold. Since this could be several years, this increases the overall tax burden of 

51

the redevelopment project. This higher tax burden hinders redevelopment efforts—

particularly in areas that need them most. 

We are pleased that in 2000 Congress determined that these clean up costs should 

be deductible in the year they are incurred and do not have to be capitalized. However, for revenue reasons, Congress scheduled the expensing provision to expire in 

2004. We strongly believe clean up cost expensing for all brownfields should be extended permanently. H.R. 2264 would do this and we urge its immediate enactment.

Broadening the Definition of ‘‘Hazardous Substance’’

Petroleum and Pesticides

In addition to extending Section 198 permanently, we also believe Section 198 

should be amended to work more as intended by Congress. One such amendment 

would be to broaden the types of hazardous substances that are eligible for expensing treatment if cleaned up to include petroleum, lead paint asbestos and pesticides. 

The current version of IRC Section 198 relies on the term ‘‘hazardous substance’’ 

used in the Comprehensive Environmental Response Compensation and Liability 

Act (‘‘CERCLA’’) to identify which contaminated sites would be eligible for tax relief: 

Section 98(c)(1)(A)(iii) defines a ‘‘qualified contaminated site’’ as one ‘‘at or which 

there has been a release (or threat of release) or disposal of hazardous substance.’’ 

The term ‘‘hazardous substance’’ is defined in Section 198(d)(1) to have the same 

meaning as in sections 101(14) and 102 of CERCLA. Section 198(d)(2) further states 

that the term ‘‘hazardous substance’’ shall not include any substance for which a 

removal or remedial action is not permitted under section 104(a)(3) of CERCLA. 

At first blush, it appears logical for the drafters of Section 198 to simply borrow 

the term ‘‘hazardous substance’’ as used in CERCLA, the principal Federal statute 

concerning environmental remediation, rather than coming up with a new term or 

a new definition. But, the problem created by this approach is that it assumes that 

the CERCLA definition of the term is broad enough to encompass all types of toxic 

materials that might be found at a brownfield site. That is not the case. 

When CERCLA was adopted in 1980, Congress made the decision that it did not 

want the Federal Superfund used to clean up certain types substances—such as petroleum and certain pesticides—or to be spent cleaning up the interiors of buildings. 

While the decision not to authorize the spending of Federal funds on these types 

of cleanups had significance for the administration of the Superfund program, the 

same rationale does not apply to a statute intended to provide a tax incentive to 

private parties cleaning up brownfield properties. 

When CERCLA was adopted in 1980, the term ‘‘hazardous substances’’ was expressly defined not to include ‘‘petroleum.’’ Also, although the term ‘‘hazardous substance’’ was defined to include a variety of substances considered toxic under various other environmental laws, it did not include most pesticide products and a variety of other toxic materials. 

There were various reasons for the decision to exclude from the definition of ‘‘hazardous substance,’’ these materials which are nonetheless considered toxic. In the 

case of petroleum contamination, for example, Congress made a decision to rely on 

other statutory mechanisms to effectuate cleanups. In 1984, Congress adopted subtitle I of the Resource Conservation and Recovery Act (‘‘RCRA’’), 42 U.S.C. section 

6991 et seq., which addressed the cleanup of releases from underground storage 

tanks, many of which contain gasoline, fuel oil, or other petroleum products. In 

1990, Congress adopted the Oil Pollution Act, 33 U.S.C. Section 2701 et seq., to address oil pollution into navigable waters. Thus, the exclusion of ‘‘petroleum’’ from 

the CERCLA definition of ‘‘hazardous substances’’ was not an indication that Congress believed that petroleum pollution did not need to be cleaned up. Petroleum 

simply was covered in other statutes. 

Petroleum and pesticide pollution are common at brownfield sites. Petroleum 

products in the forms of fuel oil, heating oil or gasoline, were often used at these 

sites. Indeed, these materials were often stored in above ground or underground 

tanks. Also, some of these sites have been contaminated by migrating gasoline spills 

from nearby service stations. 

Pesticide residues are also frequently found at brownfield sites. Pesticides were 

often used to control weeds or insects at these sites when they were operating industrial plants. Moreover, some of these sites may be contaminated by pesticides 

run-off from other properties. While it may make sense not to authorize the use of 

Federal funds under the Superfund program to clean up petroleum and pesticides, 

these substances often have to be cleaned up at brownfield sites before those properties can be returned to beneficial use. There is no reason not to extend the same 

type of tax incentive to a private party who is cleaning up petroleum waste or pesVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00055 Fmt 6633 Sfmt 6621 E:\HR\OC\85675A.XXX 85675A
52

ticide residues on a brownfield site as to one who is cleaning up other types of contaminants.

Asbestos and Lead Paint

Also, Congress in adopting CERCLA in 1980 did not want EPA to spend Superfund dollars cleaning up the interior of buildings. Accordingly, Congress adopted 

section 104(a)(3)(B) of CERCLA which prohibited EPA from cleaning up the interior 

of structures. Congress did not adopt this limitation because it believed that contaminated interiors did not require cleanups. Rather, Congress believed that the use 

of the limited funds set aside for Superfund cleanups should be prioritized to deal 

with contamination that had escaped into the general environment. Once again, 

Congress used other Federal programs to address interior contamination, such as 

the asbestos regulations under the Clean Air Act. 

IRC Section 198, as currently drafted, states that the term ‘‘hazardous substance’’ 

does not include a substance that EPA would not be permitted to cleanup under section 104(a)(3) of CERCLA. Because of the applicability of the limitation in subsection 104(a)(3)(B), no expensing is allowed for the removal of asbestos, lead paint 

or other hazardous materials inside the buildings that are located at otherwise 

qualified sites. But brownfield restoration often involves the cleanup of existing 

buildings on the property. Expensing of costs to clean up buildings would give developers more reason to invest in brownfield properties. Thus, the expensing treatment 

IRC section 198 should be expanded to cover the removal of hazardous substances 

from buildings. 

Also, as a point of clarification, the definition of lead-based paint and lead-based 

paint hazards is more accurately described and defined in ‘‘Identification of Dangerous Levels of Lead; Final Rule 66 Fed. Reg. 1206.’’ We would urge that S. 2264 

be amended so that section 1(b)(2)(D) reads: any asbestos (whether friable or nonfriable), oil (as defined in section 1001 (23 of the Oil Pollution Act of 1990), pesticide 

(as defined in section 2(u) of the Federal Insecticide, Fungicide, and Rodenticide 

Act), radon, lead-based paint and lead-based paint hazards as defined in Lead: Identification of Dangerous Levels of Lead; Final Rule 66 Fed. Reg. 1206. 

Recapture

Finally, another amendment that H.R. 2264 would make to Section 198 is to repeal the recapture requirement of Section 198(e). Currently, any qualified environmental remediation expenditure expensed under Section 198 is subject to recapture 

as ordinary income when the property that was contaminated is sold or otherwise 

disposed of. 

In effect, the amount expensed as a cleanup cost is treated as depreciation on IRC 

Section 1245 property. Thus, when the property is sold, gain to the extent of the 

cleanup cost deduction is treated as ordinary income.

Example

In 2001, Owner purchased an acre of land that was contaminated with 

a hazardous substance. The land cost $10,000 and Owner spent $5,000 in 

remediation expenses. Currently, he is allowed to claim a current deduction 

for the $5,000 instead of adding it to his basis in the land. If he sells the 

land for $16,000, he would be required to treat $5,000 of his $6,000 gain 

($16,000 sale proceeds less $10,000 cost) as ordinary income taxable at 

39.6%. The remaining $1,000 gain would be taxed at 20%.

When Does Recapture Matter?

In the example above, if Owner sold the land the year after he cleaned it up, he 

would receive little or no benefit from having deducted the clean up costs. This immediate repayment to the government leaves Owner with little tax incentive to 

clean up the property. 

We believe that a more appropriate result would be to treat any gain in excess 

of Owner’s original investment/acquisition cost in the property ($5000 in this case) 

as capital gain by repealing the recapture requirement. This provides an incentive 

for Owner to clean up the property without having the deduction effectively rescinded after the improvement is made. 

If the clean up expenditure were recaptured as a capital gain, rather than as ordinary income, each party is in a stronger position. It would allow the government 

to recover a portion of its tax incentive from the developer, the developer retains 

a significant incentive for bearing the expense and associated risks of the clean up 

activity, and the community receives an improved property with the prospect of job 

creation. 

53

This treatment would be particularly helpful for developers who acquire 

brownfield properties with the intent of reclaiming them and then selling the improved property shortly thereafter. If a developer were to acquire a brownfield, clean 

it up and restore it to a viable market use, but then immediately lose the benefit 

of the clean up deduction at the time of sale, the developer is left with little, if any, 

incentive effect. If the recapture provision were repealed, Section 198 would become 

far more of a redevelopment incentive than it is now. 

Conclusion

In conclusion, we urge Congress and this Committee specifically to enact H.R. 

2264. The result will be the injection of new capital into rehabilitation projects. 

Many small, urban centered businesses will benefit resulting in substantial job creation and economic revitalization. Also, the viability of existing space will improve 

and ease the pressure to develop ‘‘greenfields’’ allowing for the preservation of more 

open space.

that our next witness is actually a tandem act and Mr. Bingham 

Chairman MCCRERY. Thank you, Mr. Brazell. I am told by staff 

f and Mr. Duvernoy are going to share some time to share their 

views. I will first call on Charles W. Bingham. He is a Board Member of Evergreen Forest Trust from Seattle, Washington. Mr. Bingham? 

STATEMENT OF CHARLES W. BINGHAM, BOARD MEMBER, 

EVERGREEN FOREST TRUST, SEATTLE, WASHINGTON 

Mr. BINGHAM. Mr. Chairman, thank you very much for having 

me and my cellmate here together. I think it is symbolic that a tree 

cutter and a tree hugger could appear together at the same time 

supporting the same legislation. 

I am a member of the board of the Evergreen Forest Trust, a 

nonprofit conservation company chartered in the State of Washington. For the last 20 years of my professional life before I retired, 

I served as Weyerhaeuser Company’s Executive Vice President responsible for forest management. I am here urging your consideration of H.R. 1711 that you have heard about from Congresswoman 

Dunn, who, incidentally, has done a fantastic job in helping to 

bring this needed legislation to a point of consideration. It will 

make possible the opportunity for private nonprofit organizations 

to issue tax-exempt bonds to acquire and manage forestlands for a 

whole array of economic and environmental benefits. 

Nearly two-thirds of the forested lands in this country are privately owned, yet well over 90 percent of the timber harvest comes 

from these lands. Even though that is true, we are still a net importer of forest products. In some years, a third of our lumber 

comes from outside of this country. One of the reasons is the conversion of forestlands to higher-value uses. Another reason, of 

course, is the increasing environmental restraints that causes capital to move away from forestland investment. 

Because of the long-term nature of the investment, usually, companies that are in the business to stay require about an 8 percent 

real rate of return on their investment in this very important asset. 

If a private nonprofit organization could issue tax-exempt bonds at 

roughly a 6-percent rate, we could borrow at a capital cost rate 

which permits us to pay, a private organization to pay a private 

owner the full market value of that company and also provide the 

opportunity for enhanced public benefits through time. 

54

This legislation would permit bonds to be issued on behalf of our 

organization. They will require a permanent conservation easement 

to be placed on the property, and so there is no misunderstanding, 

this property is going to be managed for timber production. It is 

going to be harvested and reforested. It is going to support family 

wage jobs in the forest, in the mills. It is going to pay the same 

local and State land and harvest taxes that would be paid by any 

other private owner. The only source of income is the harvest of 

timber and the sale of logs to retire the debt and the bonds through 

time. 

I would urge you respectfully to consider this very, very carefully. It is another source of needed capital to protect these valuable resources. Gene, you are on. 

[The prepared statement of Mr. Bingham follows:]

Statement of Charles W. Bingham, Board Member, Evergreen Forest Trust, 

Seattle, Washington 

Mr. Chairman and Members of the Subcommittee; my name is Charles W. Bingham. I am a board member of the Evergreen Forest Trust, a nonprofit conservation 

company based in Washington State. During the last 20 years of my professional 

life I served as the Weyerhaeuser Company’s Executive Vice President responsible 

for forest management. 

I want to thank you for holding this important hearing today on conservation tax 

incentives. It is a subject that holds great promise to bring the forest products and 

environmental interests together in an era that has most recently been characterized by deep conflicts. 

I am here today to testify in strong support of H.R. 1711—The Community Forestry and Agriculture Conservation Act of 2001. Passage of this legislation will help 

private nonprofit conservation organizations acquire and manage forestlands for an 

array of the environmental, economic and social benefits they provide. More specifically, this bill will help the Evergreen Forest Trust acquire nearly 100,000 acres of 

forestland in Washington State that hold important conservation and economic benefits and is threatened by conversion to non-forest uses. 

Before I go into more detail, I would like to express my sincere appreciation to 

Congresswoman Jennifer Dunn and Congressman John Tanner for their leadership 

in working to secure passage of H.R. 1711. Your tireless efforts have been recognized by all of us who care so much about this particular transaction and the broader need addressed in the bill. I would also like to thank the other original cosponsors of this bill—Congressmen McDermott, McInnis, Herger and Matsui—as well as 

the rest of the Washington, Oregon and Idaho delegations for their support. 

Forest Products Industry

Nearly 400 million acres—nearly 65%—of our nation’s forests are privately owned, 

yet well over 90% of the timber harvest originates from private lands. These 

forestlands are valued at roughly $300 billion and, therefore, are one of the largest 

agricultural commodities in the nation. 

Even with these impressive economic statistics, the United States is a large importer of forest products. For example, up to one third of the national softwood lumber used each year is imported from Canada. While there are many macro and 

micro-economic reasons for this, some in the industry believe that one factor we 

must recognize is the erosion of working forestlands that are available to grow trees 

in a cost efficient manner. Thus, we must maintain a critical mass of working 

forestlands so that we can remain competitive with other producers. 

Changes in Industrial Ownership

Over the last 15 years the forest products industry has seen important changes 

cause by restructuring, increased value of non-forest uses and environmental regulations. Collectively these changes have resulted in almost one quarter of the industrial forest land base changing hands in the 1990s.

Real-Estate Conversion—Forest fragmentation and conversion to non-forest 

uses is taking place high rates. For example, according to American Forests, a national conservation group, 107 thousand acres or 50 percent of the greater Seattle, 

Washington area has been converted to non-forest uses since 1973. And such conversion is not just taking place in urban areas. If you travel to the Bitteroot Valley 

55

in Montana, Bend, Oregon or many parts of the southeast you will find that higher 

financial values are increasingly being placed on forests’ real estate value than on 

their timber value. In other words, especially around urban areas and rural recreational acres, forests do not compete with real estate or with annual agriculture 

on a per acre basis.

Environmental Regulations—Despite their tremendous public benefits that result from the nation’s environmental laws, it is a fact that local, state and Federal 

regulations can significantly impact the cost of acquiring and managing forestlands. 

For example, the citizens of Washington State and the nation generally agree we 

should save salmon. There is, however, a cost to forestland owners for doing so. In 

Washington State new forest practice rules directly and indirectly require that that 

10% to 15% of a landowner’s land must be taken out of production to protect riparian areas. In some cases, this has the impact of making once profitable forest operations unprofitable. Thus, forestland owners, especially industrial forestland owners, 

will look to monetize their assets by selling it off to other timber investors, developers or those who want to subdivide for recreational properties. 

Legislative Need

Notwithstanding the trends outlined above, tens of millions of acres of commercial 

forestlands are being and will continue to be responsibly managed by industrial and 

non-industrial landowners. Yet, because of the trends outlined above we still have 

tens of thousand of acres where unplanned urban sprawl is forcing conversion or 

where regulation or the needs for public benefits exceed what a private owner can 

afford. What we need is a financial vehicle that makes less intensive forestry pay 

and the Community Forestry and Agriculture Conservation Act does just that.

Financial—Because of the long-term nature of a forestland investment (generally 

30 to 60 years) the real rate of interest on borrowed capital is the greatest single 

variable in the price one can afford in acquiring and re-investing in a forest asset. 

While fluctuations occur, such capital cost are generally around 8%. Applying taxexempt rates at 6% could provide qualified nonprofit conservation organizations 

with a capital cost that allows them to buy forestland, assure that public environmental and economic benefits are maintained and enhanced and allow property 

rights to be preserved. In addition, the tax-exempt market is very large and established. Based on our discussions with underwriting companies there is a financial 

market for the type of conservation bonds we must access in order to purchase the 

property.

Stop the Conflict—We are all acutely aware of the conflicts over the use of our 

great National Forest lands. We are still struggling to find an acceptable balance 

between commercial harvesting and preservation of these lands. On private lands, 

so far, we have either set-aside from harvest relatively small parcels of private 

forestlands or we have devised regulations that would permit harvest at reduced 

levels but within the economic parameters of a long-term forest investor. 

Legislative Provision

The Community Forestry and Agriculture Conservation Act will allow tax-exempt 

revenue bonds to be issued on behalf of a private nonprofit conservation organization to acquire a renewable resource. Such bonds will require that a permanent conservation easement that complies with Section 170(h)(4)(A) be placed on the property and that environmental laws are exceeded. Thus, Mr. Chairman and Members 

of the Subcommittee, the Community Forestry and Agriculture Conservation Act will 

allow me as a strong advocate for private commercial forestry to join with strong 

advocates of the environment to do two very important things:

• First, when we finally have the financial wherewithal to work together on a 

goal we both strongly support—acquiring large-scale forestlands to keep them 

forested. • Second, we will be forced—in a very positive way—to make joint economic 

and environmental decisions on how those forestlands are managed.

These actions will be afforded by our private non-profit conservation organization’s ability to, in certain situations:

• Borrow at a lower cost of capital so that it can acquire a forest property at 

its current market value, • Operate the forest while providing a higher level of public benefit, including 

but not limited to wider stream side buffers, alternative silviculture for fish 

and wildlife habitat, longer holding periods for trees to store carbon, and 

more thinning and less clear cutting.

Also to be clear, our forest will be managed. When I joined this board I said I 

would do so only if we recognized that this state has some of the most productive 

56

forestland in the Nation. I want to be a part of something that shows the positive 

benefits of active forest management. My Evergreen Forest Trust colleagues agree. 

The Evergreen Forest at Snoqualmie will be managed, it will be harvested and it 

will be reforested. There will continue to be family wage jobs in the forest and there 

will be raw material to sell to converting plants to support those jobs as well. The 

owner will pay the same local and state land and harvest taxes as that of any other 

private forestland property owner. These are issues that I know are very important 

to Members of this Committee not only in the Northwest but also around the Nation. 

These decisions will be made within economic parameters because all of the board 

directors will have 40 +/¥ years of debt to pay back. The only source of income to 

pay the dividends and to retire the bonds will come from harvesting trees. Whatever 

the background of the directors, whether in commercial forest management or preservation of forests, they will have to come face to face in the running the operation 

in the boardroom and not with sound bites on television. They will have to balance 

the terms of the easement on the property which in a very real and beneficial way 

requires a high level of public benefit with the realities of the commodity market 

for logs, the need for cash reserves, interest payments, and bond refinancing or retirement. 

Mr. Chairman and members of the Subcommittee, in my 35 year career in the 

forest products industry I have yet to see a private market vehicle that truly brings 

industry and environmental interests together in support of both the economic and 

environmental benefits forests provide. 

In Washington State we have an opportunity to show the Nation that jobs and 

the environment can be produced. And we don’t have much time. Our purchase and 

sale agreement with the seller is contingent on a tax clarification. I would again, 

respectfully request that you seek prompt passage of H.R. 1711—The Community 

Forestry and Agriculture Conservation Act of 2001. 

Thank you for this opportunity to appear before your Committee today and I 

would be pleased to answer any questions you may have.

Cascade Land Conservancy and also from Seattle, Washington. Mr. 

Chairman MCCRERY. Mr. Eugene G. Duvernoy, President of 

f Duvernoy?

STATEMENT OF EUGENE G. DUVERNOY, BOARD MEMBER, EVERGREEN FOREST TRUST, SEATTLE, WASHINGTON, AND 

PRESIDENT, CASCADE LAND CONSERVANCY, SEATTLE, 

WASHINGTON 

Mr. DUVERNOY. Thank you, Mr. Chairman, Subcommittee. I 

suppose I must be the tree hugger component of this tandem presentation. 

In any event, I am here to voice strong support for H.R. 1711 and 

I want to thank Congresswoman Jennifer Dunn and Congressman 

John Tanner for their leadership on this legislation. I would also 

like to thank Congressmen McDermott, Herger, Matsui, and 

McInnis for their original sponsorship and acknowledge the legislation’s many other cosponsors. 

I want to touch base quickly on the problem that H.R. 1711 addresses, the solution it presents, and then the benefits it provides. 

First, the problem. In recent years, as Ms. Dunn correctly pointed out, differing ideas about how forestland should be used and 

managed have polarized our Northwest communities. On private 

timberlands, this rancorous debate has centered on clear cutting, 

water quality, and the protection of salmon habitat. 

Now, in the Puget Sound basin, the problem has become even 

more complex with the rapid conversion of forestland to other uses. 

As these lands are converted and the debate about how to best 

manage a resource, either for timber or for the environment, is silenced and replaced by a community’s recognition of a loss, a very 

57

significant loss of landscape that provided a multitude of environmental, recreational, and economic benefits. 

While there is growing consensus finally on the importance of 

keeping land in forests, it is still a fact that, too often, environmentalists and owners of private forestlands still sit at opposite 

sides of the table. I think as you see this panel here today, it is 

the demonstration that the conservation community is working 

with private landowners to forge solutions to this very vexing problem and creating the foundation of trust that has led to today’s 

joint appearance by Mr. Bingham and me. Now, H.R. 1711 is a 

hallmark of this collaborative effort. 

I have just briefly touched on the problem. In order to illustrate 

the solution provided by H.R. 1711 to this problem, I am going to 

focus on the transaction that, again, Congresswoman Dunn mentioned that has great promise to the Puget Sound community. 

Puget Sound community leaders with backgrounds in business, 

timber management, environment, and government have joined to 

create the Evergreen Forest Trust. In January of this year, the 

trust signed an agreement with the Weyerhaeuser Company to 

purchase the 100,000-acre Snoqualmie Tree Farm, which is a scant 

distance from Seattle, a very vibrant and growing metropolitan 

area. In collaboration with the Cascade Land Conservancy, the Evergreen Forest Trust has developed a very strong statement of 

principles that will guarantee in perpetuity the careful stewardship 

of this property as it produces wood fiber. The trust has also 

worked with forestry and financial advisors to ensure a harvest regime adequate to fulfill the debt obligation it will assume to finance the transaction. 

Now, how did we provide both these significant benefits while 

also meeting our business obligations? To do that, the trust proposes to finance the purchase of property by selling a tax-exempt 

bond. The bond would be repaid through the revenue stream expected from the harvest flow from the timber operations. Consequently, this transaction hinges on the clarification of the tax 

code provided by H.R. 1711 that clearly authorizes this sort of financing. 

Now, I have touched on the problem. I have mentioned the elegant solution provided by H.R. 1711. Let me conclude with an overview of its remarkable benefits. 

By establishing a mechanism for the forest to pay for its own 

conservation, which is remarkable, this transaction and H.R. 1711 

leverages the very small public cost of tax-exempt financing and 

produces a very large public benefit. Retaining this vast landscape 

and forest will sustain its air and water quality benefits and provide recreational opportunities. The forest will continue to support 

herds of elk and runs of salmon, and as Mr. Bingham said, at the 

same time, the working forest will also provide local tax revenues 

and jobs critical to forest-dependent communities. 

H.R. 1711 demonstrates that we can marry sound environmental 

stewardship and business acumen to secure meaningful conservation and the continued productivity of forestlands. 

I want to thank you for the opportunity to testify in front of this 

Committee and I respectfully urge your passage of H.R. 1711 with 

the many other fine bills discussed today. Thank you very much. 

58

[The prepared statement of Mr. Duvernoy follows:]

Statement of Eugene G. Duvernoy, Board Member, Evergreen Forest Trust, 

Seattle, Washington, and President, Cascade Land Conservancy, Seattle, 

Washington 

1. Introduction

Mr. Chairman and Members of the subcommittee, my name is Eugene Duvernoy. 

I am the President of Cascade Land Conservancy operating in the east-central 

Puget Sound area of Washington. I also join Charley Bingham as a board member 

of Evergreen Forest Trust. Both these organizations are private, nonprofit Washington corporations. Cascade Land Conservancy conducts voluntary, cutting edge 

transactions to conserve critical landscapes in King, Pierce and Snohomish counties. 

Evergreen Forest Trust is a separate, but related organization that was created to 

acquire, manage, and protect Washington’s forestland. 

I am here to voice strong support for H.R. 1711, The Community Forestry and 

Agriculture Conservation Act of 2001. This bill will allow nonprofit conservation 

companies to acquire working forestlands in order to advance the conservation, economic and social benefits these lands provide our local communities. 

I want to thank Congresswoman Jennifer Dunn and Congressman John Tanner 

for their leadership on this legislation. I would also like to thank Congressmen 

McDermott, Herger, Matsui, and McInnis for their original sponsorship of this effort. And, of course, we would like to thank the legislation’s other co-sponsors for 

their support of our efforts. It is a credit to this concept that there is such broad 

bi-partisan support. 

2. The Problem

Early pioneers saw the Pacific Northwest as a land of abundant natural resources 

including what seemed at the time an endless supply of timber. In recent years, a 

growing recognition of the limits of our natural assets has created conflicts among 

groups with differing ideas about how these forest lands should be used and managed, polarizing our Northwest communities. 

On private timberlands, this rancorous debate has centered on clearcutting, water 

quality and protection of salmon stream habitat. In the Puget Sound Basin the problem has appeared to become even more complex with the rapid conversion of 

forestland to other uses. This new threat particularly looms over the working forests 

along the foothills of the Cascade Mountains. These lands are among the most productive timber lands in the world and have provided clean water wildlife habitat 

and recreation for generations of citizens. As these lands are converted to urban 

uses the debate about how to best manage a resource for timber and environmental 

benefit is replaced by the general community recognition of the loss of a once vibrant landscape that provided a multitude of benefits to our citizens. 

While there is a growing consensus on the importance of keeping the foothills in 

forest, too often environmentalists and owners of private forestland still sit at opposite ends of the table. One side will focus on the stark ecological concerns while the 

other side emphasizes the production requirements for the property. Fortunately, 

the conservation community, working with progressive private landowners, is forging solutions to this vexing problem; creating the foundation of trust that has lead 

to today’s joint appearance by Mr. Bingham and me. Earlier cooperative experiments included the negotiations the Conservancy completed in 2001 involving the 

City of Snoqualmie, King County, Weyerhaeuser Real Estate Company, and Puget 

Western, Inc. to create the Snoqualmie Preservation Initiative. The Initiative secured the permanent preservation of the 145-acre forested viewshed directly behind 

Snoqualmie Falls, the state’s second-most visited tourist site and has also secured 

the future of a nearby 9,000 acre landscape as an active tree farm. Importantly the 

Initiative also paved the way for a significant new community within the City of 

Snoqualmie allowing needed growth to flourish where it can be supported by existing infrastructure and services. 

3. The Solution for One Critical Property that can be Applied Nationally

Over the years, these strong relationships the conservation community has established with landowners, as illustrated above, has opened the door to projects of a 

scale that can truly serve our local communities and enhance the region’s ecosystems and landscapes. H.R. 1711 is the hallmark of this collaborative effort. 

After a feasibility study demonstrated the viability of revenue-backed forestry 

bonds, community leaders with backgrounds in business, finance, timber, academia, 

the environment, and government worked together to create the Evergreen Forest 

Trust (‘‘the Trust’’). The Trust’s board of directors include B. Gerald Johnson, the 

59

board’s president and managing attorney at Preston Gates Ellis LLP, Charley Bingham, retired Executive Vice President for Weyerhaeuser, King County council members Rob McKenna and Larry Phillips, environmental activist Bill Pope, retired University of Washington Dean of Forestry David Thorud, civic leader and Cascade 

Land Conservancy Chair Carol James, and myself. 

In January of 2002, the Trust signed a purchase and sale agreement with 

Weyerhaeuser Company to acquire the 100,000-acre Snoqualmie Tree Farm (‘‘the 

Tree Farm’’). In collaboration with Cascade Land Conservancy, the Trust developed 

a statement of principles for a conservation easement to be placed on the land which 

guarantees the careful stewardship of the property in perpetuity. The Trust also 

worked with US Forest Capital, a forestry and financial services company, and The 

Campbell Group, a timber investment and management firm, to meet our conservation objectives for the property while carefully planning its harvest regime in order 

to fulfill the debt obligation it will assume in order to purchase the Tree Farm. 

In order to provide the significant public benefits secured by the Conservation 

Easement and meet its business obligations, the Trust proposes to purchase the 

property with a tax-exempt bond and repay the bond through revenue from forest 

operations. Consequently, this agreement hinges on two contingencies: tax clarification, which we are here to discuss today, and the financial logistics of a bond sale 

in excess of $200 million. With your support, the sale of the Tree Farm will be the 

first application of the tax provisions laid out in H.R. 1711. 

4. The Benefits of H.R. 1711

By establishing a mechanism for the forest to pay for its own conservation, this 

transaction leverages the small public cost of tax-exempt financing to generate a 

very large public benefit. Retaining this vast but close-to-home landscape in forest 

will maintain valuable open space that contributes to air and water quality and provides recreational opportunities. The habitat values of the forest will be maintained 

and enhanced, supporting herds of elk and runs of salmon, and supplementing forest conservation efforts on adjacent state and federal lands. At the same time, a 

working forest will maintain the forest tax base and provide jobs that are critical 

to forest-dependent communities over the long term. 

The model created by Evergreen Forest Trust is a vehicle for bringing environmentalists and industry together to protect working forests. It will be a critical tool 

to secure meaningful conservation and the continued productivity of forestlands 

across our county. The benefits to our citizens indeed will be great and importantly 

will require neither public land ownership nor significant public expenditures. H.R. 

1711 would make this opportunity available not only in the Pacific Northwest but 

across the country. I respectfully request that you pass H.R. 1711, The Community 

Forestry and Agriculture Conservation Act of 2001. Thank you for the opportunity 

to appear before the Subcommittee.

hear from Mr. Rand Wentworth, the President of the Land Trust 

Chairman MCCRERY. Thank you, Mr. Duvernoy. Now, we will 

f Alliance. Mr. Wentworth, it does not say where you are from. Perhaps you will tell us that when you start. Please share with us 

your testimony. 

STATEMENT OF RAND WENTWORTH, PRESIDENT, LAND TRUST 

ALLIANCE 

Mr. WENTWORTH. Another from Atlanta, Georgia. Thank you 

for the opportunity to testify today. I am President of the Land 

Trust Alliance, the national organization representing 1,263 land 

trusts in every State of this country. These are nonprofit, private 

conservation organizations that work with private landowners who 

voluntarily protect their land as farms, forests, wildlife habitat, 

parks, and trails. They have over one million members and have 

protected over six million acres throughout the United States. With 

two million acres of land being developed each year in America, we 

need to accelerate the pace of conservation if we hope to leave our 

children the best of our American landscape. 

60

Now, for many years, I, like Representative Isakson, was President of a commercial real estate development company in Atlanta 

and I appreciate the many economic benefits of growth. In that 

role, I have also seen how land conservation actually enhances economic development and real estate values. In many cases, keeping 

land in agriculture, forestry, protecting scenic beauty is the best 

thing we can do for our economy and our communities. 

Many landowners that we work with are willing to protect their 

land for conservation purposes, but they need help. We, the Land 

Trust Alliance, strongly endorse H.R. 1309 introduced by Representative Johnson, H.R. 2290 introduced by Representative 

Portman, H.R. 1711 introduced by Representative Dunn, and H.R. 

2279, introduced by Representative Hefley. Each of these bills 

would provide a careful measure of such help. They are complementary bills, each addressing a different set of landowners and 

a different approach to land conservation. 

I also want to thank my fellow Georgian, Representative Isakson, 

for introducing an even more far-reaching proposal in H.R. 882. He 

has seen, as I have, the astounding loss of greenspace around Atlanta in the past two decades and has sought to find a mechanism 

bold enough to meet the challenge, and I hope that this Committee 

will look favorably at those kind of bold and fresh ideas. 

Now, since others have spoken eloquently on the other bills, I 

want to specifically address my comments to Representative Johnson’s bill, H.R. 1309. This bill will encourage some truly extraordinary charitable donations in the public interest. 

Currently, the deduction allowed for conservation contribution 

under section 170(h) is limited to no more than 30 percent of a taxpayer’s adjusted gross income and can be carried forward for no 

more than 5 years. The current limits mean that a landowner of 

modest means gets next to no reward for making an extraordinary 

donation. A rancher, for example, earning $50,000 a year may own 

land with development rights worth more than $1 million. Yet, because of the rancher’s lower income, the current rules mean that 

the most they could deduct is $90,000, no matter how valuable 

their gift to the public interest. 

Section 1 of H.R. 1309 would allow the donors of qualifying conservation donations to deduct up to 50 percent of their adjusted 

gross income for as many years as it might take for them to deduct 

the entire dollar amount. Now, obviously the tax benefits spread 

out over 20 years or more are nowhere near as valuable as those 

taken all at once, but by increasing the percentage of the adjusted 

gross income, a taxpayer may deduct for a conservation gift to 50 

percent, which is the same percentage limit the law currently allows for cash donations, this will allow taxpayers an incentive more 

closely related to the value of their extraordinary donations. 

I have been asked by 50 land trusts from Connecticut to present 

to Mrs. Johnson their letters in support of her legislation, which I 

have attached for the record. All of us thank her for her work on 

this and we hope to see it come to fruition soon. 

I would urge the Committee to go even further and adopt incentives included in H.R. 2279. This bill would allow taxpayers whose 

income is primarily from farming and ranching to deduct up to 100 

percent of their adjusted gross income in any 1 year for up to 15 

61

1 IRC 170(h) defines which contributions of appreciated real property qualify for treatment as 

a charitable donation. Permanent conservation easements meeting the 170(h) standards are the 

only partial interest in property allowed to be counted as deductible from income tax. Congress 

has also provided estate tax benefits for landowners whose lands are protected with conservation easements, through IRC 2055(f) and IRC 2031(c). 

years. Are we asking too much for these donors? The average farmer, according to the Department of Agriculture, has an income of 

only $34,000 a year and pays less than $3,000 a year in income 

tax. Allowing them full tax relief is the only way they will get a 

meaningful incentive to make a gift for conservation. 

The tax incentives in the bills I have talked about will produce 

tangible, visible, permanent results. You will see those results in 

working farms, natural beauty, clean water, and livable communities throughout America. Thank you. 

[The prepared statement of Mr. Wentworth follows:]

Statement of Rand Wentworth, President, Land Trust Alliance 

Mr. Chairman and Members of the Subcommittee: 

Thank you for the opportunity to testify before this subcommittee on the subject 

of new tax incentives for the conservation of land. 

I am President of the Land Trust Alliance (LTA), the national association representing the 1,263 land trusts around the country. These local nonprofit conservation organizations work with private landowners who voluntarily protect their land 

as working farms, forestland, wildlife habitat, parks, trails, and greenways. These 

organizations have more than one million members and have protected more than 

six million acres across the U.S. 

But with two million acres of land a year being developed, we need to accelerate 

the pace of conservation if we hope to keep pace, and succeed in protecting a heritage of land for our children. 

For many years, I was president of a commercial real estate development company in Atlanta, and I appreciate the many economic benefits of development. I 

have also seen how land conservation enhances economic growth and the value of 

real estate. In many cases, the highest and best value of certain lands is for the 

continuation of agriculture and forestry as a viable economic activity; for the protection of wildlife and plant habitats; for the continued availability of clean water; for 

historic preservation, including the preservation of historic battlefields; for recreation and outdoor education; and for the protection of scenic beauty. 

Many landowners are willing to protect their land for conservation purposes, but 

they need help. We strongly endorse H.R. 1309, introduced by Representative Johnson; H.R. 2290, introduced by Representative Portman; and H.R. 1711, introduced 

by Representative Dunn. Each of these bills would provide a careful measure of 

such help. They are complimentary bills, each addressing a different set of landowners, and a different way to achieve land conservation. 

Each of them will now have had hearings in the House in two successive Congresses; and each of the elements in these bills has had hearings in the Senate. We 

believe this legislation is sorely needed, and that it is ready, right now, to be enacted into law. 

I also want to thank Representative Isakson for introducing an even more ambitious proposal, H.R. 882. He has seen the astounding scale of the loss of open space 

around Atlanta in the past two decades, and has sought to find a mechanism bold 

enough to protect open space under such circumstances. 

The incentives already in place in our tax code have been a major contributor to 

the work land trusts have done. Those incentives start with IRC 170(h), which provides for special treatment for conservation donations of land and of partial interests in land as charitable deductions from income tax. They also include the deductibility of conservation easements from estate tax under IRC 2055(f), and an exclusion from estate tax for a portion of the value of land protected by a conservation 

easement provided by IRC 2031(c), the American Farm and Ranch Protection Act. 

But rising land prices and changes the Congress has made to the general tax law 

make it necessary for us to update the current incentives. Rising land prices have 

greatly diminished the incentive provided by IRC 170(h),1 and rendered that incentive almost meaningless to many farm and ranch families. 

I want to specifically address the changes H.R. 1309 would make to IRC 170(h), 

because they would make truly extraordinary charitable donations possible. 

62

2 A conservation easement is a contract between a landowner and a nonprofit conservation organization or a government agency that restricts future uses of land to protect conservation values important to the general public. While the contract restricts development options, the landowner retains title, control and use of the land. Conservation easements may and often do provide for continued commercial uses of the land for agriculture and forestry. They may, but need 

not, provide for public access to the land, so long as they protect publicly important values. As 

with any easement, a conservation easement follows the land and binds subsequent landowners. 

Forty-nine states have statutes defining and enabling the use of conservation easements, and 

in the only state without such a statute, Wyoming, conservation easements constructed under 

common-law principles are in widespread use. Nine states have enacted state tax credits for the 

donation of conservation easements (South Carolina, North Carolina, Virginia, Colorado, Connecticut, Delaware, Maryland, New Jersey and California). 

Currently, the deduction allowed for a contribution of appreciated property to 

charity is limited to no more than 30% of a taxpayer’s adjusted gross income (AGI), 

and can be rolled forward for no more than 6 years. This provides a good incentive 

for high-income individuals, but discriminates against working ranchers and farmers with lower incomes. Many farmers, ranchers, and other landowners of modest 

means would be willing to donate their development rights for conservation if they 

received a tangible tax incentive for doing so. They love their land and they would 

like to see the fruits of their stewardship protected into the future by a conservation 

easement.2 But they cannot afford to just give away their family’s most valuable 

asset. 

That’s what the current limits require. A rancher earning $50,000 a year may 

own land with development rights worth $500,000, or $1 million, or more. Yet, because of the rancher’s lower income, the current rules dictate that the most they 

could deduct is $90,000, no matter how valuable the gift. 

We applaud Representative Nancy Johnson for recognizing this and introducing 

legislation to update the incentives for landowners to donate land or a conservation 

easement on land, to protect that land for the future. 

Section 1 of H.R. 1309 would allow the donors of qualifying conservation donations to deduct up to 50% of their AGI, for as many years as it might take for them 

to deduct the entire dollar value of their donation. That would enable many more 

landowners to consider donating their land for conservation, or donating a conservation easement to restrict future development of their land. It would provide a major 

boost for conservation across the country. 

Unlimited carryover means that the taxpayer will get a reward that is proportional to their gift. Obviously, tax benefits spread over twenty or more years are nowhere near as valuable as those taken all at once. But increasing the percentage 

of AGI a taxpayer may deduct for a conservation gift to 50%—the same percentage 

limit the law currently allows for cash donations—will allow taxpayers to get more 

of a reward for making these extraordinary donations. 

In the coming years, we predict that these changes would make a significant difference in donations of land, and of conservation easements on land. I have been 

asked by Connecticut land trusts to give Mrs. Johnson a series of letters of support 

for her legislation. The changes she has proposed would enable them to help their 

communities protect open space and farmland that is more valuable with every 

passing day. All of us thank her for her work on this, and we hope to see it come 

to fruition soon. 

I would urge the committee to go even further in helping farmers and ranchers, 

and adopt the further incentives included in H.R. 2279, introduced by Congressman 

Hefley. That bill would allow taxpayers donating a valuable conservation easement, 

and whose income is primarily from farming or ranching, to deduct up to 100% of 

their AGI in any one year, for up to 15 years. A similar bill has been introduced 

in the Senate by Senator Max Baucus (S. 701). 

While the concept of a 100% of AGI deduction may appear extraordinary at first 

glance, the lower tax rates the Congress has enacted mean that in reality this proposal is not nearly as generous as it may appear. The Economic Research Service 

of the U.S. Department of Agriculture says that the average income of a farmer or 

rancher in the U.S. is around $34,000 a year. Such a taxpayer may pay less than 

$3,000 a year in taxes when the income tax cuts enacted in 2001 are fully phased 

in. Zeroing out such a taxpayer’s AGI for 15 years would give them less than 

$45,000 in benefits, spread out over 15 years, for a gift to the public worth $450,000 

or more. 

That isn’t a very high incentive, but it would provide a tangible reward in cash 

flow to these landowners, and we know that this would result in some extraordinary 

donations of land. When Congress drafted the limits on charitable deductions, it 

may have seemed inconceivable that a taxpayer earning $30,000 a year could give 

63

a gift worth $1 million or more. But because of rising land values, this is a very 

real possibility for gifts of conservation easements. 

Are we asking for too much for these donors? I don’t think so. Compare the $45,000 in potential tax benefits described above to the benefits a high-income taxpayer already receives. If they are paying income taxes at the highest rate, they 

could receive almost $180,000 in benefits for a $450,000 donation under the current 

rules, and they would receive those benefits over a much shorter time. 

In summary, let me ask the Subcommittee and other Members present for their 

continued help in conserving the landscapes that people love. Through the tax code, 

the federal government has long been a partner in encouraging voluntary land conservation on private lands. We now have the opportunity to protect the best of 

America’s landscape before it is too late, but we need your help. 

The tax incentives in H.R. 1309, H.R. 2290, and H.R. 1711 will produce tangible, 

visible, permanent results. You will be able to see those results in the form of working farms, natural beauty, clean water, and livable communities that will benefit 

all Americans. 

Thank you again, Mr. Chairman, for the opportunity to appear before this Subcommittee, and thank you very much for your interest in federal incentives for private land conservation.

ness for the afternoon is Mr. Jim DeCosmo, who is Vice President 

Chairman MCCRERY. Thank you, Mr. Wentworth. Our last witf for Forests for Temple-Inland Forests Products Corporation, Diboll, 

Texas. 

STATEMENT OF JIM DECOSMO, VICE PRESIDENT–FOREST, 

TEMPLE-INLAND FORESTS PRODUCTS CORPORATION, 

DIBOLL, TEXAS, ON BEHALF OF THE AMERICAN FOREST & 

PAPER ASSOCIATION 

Mr. DECOSMO. That is correct. 

Chairman MCCRERY. That is somewhere between Shreveport 

and Houston, is it not? 

Mr. DECOSMO. That is pretty close. 

Chairman MCCRERY. Okay. 

Mr. DECOSMO. It is about an hour and a half north of Houston, 

and I must also say that I was recently almost from Atlanta. 

[Laughter.] 

Chairman MCCRERY. Well, welcome to Washington. 

Mr. DECOSMO. It is good to be here. I lived in Rome, Georgia, 

just outside Atlanta. 

Thank you, Mr. Chairman and Members of the Subcommittee, 

for this opportunity to testify with you today. I am responsible for 

2.1 million acres of forestland in Texas and Louisiana and Georgia 

and Alabama. We have approximately 350,000 acres of timberland 

in North Georgia and I know exactly what the other panel members and the witnesses are testifying to with regard to development 

and growth and expansion of these metropolitan areas. 

I am here on behalf of the American Forest and Paper Association, which represents 240 member companies and over nine million non-industrial private landowners. I am here to strongly endorse the Reforestation Tax Act, H.R. 1581, which I contend has 

three primary and significant objectives and benefits. 

First, it greatly supports the continued conservation and improvement of forest practices throughout the United States, and in 

turn, that leads to greater forest health. 

Second, it provides incentives for corporations as well as large 

landowners to continue to hold timberland and manage it for the 

long term. 

64

Third, it levels the playingfield for corporate and large landowners with regards to the effective tax rate when you look at our 

taxes with our competitors globally. 

The Reforestation Tax Act has primarily two components. The 

first is an adjustment for gross income at the time of timber sales 

for inflation. Generally, when we make investments in timberland, 

it is in year zero or one or at the time of the establishment and 

timber revenues are generally not realized until 25, possibly 30, 50 

years out. As you can imagine, the basis in cost considered in respect to the revenues after inflation create a fairly drastic and 

gross margin, which oftentimes inflates the taxes. 

The second part of it is full amortization of reforestation costs. 

The current law enables those who invest up to $10,000 a year a 

10-percent tax credit on reforestation expenses and the balance of 

that to be amortized over 7 years. To put $10,000 into perspective, 

that will regenerate about 50 acres a year. Temple-Inland regenerates close to 50,000 acres a year, so it is of some benefit, but not 

much. 

Of course, the logical question is how does the Reforestation Tax 

Act provide the objectives and the benefits that I have stated? Specifically with regards to improving conservation and conservation 

practices, I think it is important to note and to say that conservation has costs associated with it. We manage much of our land, 

many of our acres strictly for conservation practices and there is 

a management cost associated with it. 

I will also say that the greatest cost is an opportunity cost. Previous testimony said that, typically, forest investors look for an 8-

percent real return on a market value, which means that 

timberland should grow somewhere around $60 an acre per year in 

value. Oftentimes, conservation acres do not grow any value and 

may even be a net cost, so this tax act would help us to even do 

a better job of managing for these conservation acres and would 

certainly provide some tax relief. 

This tax relief would also provide some relief pressure in the incentive for landowners to sell property, which would be a significant benefit. When we sell property into the open market, we end 

up with further development, greater fracture, and even more fragmentation of these assets in these forested ecosystems. 

Recently, a report was issued by the U.S. Forest Service along 

with other universities called the Southern Forest Resource Assessment. It identified that in the recent past, there were 12 million 

acres in the South that had been converted to development and 

other land uses for forest and the forecast is another 12 million 

acres to be converted by the year 2020. 

You will also notice that if you look at other trends in the past, 

corporations have divested over nine million acres of timberland in 

the last 4 years and that has been divested to entities who primarily have tax structures that are far beneficial to the current tax 

rates for corporations. I would contend the corporations are good 

stewards. If you look at the role that we play and investments that 

we make in research and development, I would say that many of 

the new landowners and forest owners are not filling those footsteps. 

65

With regard to leveling the playingfield, PricewaterhouseCoopers 

conducted a study looking at global tax rates. It was completed in 

January 2001. Effective tax rates vary from 7 percent to 55 percent. Unfortunately, we are the latter. The Reforestation Tax Act 

is targeted to bring us to the midpoint, somewhere between 25 to 

28 percent. 

Just in closing, I want to say that the Reforestation Tax Act is 

endorsed by the forest products industry, our non-industrial private 

landowners, labor unions, and the Conservation Fund. 

On behalf of American Forest & Paper Association and the previously mentioned supporters, I just want to strongly encourage 

you, the Subcommittee, to include the tax act in any legislation 

moving to the full Committee that deals with sprawl or conservation tax issues. Our forests and our environment will be healthier 

as a result of your support. I thank you for this opportunity to testify. 

Chairman MCCRERY. Thank you, Mr. DeCosmo. 

Mr. DECOSMO. You are welcome. 

[The prepared statement of Mr. DeCosmo follows:]

Statement of Jim DeCosmo, Vice President-Forest, Temple-Inland Forest 

Products Corporation, on behalf of the American Forest & Paper Association 

Good Afternoon Mr. Chairman and Members of the Subcommittee. My name is 

Jim DeCosmo. I am Vice President-Forest for Temple-Inland Forest Products Corporation. Temple-Inland is a forest products company with significant timberland 

holdings in Louisiana, Texas, Alabama and Georgia. I am testifying today on behalf 

of the American Forest and Paper Association (AF&PA). AF&PA represents more 

than 240 member companies and related associations that engage in or represent 

the manufacturers of pulp, paper, paperboard and wood products, as well as the 

growers and harvesters of this nation’s forest resources. America’s forest and paper 

industry ranges from state-of-the-art paper mills to small, family-owned sawmills 

and some 9 million individual woodlot owners. 

The U.S. forest products industry is vital to the nation’s economy, providing approximately 7 percent of the U.S. manufacturing output, while ranking among the 

top ten manufacturing employers in 42 states. More than 1.5 million people are employed by the forest products industry with an estimated annual payroll of $64 billion. Sales of the paper and forest products industry top $250 billion annually in 

the U.S. and export markets, making us the world’s largest producer of forest products. We are also a natural resource based industry responsible for planting, growing and harvesting trees, a basic renewable resource. 

I would like to commend the Subcommittee for holding this hearing today on tax 

issues relating to urban sprawl and conservation. It could not be timelier. 

In May 1999, the Southern Forest Resource Assessment (SFRA) was initiated to 

examine the status, trends and potential future of southern forests. The results of 

the SFRA study, led by the U.S. Forest Service, were released this past November. 

The conclusion was that southern forests are healthy and are being sustainably 

managed; though continued urban growth presents a substantial threat to the condition, health and long-term sustainability of these forests. The report confirmed earlier findings that urban growth is the primary cause of forest loss in the South. Between 1982 and 1997, developed land in the South increased by 45%, representing 

12 million acres of forest lost forever to development. The SFRA report concluded 

that another 12 million acres could be sold and developed by 2020. 

The report goes on to underscore the important role the tax system can play in 

keeping land in forest cover. There are two critical ways this can be accomplished 

that AF&PA urges your committee to consider. They include the treatment of timber 

gain and how reforestation costs are treated under the tax code. 

AF&PA agrees with the SFRA conclusion that additional tax incentives are needed to encourage landowners to hold onto their forest land rather than be forced to 

sell to developers, thus worsening urban sprawl. Another reason for providing additional tax incentives for owners of timber is because the current tax laws governing 

the forest products industry in the U.S. place us at a great disadvantage vis-a`-vis 

66

our international competitors. A 2001 analysis by PricewaterhouseCoopers found 

that foreign-based competitors (in Indonesia, Brazil, Finland, Japan, Germany and 

Canada) of U.S. forest products companies enjoy effective tax rates as low as 8%. 

U.S.-based companies, by comparison, face an effective tax rate of 55%—25 percentage points higher than the average for the other competing nations and among the 

worst in the world. Similarly, non-corporate U.S. investment in timber is treated 

among the worst of our foreign-based competitors. 

We do not believe this situation was intended by Congress. Rather it is more likely the result of years of tax policy changes without an analysis of the accumulated 

effect on either urban sprawl or international competitiveness. Unfortunately, the 

current rules discourage job creation in the U.S., promote imports and undercut the 

high environmental standards that the U.S. practices. Congress can go a long way 

toward improving this situation by enacting ‘‘The Reforestation Tax Act of 2001’’ 

(H.R. 1581) introduced by Rep. Jennifer Dunn, a Member of the Ways and Means 

Committee, and Rep. Sanford Bishop. This bipartisan legislation currently has 80 

cosponsors in the House and 15 members of the Ways and Means Committee. Mr. 

Chairman, we also note that you are a cosponsor of this legislation, and we are 

grateful for your support. 

The Reforestation Tax Act (RTA) recognizes the unique nature of timber and the 

overwhelming risks associated with an investment in this essential natural asset 

and attempts to place the industry in a more equal position with its international 

competitors. Trees can take anywhere from 25 to 75 years to grow to maturity. Fire, 

disease, weather—events that are unpredictable and uninsurable—can wipe out 

acres of trees at any time during the long, risky growing period. Good management 

practices can help mitigate some of nature’s vagaries, but are costly over the entire 

growing period. The RTA does two things to remove disincentives for private investment in our forests and promote reforestation efforts: reduces the tax paid on timber 

for individuals and corporations; and it improves the tax treatment of reforestation 

expenses. 

Specifically, the bill provides a sliding scale reduction in the amount of taxable 

gain based on the number of years the asset is held—3 percent per year, up to a 

maximum reduction of 50 percent. While this provision does not fully compensate 

for the negative tax impact of inflation, it does provide a significant incentive for 

landowners not only to re-plant their land after a timber harvest, but to keep their 

land in forest cover for generations to come. 

Under current law, the first $10,000 of reforestation expenses are eligible for a 

10 percent tax credit and can be amortized over 7 years. Reforestation expenses are 

the initial expenses required to establish a new stand of trees including expenses 

for site preparation, the cost of seedlings, and the labor costs required to plant the 

seedlings. Because amounts over $10,000 may not be amortized and do not qualify 

for the credit, most reforestation expenses are not recoverable until the timber is 

harvested. The RTA removes the $10,000 cap and allows all reforestation expenses 

to qualify for the tax credit and to be amortized over a 5-year period. This change 

in the law will provide a strong incentive for increased reforestation by eliminating 

the arbitrary cap on such expenses. 

The RTA is enthusiastically endorsed by all elements of the forest products industry—individual landowners, large and medium sized forest and paper companies 

and our labor unions. In addition, the RTA has the support of the Conservation 

Fund since the bill directly encourages replanting resulting in not only reduced 

sprawl but also an improved environment due to trees storing carbon dioxide that 

would otherwise be released into the atmosphere. 

A variation of the RTA was included in the 1999 Omnibus Tax Bill that passed 

Congress but was vetoed by President Clinton. Likewise, it was included in the Minimum Wage and Small Business Tax Relief Bill passed by the House in 2000. 

AF&PA strongly urges the Subcommittee to include the RTA in any legislation 

you move to the full Committee dealing with sprawl/conservation tax issues. The 

RTA has the additional benefits of being bipartisan, helps our industry’s competitive 

position, protects U.S. companies and the jobs they provide and promotes sustainable forestry in an environmental friendly way. 

Thank you, Mr. Chairman, for this opportunity to testify, and I would be happy 

to answer any questions.

more time the 5 percent, the 55 percent tax rate. Where did that 

Chairman MCCRERY. First of all, would you run by me one 

f come from? 

67

Mr. DECOSMO. PricewaterhouseCoopers conducted a study for 

American Forest & Paper Association to look at the effective tax 

rates of corporations that own timberland across the globe. They 

benchmarked six other countries and the effective tax rates varied 

from the low of 7 percent to the high of 55 percent, and as I said, 

it is the United States who has a 55 percent effective tax rate. Actually, it is two taxations. One is at the corporate level and one is 

at the individual level that gets you to the 55 percent. If needed, 

that study is certainly available. 

Chairman MCCRERY. Okay. So, it is not just Temple-Inland, it 

is American corporations doing business here——

Mr. DECOSMO. Absolutely. 

Chairman MCCRERY. That are engaged in the forestry business. 

Mr. DECOSMO. Absolutely, and that is probably the real driver 

in the number that I shared with you, with corporations divesting 

nine million acres in the last 4 years. 

Chairman MCCRERY. Okay. Thank you. Mr. Duvernoy, would 

you try to summarize for me quickly the goal of Ms. Dunn’s legislation. 

Mr. DUVERNOY. Yes, I will. The goal of Ms. Dunn’s legislation 

is to allow nonprofit corporations to access capital markets. It does 

that through allowing nonprofit corporations to issue tax-exempt 

debt. Now, the obligation of the nonprofit corporation in response 

for issuing tax-exempt debt is to provide permanent public benefit 

in its conduct of its timber operations on the land, and the way this 

legislation requires that benefit to be permanent is by the placement of a conservation easement, if you will, on that property that 

then will be held by another conservation organization. 

Chairman MCCRERY. You went on to say in your testimony that 

the land that was purchased, or for which the bonds would be 

issued, would be managed for timber production and it was the sale 

of the timber that would pay the bonds, is that correct? 

Mr. DUVERNOY. That is correct. We fully anticipate the property will be managed for timber production. The public benefit that 

would emanate from this in this instance would be the fact that the 

development potential of that property would be retired and the 

care and stewardship of this particular property would exceed 

State, and the State does a very good job, but exceed State standards. We can afford to manage this property for timber, but at a 

level higher than we could otherwise. 

Chairman MCCRERY. So, in other words, the legislation would 

encourage timberland to stay timberland? 

Mr. DUVERNOY. That is correct. In the face of a very difficult 

market to manage for timber, particularly on the urban fringe, this 

vehicle will allow us to keep this land in timber production and to 

keep jobs and that local tax base so important to the local community. 

Chairman MCCRERY. So, would you say that the legislation 

that Mr. DeCosmo talked about, the reforestation tax credits and 

so forth, and the legislation that you are espousing, Ms. Dunn’s, 

have much the same goal? 

Mr. DUVERNOY. If I may, Mr. Chairman, I think a lot of this 

legislation, if you take it together, works very synergistically to create a set of very powerful tools to conserve forestland. 

68

Chairman MCCRERY. Thank you. I think it is interesting that 

we have folks from what some might call the environmental community speaking favorably about corporate America. Maybe we 

could do more of this and actually make more progress. 

[Laughter.] 

Chairman MCCRERY. So, it is good that you all have done that 

today. Mr. McCormick, since I know your organization has a lot of 

experience in facilitating through the private sector, and sometimes 

using the public sector, as well, the preservation and conservation 

of lands, I want you to address the fact that you cannot make people sell their land, you can lead a horse to water but you cannot 

make him drink. How do we then accomplish our goals without 

government telling people what they can and cannot do with their 

own land? 

Mr. MCCORMICK. That is a very good question and the Nature 

Conservancy, as you well know, does work in a very collaborative 

fashion with private landowners, and for that matter, with industry. As I suggested in my testimony, we very much believe in the 

free market system and, therefore, do not believe in any form of coercion. The Nature Conservancy does not attempt to tell landowners what they should or should not do with their property, but 

engage, as the land trust community does at large, in arms’-length 

transactions. 

A very attractive inducement for that would be for those landowners, particularly in rural communities, who have very few financial assets, an attractive inducement would be the opportunity 

to have preferential treatment for the capital gains that they derive 

on those sales, largely because, again, these are multi-generational 

landowners, for the most part, very appreciated values on those 

properties, frankly, often reflecting the development potential. So, 

there is an enormous burden on the tax and preferential treatment 

for sale for conservation purpose would be a very, very attractive 

inducement and not a coercion at all. 

Chairman MCCRERY. Thank you. Mr. Brazell, there was some, 

not confusion, I guess, but different opinions on how many 

brownfields sites might be cleaned up if we were to have Mr. 

Weller’s legislation or the Administration’s proposal enacted. Can 

you shed some light on that from the Roundtable’s perspective? 

Mr. BRAZELL. I think the figure of 400,000 brownfields was, as 

Mr. Weller said, coming from the U.S. Conference of Mayors. I am 

not able to tell you exactly how many of those are going to be 

cleaned up by continuing the legislation to allow expensing, but I 

would say more than would be cleaned up without that legislation. 

Chairman MCCRERY. Can you give us some insight on what 

that means in terms of, number one, the resulting economic growth 

in those brownfield areas, which oftentimes are distressed economically, and number two, does the fact that we would be seeing more 

development in these brownfields sites take pressure off development in the suburban areas and pressing out into the rural areas? 

Mr. BRAZELL. I would say yes to both. In the first case, when 

you redevelop an area that is fallow and unproductive, you bring 

property taxes up, you revitalize the neighborhoods, and along with 

that, you take the pressure off the greenfields because some clients 

69

that can locate into those areas do not necessarily have to locate 

outside the city center where most of the brownfields are located. 

Chairman MCCRERY. Thank you. Mr. McNulty? 

Mr. MCNULTY. Thank you, Mr. Chairman, and I want to thank 

all of the panelists for their testimony. I just have one question I 

want to pursue. 

My friend, Johnny Isakson, who is still here, suggested that I 

pursue further with Mr. Sawyer this question about the State cap, 

and I just wanted to clarify in my own mind how that is determined, but more importantly, how it would be administered. In 

other words, once you determine what the State cap is, for example, if within that particular State the cap was $50 million in benefit and there were legitimate applications for $100 million, how is 

it determined who gets the benefit? Do you say to 50 percent of the 

people, you get the benefit, and the other 50 percent, you say, 

sorry, Charlie? Who determines that? How does that work? 

Mr. SAWYER. Thank you for asking that question. On the cap, 

or the allocation, really, the way that is determined is that we look 

at the total amount of land in farms and woodlands in each State, 

pursuant to the Department of Agriculture census, and the denominator of that number for the whole country—the total acreage for 

the whole country is the denominator and the numerator is the 

State’s total acreage of those figures. Then we apply a 4-percent 

cap, which basically allows it to level out and compress just a little 

bit. I think Texas gets a disproportionate amount if you do not 

have a 4-percent cap. So, that is how your fraction of the $4 billion 

a year is determined, is through that process. 

The second part is it is really administratively quite efficient, because, basically, what we have done with this bill is we have taken 

two very accepted tax concepts, well proven tax concepts—one is 

the conservation easement structure—and have not changed that. 

So, that is going to limit any capital spent under this to accomplishing conservation goals because that is how the money has to 

be spent. It cannot be spent for any other purpose. 

On the other side, in terms of the administration of it, each State 

will have a clearinghouse, just like we use with the low-income tax 

credit system, so that the State will be told. For instance, Georgia, 

I believe, has $60 million a year under this program. So, the State 

will be told, you have $60 million in credits. You now have to assign the administration of that credit pool to one of your agencies 

or one of your branches of government, and it is then up to that 

branch to help manage this process within the State. Now, obviously, that also allows the State to help determine the priorities in 

terms of whether you make this investment or that investment. 

One other footnote is, of course, with the conservation easement, 

as Mr. McCormick pointed out, these are all voluntarily negotiated 

arrangements with private property owners, and so nobody is telling anybody they have got to conserve this or not. It is just that 

is what you work out. 

Now, we do think by having a pool of dollars under this system, 

what is going to happen is that you will have strategic conservation, which is to say that the States, the Federal Government, the 

local governments, the land trust, and the business community will 

sit down and say, gee, we have got enough money now to really do 

70

something about this problem, and so they will go out and strategically try to acquire land that actually complements the development needs of the community as well as protects the natural infrastructure of that community. 

Mr. MCNULTY. Thank you very much. Mr. Brazell, while your 

testimony focuses mostly on the brownfields legislation, what are 

your views on additional tax incentives for conservation land sales? 

Mr. BRAZELL. Well, it is not an area that I am familiar with, 

but I would say if it is in your interest to conserve open spaces and 

you want to use the tax incentive to do it, it sounds like a pretty 

good one to use. 

Mr. MCNULTY. I thank all of the panelists. That is all I have, 

Mr. Chairman. 

Chairman MCCRERY. Thank you. Mr. Weller? 

Mr. WELLER. Thank you, Mr. Chairman. I appreciate the opportunity to question our witnesses here. Before I direct my questions 

to Mr. Brazell on the brownfields legislation, Mr. Sawyer, I just 

want to commend you on your proposal and also salute your champion here in the House, Johnny Isakson. He is a very articulate, 

hard working spokesman for your cause. We have talked about 

your legislation many times, and just to let you know, he is working very hard for you on your proposal. 

Mr. SAWYER. Thank you, and I agree. 

Mr. WELLER. Mr. Brazell, on the issue of the brownfields legislation, of course, I have worked with you and with your organization in finding ways to attract private investment and environmental cleanup of old industrial sites for the purpose of revitalizing 

blighted communities. Whether it is rural or suburban or middle 

class or low income areas or even urban areas, we have our share 

of these so-called brownfields, 2,000 in the Chicago region and the 

two largest are in the district that I represent. 

The Administration, when they, of course, endorse the proposal 

to make permanent the existing provision, which expires in a little 

over a year, they point out that permanency would generate about 

$2 billion in additional investment as well as cleanup of an additional 4,000 brownfields a year, which it will take a while to get 

up to the 400,000 that are totally across this country, but it will 

make a tremendous amount of progress. 

I was wondering, from your perspective, you work with business 

decision makers every day in your business. You talk with them, 

and one thing I think we have all learned is that the tax code influences business decision making. Now, there are consequences to 

the tax code. There are incentives to the tax code. 

From the standpoint of a business decision maker who is trying 

to decide where to invest their dollars, whether or not to purchase 

an old industrial site, a brownfield, clean it up, or go to the edge 

of town and buy a cornfield or a soybean field outside the suburban 

area that I represent in Chicago, how do they factor in this expensing provision? How would a business decisionmaker use this to 

make their decision and decide it is in their advantage to purchase 

that old industrial site and clean it up and revitalize it? 

Mr. BRAZELL. Mr. Weller, it is very difficult to compare parcels 

of land, different parcels of land. If you can imagine you had two 

sites, one of which was a brownfield and one of which was not a 

71

brownfield, and the selling price of the non-brownfield site was 

$100 and you knew you had $20 of remediation costs, the other site 

is going to sell for $80. So, the fact that you are going to buy the 

other site for $80, you are going to spend $20 to clean it up, but 

then you are going to be able to expense that, your investment is 

$80 after-tax, so right away, you have got a jump on the other site, 

if there are suitable sites. 

Obviously, development has to have a plan. It has to be viably 

functional, apart from the tax effects, and it probably is not going 

to drive every transaction. It may be the fulcrum that turns a 

transaction to be being done in favor of cleaning up the 

brownfields. 

Mr. WELLER. One of the comments that I have received from 

economic development experts in the South Side of Chicago and the 

South suburbs that I represent, as they are attempting to recruit 

and lure private investors to invest in these sites, of course, is in 

the liability, the financial cost of the environmental cleanup. Of 

course, our hope is that this is working, and I see it working in the 

district that I am in, where private investors are now taking advantage of the ability to expense, to fully deduct in the year they 

incur the cost of environmental cleanup, to deduct that cost as a 

way of recovering it, so I appreciate that. 

Let me ask another question here. As one of my colleagues mentioned, also, in the legislation, in H.R. 2264, we proposed broadening the type of environmental cleanup that would be covered and 

would be able to utilize the expensing provision that is in the 

brownfields incentive. We have learned over the last several years 

in working this legislation that there are other types of cleanup besides existing law that private investors run into. It was noted currently they would, of course, have to capitalize those costs over, 

what, 40 years, and that is the cleanup of petroleum and pesticides, paint, asbestos as part of that. 

Can you explain the merits of broadening this tax provision, how 

that would be an incentive to attract investors who have to look at 

an old building that they may have to deal with on that old industrial site called a brownfield? 

Mr. BRAZELL. Right. Just in the same way that the legislation 

benefits someone that is going to purchase a piece of land and expense the remediation cost. Often on those types of sites, those 

older sites, those infill sites, you are going to find buildings that 

probably have contamination like asbestos, and as our perceptions 

about asbestos have changed, we have had many more regulations 

that require us to clean them up. 

So, being able to expense that cleanup cost in the year of acquisition or in the years in which you incur the expense, the present 

value of that is much, much higher than trying to recover that cost 

over a 40-year period. 

Mr. WELLER. Thank you, Mr. Chairman. I see my time has expired. Again, thank you for conducting this hearing on a very, very 

important issue for all of us. 

Chairman MCCRERY. Thank you, Mr. Weller. Mr. Hayworth? 

Mr. HAYWORTH. Thank you, Mr. Chairman, and my apologies 

both to the Subcommittee and the witnesses. Flight schedules kept 

me away from hearing the testimony in its entirety, but I am no 

72

stranger to the challenges we confront, especially in the Western 

States. I just must say, Mr. Chairman, how gratified I am that it 

looks like now we have reached a point where instead of drawing 

caricatures of each other and trying to shout past each other, it 

seems that now, based on the testimony I have heard today, people 

are actually talking to each other and working to solve problems. 

To the extent that the tax code and this Committee, being the 

first Arizonan in history to serve on the Committee on Ways and 

Means and one of innumerable Arizonans to serve on the Committee on Resources, I appreciate the opportunity to champion legislation like the bills discussed today and I welcome in a broader 

context the fact that, at long last, we are agreeing to disagree in 

some areas, but working in an important way to produce results 

that can help all Americans and especially those who live in States 

like Arizona So, with that, I thank you and yield back my time. 

Chairman MCCRERY. Thank you, Mr. Hayworth, and I could 

not agree with you more. I stated earlier that it is nice to have corporate America and some of the environmental community communicating and working together for bills that we all believe are laudable, so I concur with your remarks. Mr. Blumenauer? 

Mr. BLUMENAUER. Mr. Chairman, I just want to express my 

appreciation for your courtesy in allowing me to participate and to 

listen to the testimony here today. I commend the Subcommittee. 

The record that is being developed is a very powerful one in terms 

of approaching this issue, and I think we have outlined here a 

range of choices. 

I do hope that there is a way to consolidate some of these together for a bigger package. I just returned from Detroit a few 

hours ago, spending a couple of days talking to people, many of 

whom would buy into this, and I know that there is an interesting 

range of opinion and support for the work that the Subcommittee 

is doing. 

I would just note, though, the comment from the gentleman a 

moment ago that he was almost from Atlanta, and as I think about 

what is happening with metropolitan Atlanta, if we do not get the 

legislation, Mr. Chairman, that you are talking about, we all might 

almost be from Atlanta. 

[Laughter.] 

Chairman MCCRERY. That is right. 

Mr. BLUMENAUER. I appreciate your efforts. 

Chairman MCCRERY. Yes, sir. Thank you, Mr. Blumenauer, for 

participating in today’s hearing. Once again, I want to thank all of 

the witnesses for your excellent testimony and your responses to 

our questions and your patience in staying with us most of the 

afternoon. Thank you, and we look forward to working with you as 

we work together to solve the problem of encroaching urbanization 

across America, so thanks. Before adjourning, I would like to insert 

into the record a statement from Congressman Amo Houghton. 

[The statement of Mr. Houghton follows:]

Statement of the Hon. Amo Houghton, a Representative in Congress from 

the State of New York 

I appreciate the opportunity to comment on the efforts of many in Congress and 

others to continue to expand the tax incentives available to individuals and groups 

to preserve open space and promote conservation. I certainly have a strong interest 

73

in protecting the environment and preserving the natural resources of our country 

for current and future generations. Also, I have a particular interest in tax provisions that exclude the value of land subject to conservation easements from the estate tax. I commend the Chairman for holding this hearing. 

I was especially gratified that Congress enacted the basic provisions of the American Farm Protection Act (a bill I introduced), as part of the 1997 Taxpayer Relief 

Act. The bill added an exclusion from estate taxes for gifts of conservation easements. The relief is targeted. Because the measure was enacted in a time of budget 

deficits, some thought the limitations were too restrictive. In 1999, the Oversight 

Subcommittee held a hearing on the same subject as today’s hearing. I am sure 

many of the points made in that hearing will be made today. 

Since the estate tax relief law for permanent conservation easements was enacted, 

two significant changes have been made. The first was in 1998, when a change was 

made to allow the post-mortem election and granting of the easement to be made 

by the executor and heirs after the death of the decedent. The original law required 

the easement grant to be made prior to death. This change certainly facilitates the 

granting of land easements. 

In addition, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) 

of 2001 removed the restrictive requirements as to location, i.e. within a metropolitan area determined by OMB or abutting national parks or wilderness areas, etc. 

The change allows land located in the United States or any possession to qualify, 

assuming the other requirements are met. 

These changes have all contributed to making the exclusion more available and 

beneficial to taxpayers, which can only add to the increase in the granting of these 

conservation easements. Although the provision included in EGTRRA of 2001 will 

sunset in 2010, it is likely these changes will be made permanent in some manner, 

as was done in H.R. 586, which passed the House on April 18, 2002. In any event, 

2010 is some distance away, and many will still find the tax incentive to grant a 

permanent land conservation easement to be advantageous. We should not cut back 

on the efforts to encourage such transfers. Ultimately if the estate tax is repealed, 

we will need to seriously explore other tax incentives to replace the current estate 

tax incentives, in order to preserve open space and promote conservation. 

Rep. Nancy Johnson has a bill, H.R. 1309, which I am sure will be mentioned in 

today’s hearing. The bill would further improve the tax incentives for granting permanent land conservation easements, and I support the bill. 

Although it is difficult to determine the effect of the 1997 legislation, the IRS data 

for 2000 indicates that 43 estates elected the provisions to exclude easements with 

a value of $7.6 million. The prior year showed more estates electing, although the 

value was less. Of course, the number of estates will vary from year to year, and 

it will take some time for trends to develop. The Land Trust Alliance’s data indicate 

that there has been a steady upward increase in the donated acres of conservation 

easements from the Piedmont area of Virginia from 1996 to 2001. The Piedmont Environmental Council has made a significant effort to educate landowners in their 

area of the benefits involved in donating the easements. So, I believe we are certainly on the right track. 

Gifford Pinchot, the founder of the U.S. Forest Service under President Theodore 

Roosevelt, once wrote that a nation ‘‘deprived of its liberty may win it, a divided 

nation may unite, but a nation whose natural resources are destroyed must inevitably pay the penalty of poverty, degradation, and decay.’’ As true today as a hundred years ago. Thank you.

prepared statements from the American Farm Bureau Federation 

Chairman MCCRERY. I would also like to include in the record 

f and the Montana Land Reliance. 

[The statements of the American Farm Bureau Federation, and 

the Montana Land Reliance follow:]

Statement of the American Farm Bureau Federation 

The American Farm Bureau Federation, which represents over 5.1 million member families in all 50 States and Puerto Rico, is concerned over the loss of farmland. 

One million acres are lost each year to development. Concentrated around urban/

suburban cores, farmland disappears when it is more lucrative to sell land for development than for agricultural purposes. If these losses are allowed to continue, one 

of our Nation’s most valuable resources is threatened. 

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H.R. 923—SELF-EMPLOYMENT TAXES AND CONSERVATION RESERVE 

PROGRAM 

Most farmers and ranchers are self-employed. Currently they pay a self-employment tax at the rate of 15.3 percent. Self-employment taxes apply to income from 

labor and employment and are assessed in order to collect for Social Security and 

Medicare. The self-employment tax does not ordinarily apply to income from cash 

rent because cash rental income represents the equity value of ownership in land. 

The U.S. Department of Agriculture (USDA) makes Conservation Reserve Program (CRP) payments to owners and operators of land who sign a rental agreement 

and agree to refrain from farming the enrolled property in order to conserve and 

improve the environmental resources of that land. 

In 1996, the Tax Court ruled in Wuebker vs. Commissioner, that CRP payments 

were considered rental payments and therefore would not be subject to the self-employment tax. However, in March 2000, the Sixth Circuit Court of Appeals reversed 

the Tax Court’s opinion, placing an additional tax burden of 15.3 percent on farmers 

for their CRP payments and allowing the Internal Revenue Service to retroactively 

collect these taxes from the last 4 years on farmers participating in CRP. 

It is unfair to treat active farmers and ranchers differently from other taxpayers 

when imposing self-employment taxes on rental income. Because of the Wuebker

case, the IRS now singles out farmers and ranchers as landlords liable for the selfemployment tax. For other taxpayers who receive CRP payments, and are not materially participating in a farming operation, the payments are considered to be rental 

income that is not subject to self-employment tax. 

Farmers and ranchers are in a no-win situation concerning the application of selfemployment taxes. Agriculture producers face confusion and uncertainty because it 

is not known if and when an appeal will be heard by the full Sixth Circuit Court. 

Additional confusion arises over jurisdictional matters. The original case was 

brought before the Tax Court. The Tax Court ruling, which said that self-employment taxes are not owed, has nationwide application. The appeals case was heard 

in the Sixth Circuit Court of Appeals which only has jurisdiction over Ohio, Tennessee, Michigan and Kentucky. This means that farmers in other states are not 

directly affected by the appellate court decision to require self-employment taxes on 

CRP payments. But because the IRS believes that the tax should be paid, it could 

audit farmers in other states with the intention of securing favorable court rulings 

to collect the tax. If farmers and ranchers are audited and fail to satisfy the IRS, 

they risk paying back taxes, interest, penalties and the cost of amending as many 

as 4 years’ tax returns. 

This issue not only has impact on farmers and ranchers, but also on the environment. Self-employment tax on CRP payments may discourage a farmer from future 

participation in this program. Environmentally sensitive acreage that has been 

taken out of production to protect its natural resources may be forced back into production if CRP payments are subject to self-employment taxes. 

Tax policy should not single out farmland owners to pay the self-employment tax 

on cash rental receipts. The IRS should not be able to impose new taxes on farmers 

and ranchers without congressional approval. 

Congress should pass legislation to restore equitable tax treatment for farmers 

and ranchers by making it clear that CRP payments are not subject to self-employment taxes. 

Farm Bureau supports H.R. 923 introduced by Reps. Moran (R–KS) and Pomeroy 

(D–ND) to clarify that CRP payments are not subject to self-employment taxes. 

H.R. 2290—THE CONSERVATION TAX INCENTIVES ACT OF 2001

One farmland preservation tool embraced by some state and local governments 

and a growing number of private conservation groups are voluntary conservation 

easements. These programs compensate farmers and ranchers who are willing to 

give up the right to develop or to sell their property for development. 

The value of a conservation easement is typically the difference between the development and agricultural value of a piece of property. Because farmers and ranchers tend to reinvest their earnings in their businesses, they consider their land to 

be their retirement savings. Few are willing to give up the right to develop, and 

thereby lessen the value of their land, without compensation. 

Programs that purchase conservation easements from farmers overcome this issue 

and successfully protect farmland from development. But because income from the 

sale of conservation easements triggers capital gains taxes, farmland preservation 

programs are not as successful as they could be. 

Efforts have been made to exclude 50 percent of the gain on sales of land or easements made for conservation purposes from taxation. This tax code change will encourage more landowners to designate land for conservation purposes because capVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00078 Fmt 6633 Sfmt 6621 E:\HR\OC\85675A.XXX 85675A
75

ital gains taxes will be lower than if the property were sold for development. The 

change will also encourage and assist farmers and ranchers who wish to voluntarily 

preserve land as habitat for endangered or threatened plants and animals. Rewarding landowners who choose to protect habitat is a much better approach than mandatory programs that restrict the use of land without compensating land owners. 

Farm Bureau supports H.R. 2290 introduced by Reps. Portman (R–OH) and Matsui (D–CA) to exclude 50 percent of gain from the sale of land from gross income 

to an entity intending to put the land in a conservation use. 

Statement of the Montana Land Reliance, Helena, Montana 

Mr. Chairman: 

The Montana Land Reliance commends you for calling this hearing to examine 

Federal tax policy governing land conservation and preservation. The Montana Land 

Reliance was founded in l978 as a private, non profit land trust that utilizes conservation easements to protect Montana’s private lands from unbridled development. The Reliance has protected over 466,000 acres of land in Montana including 

850 miles of stream and river frontage. 

The primary focus of the Montana Land Reliance is the voluntary, private donation of conservation easements on sensitive agriculture and ranchland. Private land 

conservation is less expensive than public land conservation in that it involves the 

donation of an interest in property rather than the purchase of the property or its 

development rights. In some situations involving land with unusual beauty or fragility, land purchases by government or private conservation organizations can be 

more appropriate. All of these methods have their place and contribute to the overall goals of preserving unique lands. However, our comments today relate to some 

needed revisions to Internal Revenue Code sec. 170(h) to remove severe restraints 

on the ability of farming and ranching families with modest levels of income to donate the development rights on their land. 

Rural communities across the United States are experiencing an accelerating demise of open space. This problem is visually apparent to anyone who remembers the 

open spaces of the American landscape of only a few years ago and is now confronted with views of tract housing and new construction on what were formerly 

working ranches and farms. This disappearing open space is occurring not only in 

the perimeters of our major metropolitan cities and suburbs, but also in the more 

sparsely populated areas of the intermountain west. 

Changes in land use patterns have always occurred in America—they will continue—and they do not necessarily need to be feared or blindly prevented. What the 

Montana Land Reliance is increasingly concerned about is lack of balance in the incentives that we have at the Federal level in our tax policies that govern private 

and public land conservation efforts. This imbalance is encouraging the development 

of ranches and farms at an accelerating rate. 

Many private landowners wish to keep their farms and ranches in their traditional uses. Development is not their preference. However, if the property is scenic 

or sensitive, the owners will come under intense financial pressures to sell for development. For these working landowners and their families, we must make certain 

that the available incentives that are provided for private land conservation treat 

their situation equitably. 

We currently have a deduction in the Federal Tax Code (sec. 170(b)) that is designed to encourage the donation of conservation easements on sensitive lands and 

open spaces. These incentives tend to work well for individuals with high levels of 

adjusted gross income because the value of the donated easement is typically large 

and can be used to offset ordinary income from sources unrelated to the land itself. 

These provisions are responsible for a large portion of the private land conservation 

that has occurred in America today. The provisions work well as far as they currently go, but they do not adequately address the situation faced by a working farm 

or ranching family with a more modest level of income. For these landowners—who 

are often struggling to make a living on a ranch or tract of land that has enormous 

value for alternative uses—the restrictions on the availability of the deductions for 

conservation easements offer little practical economic incentive to counter the offers 

received from a developer. A landowner in this financial posture who places an easement on his or her ranch or farm will be left with little current tax relief and an 

immense unusable tax deduction. The solution to this dilemma (absent an outright 

subdivision and sale for development), is a sale of the family property to a high net 

worth individual who can use the deduction and the possible leaseback of ones’ 

former property for ongoing farming or ranching purposes. 

76

The Montana Land Reliance deals with these real life situations every day. Often, 

the only solution we have to recommend is the paring of a ranch family with a high 

net worth individual, the ‘‘so called’’ conservation minded buyer. The situation of the 

conservation minded, working ranch family of modest means has led us to recommend changes in our tax laws that would give these landowners a more liberalized tax deduction so that they, like their wealthier counterparts, have an equivalent economic incentive to undertake private land conservation, if they are so inclined. 

In the the last session of Congress, Congressman Hefley introduced H.R. 2279, 

The Rural Heritage Conservation Act, a measure designed to rebalance the tax code 

so that everyone with sensitive land who is conservation minded has a like incentive. The Senate counterpart to H.R. 2279 is S. 701, introduced by Senator Baucus 

of Montana, Chairman of the Finance Committee. 

The operative change in the tax code made by both bills would allow a working 

farmer or rancher, defined as someone who derives over 50 percent of their income 

from farming and ranching, to deduct the value of a donated easement against 100 

percent of their taxable income. This liberalized deduction is targeted to the category of individuals that are land rich and cash poor, and is designed in such a way 

as to avoid abuse. The fact that the average income of a farming family in the 

United States is just over $32,000 means that any revenue loss associated with this 

expanded deduction is likely to be very modest. 

The Montana Land Reliance appreciates the opportunity to present our views before the Committee today, and hopes that the Subcommittee will recommend the approval of the substance of H.R. 2279 in any markup that may be undertaken by the 

Ways and Means Committee on this subject. We do not have the luxury of postponing action at a time when the remaining open spaces in America are being developed at an alarming rate. Private land trusts respect the property rights of property 

owners to choose whether to preserve traditional uses or develop property for new 

uses. We are only asking that the network of existing tax incentives be reexamined 

so that they work better for all those taxpayers who wish to preserve their property. 

Attached is a list of land trusts in the United States who support this goal.

Chairman MCCRERY. The hearing is adjourned. 

[Whereupon, at 4:06 p.m., the hearing was adjourned.] 

f [Submissions for the record follow:]

Statement of Ralph Grossi, President, American Farmland Trust 

Mr. Chairman, Mr. McNulty, and Members of the Subcommittee: 

American Farmland Trust (AFT) appreciates this opportunity to provide your 

Subcommittee with its views on how to develop new tax incentives to encourage the 

conservation of open space and farmland. I am the President of AFT, and also a 

third-generation cattle rancher and grain producer in California. 

American Farmland Trust is a national, nonprofit organization with 50,000 members working to stop the loss of productive farmland and to promote farming practices that lead to a healthy environment. I make this statement on behalf of AFT’s 

members and the vast majority of farmers who care deeply about resource stewardship. 

For the past century land conservation in our country has largely focused on the 

acquisition of land for parks, wildlife refuges, forests and recreation areas. These 

efforts have protected over 89 million acres of parks, 80 million acres in national 

wildlife refuges and over 190 million acres in national forests. Although this is a 

tremendous accomplishment, our country is not addressing what many believe to be 

the conservation challenge of the 21st century—ensuring that the natural, economic, 

and aesthetic resources provided by private lands are not consumed by the ongoing 

rush of development. 

The traditional approach to preserving our private working landscapes has been 

to regulate their use without providing compensation to the property owner. AFT 

believes that regulation alone is not the answer. To encourage responsible private 

land stewardship, we need to expand funding for the acquisition of voluntary conservation easements, reduce tax disincentives discouraging the sale of conservation 

easements, and expand tax incentives for the donation of conservation easements. 

On the funding side, Congress has recently taken dramatic action to increase resources for the acquisition of voluntary conservation easements by including a significant increase in the funding for the Federal Farmland Protection Program in the 

farm bill. Nearly $1 billion will be made available to match funding provided by 

state and local governments for the acquisition of agricultural conservation easeVerDate Dec 13 2002 06:37 Mar 28, 2003 Jkt 085675 PO 00000 Frm 00080 Fmt 6633 Sfmt 6621 E:\HR\OC\85675A.XXX 85675A
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ments. Perversely, however, a significant disincentive to the very conservation sales 

that this bill seeks to encourage will remain in place in the Federal Tax Code. Many 

of those sales will trigger significant capital gains tax liability for landowners with 

appreciated real estate.

H.R. 2290, sponsored by Rep. Portman, would help address this problem. It would 

exclude 50 percent of the gain realized from sales of land or interests in land to 

qualified conservation entities for conservation purposes, including the protection of 

open space for agriculture. AFT supports this bill. It will further leverage state and 

local funding for the protection of productive private agricultural land. 

The existing tax incentives that encourage private land conservation through donated conservation easements include the deduction for qualified conservation contributions under IRC § 170(h) and the partial exclusion from estate tax for land protected by a conservation easement under IRC § 2031(c). While these incentives have 

been instrumental in promoting private land conservation, many farmers and ranchers do not have the income to take full advantage of them. The income tax deduction 

available for an individual donating land or a conservation easement is limited to 

30 percent of adjusted gross income (AGI), and unused amounts can be carried over 

for up to five years after the date of the donation.

H.R. 1309, introduced by Rep. Johnson, would address this problem. It would 

raise the percentage limit for conservation gifts to 50 percent of AGI and eliminate 

the carryover limitation. It will make it possible for many more ‘‘land rich, cash 

poor’’ farmers and ranchers to take advantage of the tax benefits available for conservation easement donations. Indeed, H.R. 2279, introduced by Rep. Hefley, would 

go even further and raise the percentage limit to 100 percent of AGI for 15 years 

for taxpayers whose income is derived primarily from farming and ranching. AFT 

supports both these bills. 

AFT also supports the following pending tax bills:

• H.R. 882, introduced by Rep. Isakson, which would provide $4 billion annually in tax credits to donors to nonprofit conservation organizations. This is 

the boldest conservation proposal that has come before Congress since the 

creation of the Land and Water Conservation Fund a generation ago. • H.R. 1711, introduced by Rep. Dunn, which would give tax-exempt status to 

bonds issued to acquire renewable resources on lands subject to conservation 

easements. While we expect tax-exempt bond financing to be most useful in 

the preservation of forest properties, it has the potential to be used for the 

preservation of agricultural lands as well.

Over a million acres of privately owned farmland are lost to development each 

year. However much it may trouble them, this is a result of economic forces beyond 

the control of most ordinary Americans. But unlike most Americans, as Members 

of this Subcommittee you have it within your power to actually do something to 

stem this tide of farmland loss. And not only do you have that power, you also have 

a number of thoughtful pieces of legislation before you suggesting effective ways to 

use that power. So we urge you to act now to create additional tax incentives for 

the protection of farm and ranch land. Your children will thank you for it. 

Thank you for the opportunity to submit this statement.

Statement of Lee R. Epstein, Director, Lands Program, Chesapeake Bay 

Foundation, Inc., Annapolis, Maryland 

f Thank you for the opportunity to provide our views on this important matter. The 

Chesapeake Bay Foundation (CBF) is the largest non-profit conservation organization dedicated to the restoration of the Chesapeake Bay. With 100,000 members in 

virtually all the states of the Union, and programs in environmental education, environmental protection, and restoration, CBF is vitally interested in promoting land 

conservation throughout our 64,000 square mile watershed. 

We wholeheartedly agree with Chairman McCrery that sprawling urbanization, 

outpacing mere population growth in some places and occurring even with population decline in others, is threatening to overcome the nation’s best resource lands. 

In our six-state watershed, the environmental impacts of uncontrolled growth 

threaten to overcome many of the gains that have been made cleaning up other 

sources of pollution. Communities and individuals do face great challenges in protecting and preserving their invaluable open spaces, and the Federal Government 

does have a role to play in helping communities realize such important objectives. 

It seems only fitting, given the role that the Federal Tax Code plays in actually 

creating some incentives for urban sprawl—from accelerated depreciation, to fiveyear amortization, to the deductibility of ‘‘passive’’ real estate losses—for that same 

78

code to better encourage and promote active land conservation. There are already 

some land conservation incentives embedded in the Code. Land conservation receives some favorable treatment, for example, with respect to the deductibility of 

conservation easement and fee donations. 

We would propose that other approaches or extensions of these ideas be explored. 

Enhancing the tax deductibility of a conservation easement, up to a significant percentage of adjusted gross income, and allowing a carryover into (unlimited) future 

years, is one idea with merit. For farmers, an even higher amount of deductibility 

might be appropriate. 

Another idea would be to reduce the capital gains on sales of land or easements 

to conservation entities. A third idea worthy of some examination might be to create 

a tax credit or partial tax credit, similar to that utilized for rehabilitating qualifying 

historic properties, for example, that would apply toward conservation transactions. 

Tax credits have the advantage of being able to be bundled together and sold to investors, so that REIT-like syndicates or other partnerships could actually be formed 

around solid land conservation objectives. A Federal tax credit could be matched 

with State tax credit programs to generate an even larger conservation impact. 

In any case, we commend to you these various ideas for further study and exploration, and pledge our assistance should the Subcommittee deem that of some value. 

Thank you for the opportunity to provide our views.

Statement of Alan Front, Senior Vice President, Federal Affairs, Trust for 

Public Land, San Francisco, California 

f The Trust for Public Land (TPL) is a national nonprofit land conservation organization founded to protect land for public enjoyment. TPL helps citizens and government agencies identify and conserve lands in need of protection. We support H.R. 

2290, H.R. 1309, and H.R. 1711 as measures that provide market-based incentives 

for land conservation, thus meeting the needs of landowners as well as the public 

good. TPL often works with landowners who feel pressured to sell their land for development, but who would nonetheless like to see the land preserved in its natural 

state or as a working farm or ranch. These landowners are frequently ‘‘land rich 

but cash poor,’’ and the land conservation tax incentives legislation being considered 

by the Subcommittee on Select Revenue Measures will better enable them to make 

the choice to conserve land. 

H.R. 2290, introduced by Congressman Rob Portman, would exclude from gross 

income 50% of the gain on sales of land or interests in land or water when sold for 

conservation purposes. This legislation is especially important for landowners of 

modest means, who need to sell rather than donate the land. In TPL’s experience, 

there have been cases where significant parcels of land have been lost to development because of the obstacle posed by the tax burden faced by the landowner. 

In one such case a few years ago, the Oconee National Forest was very interested 

in acquiring a tract along the Ocmulgee River in Georgia. The property was an 800-

acre forest with river frontage. There were numerous ownership interests due to the 

land being passed down to heirs after death. All but one interest agreed to sell. The 

owner of that interest was an 80-year-old uncle, who would have been a willing seller but for capital gains tax considerations. While the entire family wanted to arrange a conservation transaction for their property, the uncle and TPL ultimately 

recognized that there was no way, given capital gains consequences, to structure a 

sales to meet his needs. A 50% reduction in the capital gains tax might have been 

enough to encourage the uncle to sell to protect the land, but when he died two 

years later, development pressures were such that The Trust for Public Land could 

not compete with developers for the property. The Oconee National Forest was unable to acquire this high-priority land, which will now be developed. 

Ever-increasing amounts of land are consumed by the sprawl emanating from 

metropolitan areas. We believe that land conservation is a public value that should 

be promoted through tax policy as well as direct public expenditures. H.R. 2290 

would permit government agencies and nonprofit land conservation organizations to 

compete for land threatened by sprawl development. State programs like Florida 

Forever and Great Outdoors Colorado would find their limited dollars going even 

farther in purchasing land for open space. 

For those landowners who are able to donate land or an easement for conservation purposes, there is an income-based inequity in the tax benefits received for such 

a donation. H.R. 1309, introduced by Congresswoman Nancy Johnson, addresses 

this problem. Under current law, a taxpayer with a $300,000 adjusted gross income 

(AGI) could deduct over six years the entire value of a donated $500,000 conservation easement. A taxpayer with an AGI of $50,000 would only be able to deduct 

79

$90,000 over six years for donating a $500,000 easement. Enactment of H.R. 1309 

would mean that these two taxpayers with disparate incomes would both be able 

to deduct the full value of the easement. H.R. 1309 would permit the deduction of 

up to 50% of the taxpayers AGI with unlimited carryover. This legislation will provide the necessary incentive and reward for the generous donation of easements by 

taxpayers of all income levels. 

The Trust for Public Land is also on record supporting H.R. 1711, introduced by 

Congresswoman Jennifer Dunn, which would enable communities to issue tax-exempt revenue bonds on behalf of private nonprofit organizations to purchase, or 

lease long-term, land for conservation purposes. The revenue to service these bonds 

would be provided by permitting the harvesting of resources, such as timber, crops, 

and water rights. This legislation provides an additional tool for conservation of 

working landscapes. TPL has worked with timber companies throughout the country 

to preserve lands from development when the companies need to divest some of 

their acreage for economic reasons. H.R. 1711 will further the goal of cooperating 

with industry to promote the preservation of open space. 

As Congress considers further changes to the tax code in the coming weeks and 

months, I urge the passage of tax incentives for land conservation. Enactment of the 

provisions included in H.R. 2290, H.R. 1309, and H.R. 1711 will encourage land 

preservation at a time when there is widespread agreement on the necessity of protecting open space and natural resources against the encroachment of urban sprawl. 

I commend the Subcommittee on Select Revenue Measures for holding this important hearing, and The Trust for Public Land will be happy to work with you as you 

consider these proposals.

Æ