What is a Conservation Easement?

A conservation easement is a recorded deed restriction under which a landowners gives up some or all of the development rights associated with their property. In the early 1980s, Congress added the conservation easement provisions to the tax code to provide tax incentives for private landowners who want to protect their land from unwanted development.

The landowner still owns the property and is responsible for any legal requirements of owning it. But when the owner puts a conservation easement on their property, three possible tax benefits can follow if they meet the tax law requirements.

• They can lower the value of the property, and that can result in a lower estate tax.
• They can take an income tax deduction.
• And they may be able to lower their property tax bill.

There are specific regulations as to how much of an income tax deduction a landowner may take for donation of a conservation easement (or any other item of great value) to a tax-exempt, 501c3 non-profit organization. These regulations change frequently, so the landowner must understand the specifics at the time the easement is signed. Please call PPLT for some of the current highlights of this law. You will need to consult your own tax attorney for legal consultation on actually taking a tax deduction. However, no landowner is required to file for or get a tax deduction, if their primary reason for imposing this protective covenant on their land is they love of the land.

What are development rights?

The right to develop one's property as one sees fit is a long-standing legal underpinning of our country. A very common technique for creating wealth out of one's property is to subdivide it and sell smaller pieces at a higher rate per acre than could be expected were one to sell the whole tract at once. In some cases, a single larger entity=--usually a business corporation-may offer to buy the whole property, either for a commercial or industrial development or to subdivide themselves.

Many people with larger tracts, including some farmers and ranchers, have no interest in selling their property to an entity or person who plans to change the use of the land from agricultural or wildlife focus to commercial or high-density residential use. Some landowners in this category represent families that have owned the property for generations-"family lands". Other recognize a special natural resource worth protecting-a river, a forest, a scenic view.

The land trust listens to the landowner's rationale and desires for the future of the tract, and helps craft a legal agreement that satisfies those desires. However, the land trust also must be ready to prove that the restrictions placed on the use of the property are sufficiently unambiguous to be effective and significant enough to pass the Internal Revenue Service's "public benefit test". The intent of the conservation easement provision in the tax code was to help landowners protect their land from certain kinds of development because the public benefits from protected open space, including scenic beauty, watershed protection, wildlife value, and other reasons.

What kinds of restrictions would large landowners want to impose on their lands? As one example, the landowner may want to put in the easement, "I reserve the right to live here, come and go as I please, continue doing agricultural practices, and cut some timber. My friends can hunt and fish here as long as they don't destroy the wildlife populations. I also reserve the right to carve out two more house five acre lots and operate a bed-and-breakfast. But beyond that, there can't be any further development, any more subdivision, or any other commercial or industrial uses."

The tax code states that the landowner must "give" the conservation easement to a charitable organization (such as a land trust) or to a unit of government. But the owner doesn't really "give" the development rights to the donee-they "give" the land trust the right to enforce the recorded restriction on the use of the property-against themselves and against any future owner of the property-forever.

The document is developed by the landowner and the land trust together, usually with the assistance of an attorney for each party. While the landowner is responsible for upholding the restrictions of a conservation easement, the land trust is legally responsible for it's enforcement, and monitors each property regularly.

The gift of an easement must be accompanied by a contribution to PPLT's Stewardship Fund. This will ensure PPLT's ability to meet the obligations to the donor and therefore uphold the easement forever.