What is a Conservation Easement?
A conservation easement is a restrictive covenant that is a voluntary agreement that allows a landowner to limit the type or amount of development or conserve and protect natural resources on their property while retaining private ownership of the land. The conservation easement is signed by the landowner, who is the easement donor, and the Land Trust or Conservancy, is the party receiving the easement. The Land Trust or Conservancy, is the party receiving the easement. The Land Trust or Conservancy accepts the easement with the understanding that it must enforce the terms of the easement in perpetuity. After the easement is signed, it is recorded with the County in the record room and runs with the land and binds all future owners of the land.
Why Do People Grant Conservation Easements?
People grant conservation easements because they want to protect their property from unwanted development or they wish to conserve or protect natural resources; while also retaining ownership of their land. By granting a conservation easement, a landowner can assure that the property will be protected forever, regardless of who owns the land in the future. Another primary benefit of granting a conservation easement is that the donation of a conservation easement may provide significant financial advantages and tax incentives to the donors or landowners.
What Type of Land Qualifies for a Conservation Easement?
In general, most any land that has a higher value other than what it is presently being used for qualifies. This would include: land that is currently vacant and could be developed, a farm, timber land, wetlands, scenic areas, historic areas, wild and scenic rivers, undisturbed natural areas, residential subdivision land, or commercial land zoned for a less intense use. In order for land to be qualified for the placement of an easement, it must have value as a conservation resource. In order to be able to place an easement on a piece of property the development potential must meet certain requirements. First and foremost, it must be feasible to develop the land to the projected use. The land must be owned fee simple by the owner wishing to place the easement for a period of at least one year prior to the placement of the easement.
What are the Income Tax Benefits of Granting a Conservation Easement?
Under Federal Tax Law for 2011, the amount of the deduction that can be used the same year the easement is recorded, is limited to 50% of a taxpayer’s adjusted gross income in the year the easement is recorded and the balance could be carried forward up to fifteen years until it is used or lost. In prior years, and starting in 2012 unless Congress extends the current rules, the deduction of up to 30% of a taxpayer’s adjusted gross income can be taken the year the easement is recorded and carried forward up to five years.
Other financial benefits include lowering the tax basis for estate tax purposes when the land is passed by will once the current landowner dies, as well as lowers the property or ad valorem taxes on the land.
Certain states also have additional tax credits for conservation easements subject to certain requirements imposed by the state: this is addition to already receiving the same tax deduction from the state as received from the Federal Government for the granting of the conservation easement.
How Long Does an Easement Last?
To be eligible for a federal income tax deduction, the conservation easement must be “perpetual”, that is, it must last forever. The Conservancy or Land Trust monitors the property, generally once a year, to assure that the easement is not being violated. If the easement has been violated, the Conservancy or Land Trust will take whatever steps are necessary to uphold the terms of the conservation easement, including taking legal action. Because of this obligation, the Conservancy or Land Trust asks all conservation easement donors to make a financial endowment to the Conservancy’s or Land Trust’s Fund. This fund ensures long-term monitoring and enforcement of every easement the Conservancy or Land Trust receives.