Do Well By Doing Good - Extra Tax Benefits for Donating a Conservation Easement!
The tax bill passed by Congress at the end of 2015 made permanent tax incentives for donating a qualifying conservation easement.
These incentives provide a powerful tool for owners of valuable conservation property to put their land into protection, maintain private property rights to the land, and potentially receive significant federal income tax benefits.
For more information on the topic, see the Land Trust Alliance Tax Incentives for Land Conservation.
What is a Conservation Easement?
A conservation easement is a legally binding agreement between a landowner and the Land Trust that permanently defines the uses allowed on the land in order to protect specific features and resources (conservation values). Each easement is tailored to reflect the unique qualities of the land and the desires of the landowner. A conservation easement may cover an entire property, or just part of the property. Conservation easements may be donated or sold to the CDLT during the landowner's lifetime or planned in a Last Will and Testament to take place after death.
Who Owns the Land?
The landowner continues to own the property, and retains the right to transfer it by sale or bequest at death. The easement grants the Land Trust the right to protect the identified conservation resources for the purposes and in the manner set forth in the easement.
What Rights Does the Owner Retain?
The owner retains all rights normally associated with ownership of land, except those that have been explicitly conveyed to the Land Trust in the easement document. The conservation easement does not restrict the owner's right to sell the property or leave it to heirs in a will or trust. However, the easement runs with the land, so future owners are also bound to the terms of the conservation easement. An easement does not grant public access to property unless specifically desired by the landowner.
What Does the Land Trust Do?
Working together with the landowner, the Land Trust identifies and documents the conservation values of the area to be protected. Those values are then specifically described and protected in the terms and conditions of the easement document. The landowner and the Land Trust prepare a baseline document that describes the features and conditions of the property at the time they enter into the easement. They also prepare a stewardship plan for the property. The Land Trust commits to monitoring the easement annually to ensure that the landowner's desires and promises contained in the easement are being respected. The Land Trust accepts a perpetual responsibility to protect the conservation values of the land, and to enforce the terms and conditions of the easement.
What Are the Tax Benefits?
In order to qualify as a tax-deductible charitable donation, a conservation easement must meet federal tax code requirements. The easement must provide public benefit by permanently protecting important conservation resources. In addition, the easement must be granted to a qualified conservation organization (i.e., a land trust).
For income tax purposes, the value of the donation is the difference between the land's value with the easement and the land's value without the easement. The value of the easement must be established by qualified appraisal. Because the appraised value of the land may be lower after the easement is in place, it can also result in reduced estate taxes if the property is passed on to heirs, reduced capital gains taxes if the property is sold, and in some jurisdictions, lower property taxes.