A conservation easement is a legal
agreement between a landowner and
a land trust or government agency
that permanently limits uses of the
land in order to protect its conservation
values. It allows landowners to continue
to own and use the land and to sell
it or pass it on to their heirs.
When landowners donate a conservation
easement to a land trust, they give
up some of the rights associated with
the land. For example, the landowner
might give up the right to build additional
structures, while retaining the right
to grow crops. Future landowners will
also be bound by the easement's terms.
When a land trust accepts the donation
of an easement, they become responsible
for making sure that the easement's
terms are followed in perpetuity.
Each conservation easement normally
contains a list of allowed and restricted
uses. This helps protect the conservation
values of the property - not only
now, but in the future.
Why would
I need a Conservation Easement Advocate?
Conservation easements are complex
legal documents that affect a landowner's
property now and in the future. They
should not be entered into lightly.
Most landowners find that the donation
of a conservation easement takes more
time and effort to complete than they
first expected. They also find that
they need financial and legal expertise
to protect their interests and carefully
consider their options. An experienced
conservation easement advocate, like
Conservation Assistance, can help
landowners navigate through the process,
avoid pitfalls, explore different
options and work with other easement
consultants. Typically, an experienced
conservation easement advisor can
help landowners spend less money on
their project and prevent some headaches.
What are the
Tax Benefits of a Conservation Easement?
There are federal, state and estate
tax benefits associated with the donation
of a "qualified" conservation
easement. The tax benefits are a great
incentive for donating a conservation
easement, but according to the IRS,
the primary purpose of a conservation
easement must be to protect the conservation
values of the property, not to maximize
the tax benefits.
The following information concerning
tax benefits should not be considered
as tax or legal advice:
In August 2006, the federal government
significantly expanded the tax incentives
for qualified conservation easements.
For those conservation easements,
landowners can deduct 50 percent of
their adjusted gross income (versus
the previous 30 percent) and qualifying
farmers and ranchers (who receive
more than 50 percent of their income
from "the trade or business of
farming") can deduct up to 100
percent of their adjusted gross income.
The 2006 law also extended the period
of time a landowner can carry forward
tax deductions from 5 to 15 years.
These tax incentives are scheduled
to be in place through 2009.
In Colorado, we have a generous tax
incentive for the donation of conservation
easements within the state. Colorado
tax credits are calculated at 50%
of the value of the easement up to
a maximum of $375,000. Since the tax
credits are transferrable, landowners
can either use them against their
personal state income tax liability,
in which case they can be carried
forward for up to 20 years or they
can be sold to other Colorado taxpayers
at a discount. If the landowner chooses
to sell these credits, there are several
tax credit brokers around the state
who specialize is matching conservation
easement donors and tax credit buyers
together.
Estate taxes can also be affected
by conservation easements. The placement
of a conservation easement typically
reduces the fair market value of the
property and brings it into the estate
at a lower value. There is also a
conservation easement exclusion for
estate taxe purposes where a certain
dollar amount of the value of the
easement is not inculded in estate
calculations. This dollar amount varies
from year to year.
For more information on conservation
easements, tax benefits and land trusts
in your area, please contact the Land
Trust Alliance.
For more information about Colorado
land trusts, please contact the Colorado
Coalition of Land Trusts.