Preserve Your Land

Window of Opportunity! A new federal tax law helps family farmers, ranchers and other moderate- income landowners get a significant tax benefit for donating a conservation easement. For more information see the Land Trust Alliance fact sheet or the NOHLC Tax Incentives article.

Land Trust Tools for Conservation

Preserves

A “preserve” is an outright gift to, or purchase of land by a conservancy (land trust), to protect the land’s conservation values. The Conservancy has responsibility for the stewardship of its conservation preserves. A baseline document and yearly inspections of the land are required. Preserves may be open to the public, closed to the public, or opened only on a limited basis. On some Preserves, wildlife is protected. Others may be open to hunting.

Easements

With a conservation easement, a property owner permanently protects his/her land from development without giving up ownership. The easement places certain restrictions on the use of the property in perpetuity. From the “bundle of rights” belonging to the property owner, only one “stick” or right, is removed; the right to develop (build on the land) or to sell the land for development purposes in the future. The owner may continue to live on the land and use it, and can sell it or pass it on to heirs.

The conservancy accepts responsibility for stewardship of properties on which it holds easements. A baseline document and yearly inspections of easements is required. Property owners or donors usually make a money donation in addition to the easement, to help offset the costs of future stewardship expenses.

Every easement is tailored to fit the unique wishes of the property owner and the conservancy. If the property is generating income for the owner, it can continue to do so. Future owners also will be bound by the easement’s terms.

The easement does not grant permission to anyone to cross or enter the land, although the Conservancy’s inspectors will need access for yearly inspections. Easements can be created to protect historical or conservation values, or both. It is the shared responsibility of the conservancy and the property owner to see that the language in the easement agreement is upheld.

Income Tax Advantages

Land donations, either as conservation easements or outright gifts, can qualify a property owner for substantial federal income tax deductions, depending on the property owner’s tax situation. For tax purposes, the value of an easement is the difference between the land’s value with the easement and its value without the easement. Generally speaking, higher tax deductions occur where an area is under intense development pressure and the property consists of open space that could have been developed.

Reduced Inheritance Taxes

Inheritance taxes often make it prohibitive for many property owners to pass their property on to their heirs. However, the new federal inheritance tax code 2031 (2001) makes it possible to pass land on to heirs with the estate taxes reduced to the point where it would cost the heirs more to develop the land or sell it to a developer, than to hold it in an easement. The tax savings to the heir(s) are greater when a donation or easement is made by will than it is by placing an easement on land that has already been passed down in an estate.

Registry Program

Some Conservancies offer a Registry Program for the property owner who may not be ready to place their land in a conservation easement. Landowners who are registered promise to notify the conservancy if they make any changes to the land, or if the land changes hands.

How Tax-base is Affected

The hidden infrastructure costs of development are more than offset when land is placed in a conservation easement or donated as a preserve. It costs local governments an average of $1.20 in tax money for the added infrastructure that is needed to support new development (schools, police and fire protection, roads, sewers) for every dollar that is lost to the tax-base when land is protected.

The additional taxes collected from developed property will not fully cover the additional costs of services that will be required. Those additional costs, therefore, must be passed on to everyone through higher taxes. Land that is not developed, such as land subject to a conservation easement, will not require those additional infrastructure service costs. In fact, since there are minimal costs needed for undeveloped land, those taxes which are collected represent additional funds available to help pay for the additional infrastructure services of developed land.

Property Values

Typically, where open space is protected, property values in the surrounding community rise, and property taxes in aggregate rise accordingly.