Farm and Forest Land
Preservation with
Conservation
Easements
Topics to be Covered
What is a conservation easement?
What is a land trust and how do they relate
to conservation easements?
What sorts of restrictions do conservation
easements place on landowners?
How can conservation easements benefit
landowners?
What is involved in creating a conservation
easement?
Fine Print
This presentation provides basic
information on conservation easements.
Anyone involved in granting a
conservation easement should contact
qualified professionals for legal and
financial planning assistance.
Property Ownership
Property ownership is a collection of
individual rights
This collection of rights is often compared to
a “bundle of sticks” because individual
rights can be removed from the collection
just as a stick can be removed from the
bundle
Examples of Property Rights
Transfers
Lease – right to exclusive possession
Easement – right to use
Zoning
Deed with restrictions - retention of rights
Conservation easement
What is a conservation easement?
Legal, voluntary agreement between a
landowner and a land trust or government
agency that restricts the development or
use of property
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In effect, conservation easements remove the
right to develop the property from the
landowner’s “bundle of sticks”
Conservation easements “run with the land” they bind both current and future landowners
Conservation Easements
Land trusts and government agencies can
leverage resources by only acquiring the
rights relevant to their goals.
Landowners retain all other rights.
What is a land trust?
A non-profit organization that holds land
and/or the rights to enforce the provisions
of conservation easements “in trust” for
the public good
How can conservation
easements benefit landowners?
Preserve desired land uses into the future
Allow continued use of the land
Potential source of income
Possible tax benefits
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Property Taxes
Income Taxes
Estate Taxes
Conservation Easements
as a Possible Source of Income
Some land trusts and government
agencies can pay full value for the rights
extinguished in a conservation easement
More often, they are only able to acquire
these rights through either a “bargain sale”
(below fair market value) or a donation
Property Tax Benefits
Conservation easements often decrease
the value of property because they
foreclose the possibility of future
development
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Difference can be dramatic
Potential savings are often reduced if the land
is already being assessed for its current use
and not fair market value
Income Tax Benefits
Donation or bargain sale may qualify as a
charitable donation for federal and state
income taxes
To qualify for federal income tax benefits,
a conservation easement must meet
certain requirements specified in Section
170 of the Internal Revenue Code

http://www.irs.gov/taxpros/article/0,,id=98137,00.html
Estate Tax Benefits
Conservation easements reduce value of
an estate just as they reduce the value of
the property for property tax purposes
If the easement reduces the value of the
property by at least 30% it may also
qualify for additional estate tax benefits
under Section 1031 of the Internal
Revenue Code
Steps Involved in Granting a
Conservation Easement
Locate a receiving entity
Compile a baseline inventory
Negotiate and draft the terms of the
conservation easement
Execute and record the documents
Get the property appraised
Steps Involved in Granting a
Conservation Easement
Locate a receiving entity
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Must be a “qualified organization” for income
and estate tax purposes
Compatible and stable partner
Must be willing to purchase or accept a
donation of the conservation easement
Typical factors considered include current use,
size and location of the property and costs of
acquiring, monitoring and enforcing the
conservation easement
Steps Involved in Granting a
Conservation Easement
Compile a baseline inventory
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Establishes a reference point for
determining compliance with the terms
of the conservation easement
Includes
Title search
Survey of the property (may not be needed)
Description of current uses of the property
Description of resources that the easement is
designed to protect
Steps Involved in Granting a
Conservation Easement
Negotiate terms
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For working lands, landowner should seek not only
to retain rights for current uses, but also the
flexibility to allow future changes in operations
Receiving entity will seek meaningful and
enforceable restrictions relevant to its mission
Other Landowner Considerations
Future borrowing power
Impacts of increasing property values
Conditions under which the terms of
the conservation easement can be
modified or invalidated
Steps Involved in Granting a
Conservation Easement
Execute and record the documents
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Conservation easements must be executed
by all current owners of the property
The holders of any mortgage or deed of trust
must consent in writing to the easement and
the consent must also be recorded
Its also prudent to inform others with
interests in the property
Conservation easements are publicly
recorded with other land records
Steps Involved in Granting a
Conservation Easement
Obtain an appraisal of the property
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Needed to qualify for certain tax benefits
Conclusion
Conservation easements are an attractive
way to preserve current land uses
Conservation easements may have other
significant benefits for landowners
Conservation easements are legally
binding agreements that should not be
entered into without great care and
thought
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Especially true for working lands
Comments or
Questions?
For additional information see Farm and
Forest Land Preservation with Conservation
Easements available online at
http://srwqis.tamu.edu/programruralurbaninterface.aspx
This presentation is produced by the Southern Regional Water Program with support
by the Cooperative State Research, Education, and Extension Service, U.S.
Department of Agriculture, National Water Program, under Agreement No. 200451130-03114. Any opinions, findings, conclusions, or recommendations expressed in
this presentation are those of the author(s) and do not necessarily reflect the view of
the U.S. Department of Agriculture.
Federal Income Tax
Sale For Less Than Fair Market
Value of the Easement to a
‘Qualified Organization’ is
Deductible
Deduction = Fair Market Value
Minus Sales Price.
Deduction Limited to 30% of
Person’s Adjusted Gross
Income (10% For
Corporations).
Any Excess Can Be Used For
Up To Five More Years.
FEDERAL INCOME TAX
DEDUCTION INCREASED FOR
EASEMENTS MADE FROM
1/1/06 THRU 12/31/07
FEDERAL INCOME TAX
DEDUCTION LIMIT RAISED FROM 30%
TO 50% ADJUSTED GROSS INCOME
LIMIT RAISED TO 100% AGI FOR
“QUALIFIED” LANDOWNERS
CARRY-FORWARD PERIOD
EXTENDED FROM 5 TO 15 YEARS
“QUALIFIED”
MORE THAN 50% GROSS INCOME
FROM FARMING.
‘AGRICULTURAL’ LAND
REMAINS AVAILABLE FOR AG
USE UNDER THE EASEMENT
CAN BE AN INDIVIDUAL OR
CORPORATION
For More Information
IRS Website
http://www.irs.gov/publications/index.html
This presentation is produced by the Southern Regional Water Program with support by
the Cooperative State Research, Education, and Extension Service, U.S. Department of
Agriculture, National Water Program, under Agreement No. 2004-51130-03114. Any
opinions, findings, conclusions, or recommendations expressed in this presentation are
those of the author(s) and do not necessarily reflect the view of the U.S. Department of
Agriculture.