Preserving Land through a Conservation Easement
A conservation easement is a permanent donation of a legal right in real estate by the property owner to a qualified non-profit organization such as a land trust. While the owner retains title to the land, the donated easement gives the land trust the exclusive right to manage the land for the conservation purpose. The donation of the easement can entitle the landowner to a charitable tax deduction for federal income tax purposes and a reduction in real estate taxes.
To set up the donation properly so that it achieves the conservation goals and qualifies for tax benefits, a legal document must be prepared reflecting the grant of the easement and the terms and conditions associated with it. The landowner must record the easement with the register of deeds. In addition, the landowner must obtain an independent appraisal of the value of the donation for determining the amount of the tax deduction.
To qualify for tax benefits, the IRS requires that the easement be for one or more of the following purposes:
- The protection of natural habitats for fish, wildlife or plants.
- The preservation of land for public recreational or educational use.
- The preservation of “open space,” or undeveloped land.
- The preservation of land or certified historic structures.
The land trust or other organization receiving the donation of the easement must establish it has the resources to manage the land and enforce the restrictions on use contained within the easement agreement. Typically, the landowner and the land trust will work together to establish and document the ideal terms and restrictions for the donated easement and its stated purpose. While the land will remain titled in the name of the donor, it is important to recognize that the landowner permanently forfeits all rights to use the land in a manner other than allowed in the easement agreement. Further, the easement agreement gives the land trust the right to enforce the easement against anyone who uses the property inconsistent with the terms of the easement, including against the landowner, if necessary.
The easement runs with the land, meaning that in the future, the owner can only convey or gift the title to the property subject to the easement. It is a permanent grant, so once recorded, the easement governs the land regardless of who purchases or inherits the land in the future.
Often, a land trust, as part of its conservation objectives, will seek to open a donated parcel to public use that is not detrimental to the conservation purpose. Some examples include hiking and cross-country ski trails. However, the IRS does not require public access to qualify for a tax deduction. For example, the management plan for a sensitive habitat or a wildlife refuge might purposefully exclude public access.
If you own property you would like to see preserved for conservation, a conservation easement may be a viable means for achieving that goal, while also providing a tax benefit.