CONSERVATION AGREEMENTS
A conservation easement is a legal agreement between a landowner and a land trust that permanently limits uses of the land in order to protect its conservation values. It allows continued ownership and use by the owner and conveyance to heirs. Donating an easement may provide estate and income tax benefits.
When you donate a conservation easement to a land trust you give up some of the rights associated with the land. For example, you may give up the right to build additional structures while retaining the right to continue agricultural operations. The Trust is responsible for enforcement of the terms of the agreement in perpetuity.
Though conservation agreements may restrict some uses, many offer great flexibility. For instance, an agreement on a ranching property containing rare wildlife habitat may limit development yet still allow the building of additional agricultural structures. Furthermore, the agreement may apply only to a certain portion of property and need not require public access.
DONATION OF LAND RIGHTS PERTAINING TO DEVELOPMENT AND SUBDIVISION
If the donation benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements, it may qualify as a tax-deductible charitable donation. The amount of the donation is calculated by determining the land’s value before the conservation agreement is made and then with the restrictions imposed by the agreement. An independent, certified appraiser needs to conduct this valuation and must have experience performing appraisals specifically for conservation agreements. Once the value is determined (conservation value), the tax benefits can be calculated. Following is an example using current federal tax incentives approved under the 2008 Farm Bill (the Farm Bill renews a powerful conservation tax incentive for voluntary conservation agreements that had expired January 1st, 2008).
The incentive:
• Raises the deduction a donor can take for donating a voluntary conservation agreement from 30% of income in any year to 50%.
• Allows farmers and ranchers to deduct up to 100% of their income; and
• Increases the number of years over which a donor can take deductions from 6 years to 16 years.
• Landowner donations to conservation organizations such as land trusts have resulted in
millions of acres of farmland, forest and rangeland being conserved for the future.
• The Land Trust Alliance led a broad coalition of local and national organizations representing conservationists, sportsmen, farmers and ranchers to renew this important conservation tool. This coalition and a bipartisan list of more than 200 supporters in Congress will work to make this incentive permanent over the next two years.
• The renewed incentive is retroactive to the beginning of the year and will last through 2009.
When you donate a conservation easement to a land trust you give up some of the rights associated with the land. For example, you may give up the right to build additional structures while retaining the right to continue agricultural operations. The Trust is responsible for enforcement of the terms of the agreement in perpetuity.
Though conservation agreements may restrict some uses, many offer great flexibility. For instance, an agreement on a ranching property containing rare wildlife habitat may limit development yet still allow the building of additional agricultural structures. Furthermore, the agreement may apply only to a certain portion of property and need not require public access.
DONATION OF LAND RIGHTS PERTAINING TO DEVELOPMENT AND SUBDIVISION
If the donation benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements, it may qualify as a tax-deductible charitable donation. The amount of the donation is calculated by determining the land’s value before the conservation agreement is made and then with the restrictions imposed by the agreement. An independent, certified appraiser needs to conduct this valuation and must have experience performing appraisals specifically for conservation agreements. Once the value is determined (conservation value), the tax benefits can be calculated. Following is an example using current federal tax incentives approved under the 2008 Farm Bill (the Farm Bill renews a powerful conservation tax incentive for voluntary conservation agreements that had expired January 1st, 2008).
The incentive:
• Raises the deduction a donor can take for donating a voluntary conservation agreement from 30% of income in any year to 50%.
• Allows farmers and ranchers to deduct up to 100% of their income; and
• Increases the number of years over which a donor can take deductions from 6 years to 16 years.
• Landowner donations to conservation organizations such as land trusts have resulted in
millions of acres of farmland, forest and rangeland being conserved for the future.
• The Land Trust Alliance led a broad coalition of local and national organizations representing conservationists, sportsmen, farmers and ranchers to renew this important conservation tool. This coalition and a bipartisan list of more than 200 supporters in Congress will work to make this incentive permanent over the next two years.
• The renewed incentive is retroactive to the beginning of the year and will last through 2009.
CONSERVATION STRATEGIES
As our population grows and development expands, conservation and preservation of land is critical to protecting our western heritage–especially in Central Arizona, an area gifted with diverse natural beauty, storied ranching culture and history, and a unique blend of significant flora and fauna.
CALT works diligently with landowners and local governments to protect ranchlands and public open space. Do you own land that you want to remain undeveloped during your lifetime and that of future generations? Doing nothing may mean that your heirs or future owners may be compelled by ever-increasing property values–or simply by a lack of appreciation for the land–to sell it for development. CALT staff use two key programs, Family Ranchlands and Public Open Space to preserve land and take advantage of updated tax benefits.
CALT works diligently with landowners and local governments to protect ranchlands and public open space. Do you own land that you want to remain undeveloped during your lifetime and that of future generations? Doing nothing may mean that your heirs or future owners may be compelled by ever-increasing property values–or simply by a lack of appreciation for the land–to sell it for development. CALT staff use two key programs, Family Ranchlands and Public Open Space to preserve land and take advantage of updated tax benefits.
- The Family Ranchlands Program helps landowners find ways to protect their land, keep it in production, and within the family. The Ranching in the Future workshops provide expertise and information regarding the various land protection tools that private landowners can use, such as agricultural agreements, to accomplish their goals.
- The Public Open Space Program works closely with the City of Prescott Parks Trails and Open Space Division to protect the conservation values of public properties. Additionally, CALT staff work with the city to ensure that future open space parcels purchased with tax dollars are protected by conservation easements when possible.
SALE AND BARGAIN SALE OF REAL PROPERTY TO THE TRUST
If you need immediate income from selling your land yet would like the property to go to a land trust, a bargain sale might be the answer. In a bargain sale, you sell the land to a land trust for less than its fair market value. This not only makes it more affordable for the land trust, but offers several benefits to you. It provides cash payment, avoids some capital gains tax, and entitles you to a charitable income tax deduction based on the difference between the land’s fair market value and its sale price. The land trust would then apply a conservation easement to protect the land in perpetuity. Perhaps most important, a conservation easement can be essential for passing land on to your heirs. By removing the land’s development potential, the easement lowers its market value, which in turn lowers estate tax. Whether the easement is donated during life or by will, it can make a critical difference your heirs’ ability to keep the land intact.
LAND DONATION OF LAND IN FEE TO THE TRUST
Donating your land to a land trust is a wonderful way to share its beauty with future generations. The donation can be set up in a way that allows you to continue to live on the land or to receive a life income. Donating land for conservation purposes is truly one of the finest legacies landowners can leave to future generations. It may be the best conservation strategy for you if you do not wish to pass the land on to heirs, own property you no longer use, own highly appreciated property, have substantial real estate holdings and wish to reduce estate tax burdens, or would like to be relieved of the responsibility of managing and caring for the land. Donating land releases you from the responsibility of managing the land and can provide substantial income tax deductions and estate tax benefits while avoiding any capital gains taxes as a result of selling the property. Most important, if the land is donated because of its conservation value, it will be protected.
TOOLS FOR LAND PROTECTION
DONATING A REMAINDER INTEREST IN LAND
An outright donation (in fee) is not the only way to give land. You can continue to live on the land by donating a remainder interest and retaining a reserved life estate. In this arrangement, you donate the property during your lifetime, but continue to live on and use the property. When you die (or sooner if you choose), the land trust gains full title and control over the property.
By donating a remainder interest, you can continue to enjoy your land and may be eligible for an income tax deduction when the gift is made. The deduction is based on the fair market value of the donated property less the expected value of the reserved life estate
By donating a remainder interest, you can continue to enjoy your land and may be eligible for an income tax deduction when the gift is made. The deduction is based on the fair market value of the donated property less the expected value of the reserved life estate
CENTRAL ARIZONA LAND TRUST
Photo: Jeanne Trupiano 2008
Photo: Jeanne Trupiano 2008
