Leanne Goebel, firstname.lastname@example.org | Posted 1/14/05
Preserving open space, wildlife habitats, and the family ranching way of life without putting the land in the hands of a government agency — this is one appeal for creating a conservation easement with a non-profit land trust such as the Southwest Land Alliance (SLA)
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 the landowner to continue to own and use the land and to sell it or pass it on to heirs.
There are numerous land trusts and agencies available to help a landowner create a conservation easement. Some of the more well known are The Nature Conservancy and The Conservation Fund. But while these large, nationally known organizations are focused on targeted purchasing of critical property, such as the I-25 corridor between Denver and Colorado Springs, our local land alliance is not actively pursuing property for purchase, at this time. The more than 12,000 acres on 33 easements held by the SLA have all been donated to the alliance.
“We’re not here to help development occur and we’re not here to stop it, we’re here to protect land that has conservation value,” said Linda Newberry, executive director of SLA. “We have to be really careful what easements we are willing to accept. We’re not willing to accept anything that walks in the door. The land has to meet certain requirements,” Newberry continued.
According the conservation purpose test described in 1980 in Section 170(h) of the Internal Revenue Code, in order to qualify for tax benefits for donating a conservation easement, the easement must be created for one of the following reasons: 1) To provide for the scenic enjoyment of the general public, or be part of clearly defined government conservation policy and yield significant public benefit; 2) To protect the relatively natural habitat for fish, wildlife, and plants; 3) To preserve an historically important land area or a certified historic structure; or 4) To preserve the land for outdoor recreation.
The benefit to the landowner is that the land they love and value is protected in perpetuity from future development, a benefit that some land rights and property rights advocates criticize. They believe that heirs and future owners should have a right to decide how to use the land. Some landowners may fear what their heirs or a future owner will do to the land and a conservation easement is a way to protect the land from future development.
Other benefits include tax breaks. The assessed value of land in conservation easement is much lower than development value. The reduced value can then be taken as a charitable deduction on taxes. Colorado has a special tax credit exchange program available. This program is very helpful for land wealthy, cash poor ranching families. Say for example that the land a rancher decides to put into a conservation easement is valued at $500,000. The rancher would get a $260,000 tax credit that they can spread over twenty years, taking $13,000 a year. But what if they don’t make enough money to benefit from that $13,000 tax credit? Colorado allows special tax credit brokers to sell that tax credit for up to 85% of its value. The rancher can sell his credit for approximately $220,000.
The most important benefit of having a conservation easement seems to involve estate taxes. Federal estate taxes can be as high as 50% of the fair market value of the land. Because an easement lowers the appraised value of the land, the estate taxes are lower.
“Some estate taxes are as much as forty percent lower because of the reduced value of the land,” Newberry said.