The State of Connecticut has set a goal of preserving 21% of the State as open space. If the State is to meet its goal, rural towns will have to preserve much more of their land to compensate for heavily developed towns, which have little or no open space left to preserve. Approximately 22% of Washington is now permanently protected open space. Of that, approximately 18% is owned by the Steep Rock Association.
How land trusts like Steep Rock preserve land
Until fairly recently, land trusts usually acquired land by outright donations in fee. Ownership was conferred to the land trust and the donor could claim the gift on his tax return as a charitable contribution. In the early 1980s conservation easements became a popular way of protecting land, and easements remain popular today.
What is a Conservation Easement?
A conservation easement (or conservation restriction) is a legal agreement between a landowner and a land trust (like the Steep Rock Association) or government agency that permanently limits uses of the land in order to protect it conservation values. It allows you to continue to own and use your land, and to sell it or pass it on to heirs.
When you donate a conservation easement to a land trust, you give up some of the rights associated with the land. For example, you might give up the right to build additional structures, while retaining the right to grow crops. Future owners also will be bound by the easement’s terms. The land trust is responsible for making sure the easement’s terms are followed.
Conservation easements offer great flexibility
An easement on property containing rare wildlife habitat might prohibit any development, for example, while one on agricultural land might allow farming to continue. An easement may apply to just a portion of the property, and need not require public access.
Usually easements are donated to a local land trust (like Steep Rock)
If the donation benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements it can qualify as a tax-deductible charitable donation. The amount of the donation is the difference between the land’s value with the easement and its value without the easement. Placing an easement on your property may or may not result in property tax savings.
A conservation easement can be essential for passing land on to the next generation
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 in your heirs’ ability to keep the land intact.
Conservation Easement Tax Incentive
Like other non-cash contributions to charitable organizations, the deduction for a gift of a conservation easement is limited to 30% of the donor’s adjusted gross income. If the donor cannot deduct the full value of the property in the year of the gift, the balance of the donated value can be carried forward for up to five years, with the deduction limited to 30% of adjusted gross income in each of those succeeding years.
Since 2006, an enhanced income tax deduction has helped accelerate the pace of land conservation. Unfortunately, this temporary Enhanced Easement Incentive expired at the end of 2013. However, a bill is currently before Congress to make this incentive permanent. If reauthorized, the Enhanced Easement Incentive will:
- Raise the deduction a donor can claim for donating a conservation easement from 30% of their adjusted gross income in any year to 50%;
- Allow qualifying farmers and ranchers to deduct up to 100% of their adjusted gross income;
- Extend the carry forward period from 5 to 15 years.
Please consult with an attorney or CPA concerning current tax laws and the status of this proposed legislation.