Preserving the Land
Wouldn’t it be nice if you could forever protect the land you love from inappropriate development, leaving it intact as a lasting legacy that would benefit nature, your community and your family? With a conservation easement, you may be able to do just that.
John Bianco and Jane Rohman own 160 acres in the Berkshire Hills of western Massachusetts that have remained relatively undeveloped for the past century. And they’re determined to keep it that way for years to come.
“We see all sorts of wildlife — bears, moose, turkey, coyote, mountain lions, fox, owls, eagles, etc.,” says Rohman. “Whether our son ends up staying here or not when he becomes an adult, we know that he will return someday — hopefully with his own children — to visit his parent’s park, nature conservatory or walking trails.”
The couple first considered the idea of using a conservation easement to protect their land after reading a book on the topic and speaking with the author, Elizabeth Arnold, about their plans. “She really helped open our eyes up to the possibilities and the importance of leaving a legacy beyond anything we had even considered,” says Rohman. “She drew us out in her questioning and made us realize that indeed our land and love of it most embodied our values and it was the best vehicle for leaving a living legacy.”
A Growing Trend
Bianco and Rohman are part of a growing number of private citizens hoping to preserve the character of their land and their communities by using conservation easements or by working with or establishing land trusts. According to the Land Trust Alliance’s 2003 National Land Trust Census, between 1998 and 2003 the acreage covered by private conservation easements increased by 266%. And the acreage protected by local or regional land trusts doubled during the same period.
The explosion in conservation easement use has been fueled in part by the introduction in 2000 of tax credits for land protected by conservation easements, but also by a growing awareness of the role undeveloped land plays in a community’s character.
Easements Offer Protection, Control
“People usually want to preserve the conservation integrity of the land over time because of its personal significance to them,” says Bruce Boyd, executive director of The Nature Conservancy in Illinois. You can protect your land by selling or donating it to one of the nation’s 1,500-plus land trust organizations, such as The Nature Conservancy, but this means you are also giving up control of the property.
For landowners who want to retain control of their property while also protecting it, a conservation easement provides a solution. A conservation easement is a legal agreement between a landowner and a land trust or government agency that permanently limits uses of the land to protect its conservation values. An easement allows you to continue to own and use the land, and to sell it or pass it on to your heirs. Any future owners are bound by the easement’s terms, and the land trust or government agency is responsible for making sure future owners follow those terms.
Conservation easements can allow preservation of wildlife habitat by barring any development of the property whatsoever, or allow the construction of park facilities on a historical site. Some states also have programs that make it possible to sell conservation easements to government entities if you intend to keep the property as a working farm, need the cashflow generated by the sale of the easement, and want to ensure it stays as farmland in the future.
Be aware, however, if you choose to sell your easement to the government that the long-term conservation of the land may not be guaranteed, says Bill Bullitt, a partner with the private client group of Drinker Biddle & Reath, a Philadelphia, Pa.-based law firm with experience in writing easements. “Future political pressure may encourage the entity to sell the easement and development rights, and the landowner or her descendants may have no control over that decision.”
Find a Suitable Partner
It is important to remember that while well-prepared easements can provide flexibility, they also restrict your actions. Even if you are careful in preparing the documents, you may find yourself unable to use the land in the way you would want. “If [using an easement] is a fit,” Boyd says, “embrace the creativity and flexibility allowed when generating the document rather than just approaching this in a cookie cutter manner.” Working with an attorney who is experienced with writing easements can help ensure you meet your goals.
Choosing the right organization to receive the easement is also important. “You need to have a level of comfort that the group has the wherewithal, interest and ability to take care of the land,” Boyd says. You should also seriously consider a group’s viability, or your wishes may not be carried out. For example, if an organization fails to enforce the terms of an easement, it could face litigation or other consequences. The government, unless restricted by law, has the ability to condemn land whether or not an easement has been placed on it.
Benefits Beyond the Legacy
While your primary motivation for creating this type of legacy is likely your love of the land or your community, doing so also carries tax benefits. The tax rules governing the contribution of conservation easements are more complex than those for straight donations.
With a conservation easement, the value of the donation is equal to the fair market value of the land before the easement, minus the fair market value once the land is encumbered. “This difference is the amount of the gift, and it can still be significant,” says Boyd. Land subject to a conservation easement also qualifies for a $500,000 federal estate tax exclusion.
However, due to abuses of the conservation easement charitable contribution provision, the IRS is very stringent in its requirements. For this reason it is important to work with your estate planning attorney, a land trust organization and your tax advisor when creating the easement and valuing the property for tax purposes.
Some states also provide sizeable tax credits for qualified donations. In California, for example, offerings to state and local governments, or government-approved conservation groups, qualify for income tax credits on 55% of the property’s fair market value, in addition to any federal credits.
Fulfilling a Quest
Once you have determined your intent for the land in question, you can begin to iron out specifics — as Bianco and Rohman are — by now exploring conservancy relationships, easement options, and other tax and legal ramifications.
“So far we have just clarified our thinking,” Rohman says. “The initial draw was to develop some kind of meaningful legacy, now it is time to get down to the details.”
The Hollins family has been committed to Florida’s Citrus County, located on the Gulf of Mexico coastline just north of Homosassa Springs, since 1942, when they bought an 18,000-acre property now known as the Hollinswood Ranch. Since then, the family has sold parcels of the land and has run the family’s ranching, timber and mining businesses from the vast acreage — providing jobs for both family members and area residents. Now the family has decided it is time to put a plan in place that will help preserve land for the community to enjoy.
With the family’s leased mining operations scheduled to cease within the next 30 years, current family patriarch Dixie Hollins has been working diligently to develop a plan for the land that will carry out the family’s legacy. “We cannot do this piecemeal — we have to see a big plan,” he says. “For me, that plan has to ensure that the property adds value to the region and supports economic development.”
As a result, Hollins is putting a plan in action that will continue mining, and support a port center, a waterfront commercial/retail area and eventually homes. The first part will center on building a public marina close to the Barge Canal with direct Gulf of Mexico access for recreation and commercial fishing. While the family sees this as potentially being a thriving tourist area, Hollins also proposes to build this port as a Clean Marina, which — through the assistance of the Florida Department of Environmental Protection — maximizes the benefits of accessing the water while protecting the environment.
The industrial area will be along the well-traveled coastline roadway U.S. Hwy 19, and the residential area will provide a unique opportunity to appreciate wildlife, water and more. “In just the last couple of years, growth in Citrus County has changed the pace of our lives and, some say, the quality,” says Hollins. “Because of the growth, we have more pressure on our natural resources and less access to the water — something that brought many people here in the first place. We must make sure that our quality of life is protected while still embracing sensible economic development. Fortunately we have the opportunity to choose a future that gives us the best of both worlds.”
Part of what makes the Hollinswood project unique is that its different components require organizers to hold public hearings to gain public support as well as governmental approvals. “This is really a process by which we are establishing our own long-term land use plan, much like any community would establish,” Hollins says. “While this adds a level of complexity that may not exist in simple land conservation efforts, it gives us a unique opportunity to work closely with our neighbors, county and city officials to create something that our family and community can be proud of for many years to come.”
On August 3, 2006, Congress approved an expansion of the federal conservation tax incentive for conservation easement donations, which President Bush signed into law on August 17. The new law only applies to easements donated in 2006 and 2007, but it:
||Raises the deduction landowners can take for donating a conservation easement from 30% of their income in any year to 50%;
||Allows qualifying farmers and ranchers to deduct up to 100% of their income; and
||Extends the carry-forward period for a donor to take tax deductions for a voluntary conservation agreement from 5 to 15 years.
The bill also includes reforms affecting the appraisal process for all donated property and tightens the rules for easements on historic buildings. As a result, it is important to work closely with your advisors and your appraisers to ensure you are in compliance with the new rules.