Conservation Easement Essentials
Preserving The Splendor of a Natural Environment
- A conservation easement is a land preservation agreement between a landowner and a qualified land protection organization which is recorded at the courthouse and legally enforceable.
- It is private action taken on private land—no governmental approvals are required.
- Conservation easements provide for the permanent preservation of the land by restricting development, commercial and other activities on the portion of the property that is preserved.
- They are considered by the IRS under §170(h) to be a charitable donation.
- The owner of the land retains ownership and the property can be bought and sold.
- The easement must satisfy two or more of the IRS’s criteria for Conservation Purpose to qualify. Preservation of existing natural environments, views and agricultural uses are the most prevalent objectives.
- After execution and recording of the easement, use of the property is restricted by the terms of the easement agreement. These terms can include the reservation of certain rights of use which do not impair the Conservation Purposes.
How is the Easement Valued?
Landowners who donate a “qualifying” conservation easement (one which satisfies the regulations set forth in §170(h) of the Internal Revenue Code) may be eligible for a federal income tax deduction equal to the value of their donation, as determined by a qualified appraiser. This typically equals the difference between the fair market value of the property before and after the easement takes effect. Under Treasury Regulations, the appraiser must consider the highest and best use of the property under the “before and after” method. The use of supportable and proven valuation methodologies, parameters and assumptions plays a key role in safely maximizing the appraised value.