Conservation Easement Agreement
Conservation easement agreements are contracts that a property owner makes promising not to allow construction on her property. These agreements are meant to ensure land preservation, as the landowner gives up the benefits of selling her land to developers. The agreement is considered a donation to a government agency or an environmental organization; as with other charitable donations, it might provide tax benefits to the donor.
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IRS Warning
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The Internal Revenue Service warns property owners that the donated land must be fairly valued. Some property owners have had their land appraised at an inappropriately high value, and the donation allowed them to claim unreasonably large tax deductions. The IRS does track conservation easement agreements, and if a property owner reports a value the IRS believes is too high, the property owner may be audited by the IRS and may be fined.
The Nature Conservancy
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One of the largest environmental organizations that assists property owners with conservation easement agreements is the Nature Conservancy. The group offers several policies that will preserve land for future use. A conservation easement agreement doesn't require an immediate donation of the land. It's possible to have the land donated to the Nature Conservancy upon the death of the property owner. This form of donation, called a bequest, may provide additional tax advantages while the property owner is still alive.
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State Tax Benefits
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Conservation easement agreements may also provide state tax benefits. Any advantages from these benefits depend on the specific state's laws. Specific easements may be registered on the state government's website, such as the easement site run by the government of California. As with federal easement agreements, bequests may provide state tax benefits while the owner is alive. State and local regulations affect who can claim tax benefits. Property owners must ensure they have development rights according to local and state zoning laws before attempting to gain tax benefits from a conservation easement agreement.
Customizable Easements
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Easements don't have to be an all-or-nothing decision. A property owner holds several different types of property rights. For example, a property owner may choose to only prevent new construction on the property. Mining and extraction rights may be sold separately and may not belong to the property owner. Harvesting trees and hunting fish and wild animals are considered separate rights, so a property owner can retain these rights while receiving a tax break for preventing future development.
Future Effects
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The easement affects all future use of the property. If the property owner decides to sell the property to another person or organization, any restrictions also transfer along with the property deed. This does reduce the land's value if it is sold. The benefits of the easement transfer may also transfer to future land owners, as some states allow the tax benefits to transfer to the new property owner as well. New Mexico is a state that allows the transfer of tax benefits from conservation easement agreements.
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References
- Photo Credit forest image by Dozet from Fotolia.com
