Conservation Options

Each land protection arrangement is unique - the result of conversations and negotiations between the landowner and land trust. This flowchart can help you determine which option fits well with your own land protection interests and the mission and capacity of your local land trust. This information in intended to be an introduction; it is important to talk with your legal or financial advisor before making any decisions regarding your property. These are some ideas you might want to discuss with them.

Go to the Gathering Waters Conservancy to learn more about your Conservation Options and the flow chart to the left.

How can I protect my property?

Owners can protect their property though various conservation options:

Limited Development

A limited development strategy is used when conservation of an entire property is not feasible. It allows for developing a portion of the property to finance preservation of the remainder. A site inventory and concept plan are necessary elements of this strategy to ensure that development is consistent with, and complimentary to, the land's natural and scenic features. When used with a conservation easement (see below), this technique can effectively protect natural resources.

Gifts of Land

An outright donation of land releases the landowner of the responsibility of managing and caring for the land (the Land Trust holds title). It provides substantial income tax deductions and estate tax benefits, while avoiding any capital gains taxes that would result from selling the property. Donating the land will also remove its value from your estate and can reduce future estate taxes as well as reduce property taxes. You can decide to continue to own the homestead and/or buildings.

Fair Market Sale

Land Trusts or government agencies are sometimes willing, though often not able, to buy conservation land or easements. This type of protection is also not as advantageous for the landowner as it might seem. Capital gains taxes on the property's appreciated value, along with selling costs such as the realtor's commission, can substantially reduce the profits.

Bargain Sale

A bargain sale is a transaction that is part sale and part gift. It involves a sale of an interest in property for less than the fair market value of the property. For example, say Mr. and Mrs. Jones own 40 acres of woodlands adjacent to their farm and bordering on a wetland that the Land Trust is working to preserve. Let's say further that the property is "worth" $4,000 an acre on the open market. Mr. and Mrs. Jones like the idea of preserving the woods, but need to receive some funds from the property for their retirement. On the other hand, it would be difficult for the Land Trust to raise the $4,000 per acre value of the property through private fundraising. The solution might be a bargain sale of the property, with the Land Trust buying the property for $2,000 per acre. This results in cash to Mr. and Mrs. Jones of $2,000 per acre, and also an income tax deduction equal to $2,000 per acre, reducing the capital gains tax on the sales proceeds or offsetting other income that the couple has.

For tax purposes a bargain sale is treated as two separate transactions - the sale and the contribution. The "bottom line" is that this is one of the ways the Land Trust and interested landowner can achieve their goals concerning the preservation of the land.

Conservation Easement

A conservation easement is a legal, voluntary agreement between a landowner and the Land Trust. It permanently restricts the type and amount of development and activities in order to protect a property's conservation values.

Advantages:

Retain Ownership - Landowners retain ownership/title to the land and may continue use, live on, sell it or pass it on to heirs, knowing that it will always be protected.
Flexible - Conservation easements are flexible and written to meet the particular needs of the landowner and the land.
Permanent - They are permanent and stay with the land as ownership changes.
Professional- The easement can be written, with your input, by the MALC board and their attorney, thus saving the landowner the expense.
Protect a Variety of Land - They are used to protect varied land attributes including open space, river frontage, woodland and scenic areas, grassland, forests, and wetlands.
Beneficial to the Public - They protect private lands that can improve water quality, provide wildlife habitat and protect economic sustainability.
Tax Benefits - An easement donation that meets federal tax code requirements can qualify as a tax-deductible charitable donation.
Affordable Way to Pass on Land - An easement that restricts development potentially lowers the land's market value, which in turn lowers estate taxes and makes a critical difference in the heirs' ability to keep the land intact.

Conservation Easements DO NOT:

Require public access on protected private lands.
Transfer ownership or management responsibilities to the Land Trust.
Facilitate government ownership of land.
Remove property from the tax roll.
Restrict landowner's ability to sell property.

Frequently Asked Questions about Conservation Easements

What is a conservation easement?

A conservation easement is a legal agreement a property owner makes to restrict the type and amount of development that may take place on his or her property. Each easement's restrictions are tailored to the particular property and to the interests of the individual owner.

To understand the easement concept, think of owning land as holding a bundle of rights. These may include, for example, the right to construct buildings, to subdivide the land, to restrict access, or to harvest timber. To give away certain rights while retaining others, a property owner grants an easement to a qualified charitable conservation organization such as a Land Trust or a public agency. The Land Trust or public agency is then responsible for enforcing the terms of the easement agreement.

The specific rights a property owner forgoes when granting a conservation easement are spelled out in the easement document. The owner and the prospective easement holder identify the rights and restrictions, which are necessary to protect the conservation values of the property. The Milwaukee Area Land Conservancy meets the criteria of a preservation organization under the Internal Revenue Code Section 501(c)(3).

Why should I grant a conservation easement?

People grant conservation easements to protect their land from inappropriate development while retaining private ownership. By granting an easement in perpetuity the owner may be assured that the resource values of his or her property will be protected in perpetuity, no matter who the future owners are. In this way, landowners play a vital role in preserving America's natural heritage for future generations.

If there is a conservation easement on my property, does the land trust control my property?

Organizations holding easements have a responsibility to make sure the terms of the easement are being honored, but they do not have control over or ownership of any part of the property.

Must a conservation easement allow public access?

Landowners who donate conservation easements determine whether to open their property to the public. The majority of donated easements are not opened to the public and that is decided by the current landowner. If an income tax deduction is to be claimed, however, some types of easements require public access. For example, if the easement is for recreation or educational purposes it must provide access. Access generally is not required for easements that protect wildlife or plant habitats, scenic open space or agricultural lands.

What are the tax benefits?

The motivation behind most donations of land to a land trust is a landowner's love for the land and wish to see the land preserved for future generations. However, the tax benefits of conserving land can be substantial and add value for those deciding to participate in a land protection program. Leaving a priceless legacy can benefit both the land and the landowner.

What are new tax benefits for donations of conservation easements?

Congress passed a law in August 2006 allowing landowners who donate conservation easements or other "qualifying" interests in property to a land trust or government agency to deduct the fair market value of their donation up to 50% of their adjusted gross income in the year they make the gift. Any remaining value can be carried forward as deductions for up to 15 years, applying the previously unused deduction up to 50% of one's adjusted gross income each year until the total deduction amount has been used.

What are the special benefits for farmers?

The 2006 law allows a farmer to deduct the value of a donated conservation easement up to 100% of the farmer's adjusted gross income, provided the land remains available for agriculture production. Farmers are defined as those who receive more than 50% of their income from "the trade or business of farming" in the year of donation.

This present provision of the new law also allows any deduction that cannot be used in the year of the donation to be carried forward for up to 15 years.

How will this affect my local property tax?

Property taxes may be reduced when a conservation easement reduces a property's full market value, which is typically the development value.

How might this contribution affect my estate tax?

Contribution of a conservation easement can reduce estate taxes because the conservation easement reduces the value of the property for estate tax purposes.

How can I qualify for these tax benefits?

To qualify for these new tax incentives, the donation must be completed before this qualifying law expires.

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