Transcript Perpetual Conservation Easements

Agricultural Conservation
Easements
John Bonham
Carolina Mountain Land Conservancy
Definition
A written agreement between a landowner and a qualified
conservation organization or public agency under which:

the landowner agrees to keep the land available for
agriculture and restrict subdivision and non-farm
development and other uses that are incompatible with
commercial agriculture; and

the conservation organization or public agency is
responsible for monitoring the easement to ensure the
terms of the easement are met.
Key Point
A conservation easement is permanent. The
agreement is recorded on the county’s
land records and runs with the title. All
future landowners must comply with the
terms and conditions of the agreement.
Role of the Easement Holder

Works with the landowner to develop the
conservation agreement.

Assists the landowner in facilitating the
transaction.

Works with the landowner to achieve the stated
goals of the agreement.

Monitors the property annually to ensure that
the conditions of the agreement are being
upheld.
Development of the Agreement

Identify the conservation values of the
property.

Identify the area of the property to be
conserved.

Define the reserved rights.

Write the conservation agreement.
Conservation Values

Values defined by the IRS
– Follows a clearly delineated public policy
– Open space for the scenic enjoyment of the general public
– Protection of a relatively natural habitat or ecosystem

Other values
– Prime farmland soils
– Rural heritage
– Protection of water quality
– Proximity to conserved land
Identifying the Conservation Area

Not all of the landowner’s holdings must
go under the easement.

Conserve as much of the land containing
the conservation values as possible.

Consider potential future needs that will
be incompatible with the agreement.

Consider the challenges to monitoring
when delineating the conservation area.
Reserved Rights

Must be compatible with the stated conservation
values and purposes of the agreement.

Examples:
– Commercial agriculture and forestry
– Construction of agricultural buildings
– Draw water from streams & ponds for irrigation
– Small-scale non-agricultural activities
More on Rights

Rights of use are conditioned upon the
conservation values and purposes.

The agreement will expressly reserve, prohibit,
and restrict certain activities.
– Example: agricultural activities must be conducted in
accordance with a conservation plan prepared by
NRCS or SWCD.
– May or may not restrict activities near streams and
other water bodies.
Completing the Transaction

Required documents:
– Current survey of the conservation area
– Title report
– Appraisal if seeking grant funding and/or tax benefits
– Baseline inventory of the condition and resources of
the property
– Mortgage subordination agreement
After Completing the Easement

Landowners:
– retain ownership of the land
– remain eligible for the Present Use Value tax program
– can farm, hunt and restrict public access
– may use the land as collateral for a loan
– lease or sell the property
– remain eligible for federal and state farm programs
Easement Value

Determined by a licensed appraiser

Easement Value =
Fair Market Value – Restricted Value

The appraiser must consider any increase in
value to portions of the property outside the
conservation area.
Federal Tax Benefits

The portion of the easement value for which the
landowner is not directly compensated is
considered a charitable donation.

The landowner can deduct up to 30% of
adjusted gross income annually.

Has the year of the donation plus 5 years to use
the deduction.

May increase to 50% or 100% and 16 years.
North Carolina Tax Benefit

An income tax credit equal to 25% of the
donated value of the easement.

Available for the year of the donation and
5 years following.
Stewardship

Being a conservation partner with a landowner and
monitoring the property annually requires human and
financial resources.

If a land trust is to be the conservation partner they will
likely require a contribution to their stewardship
endowment before they can accept the easement.

Some grant programs will provide funds for stewardship
in addition to transaction costs.

Contributions made by the landowner are tax deductible.
Why Conserve With An Easement?

Protect the land from subdivision and
development, thereby preserving its
condition for future generations.

Ensure that the land will always be
available for farming and/or forestry.

Extract equity from the land through direct
compensation and/or tax benefits.

Tax benefits for estate planning.
Final Thoughts

The land will retain marketable value.

That value will increase over time along
with other property in the area.

Use a qualified appraiser.

Start planning early.

Consult a tax expert.
Your Land
Your Farm
Your Legacy
John Bonham
Carolina Mountain Land Conservancy
828-697-5777
[email protected]