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Show Page 6 The Ogden Valley News Volume I, Issue IX June 1999 Land Trusts Across America, there are over eleven hundred land trusts. Land trusts are organized by local or regional groups that are endeavoring and proceeding to preserve open space through direct, voluntary action. This brief introduction of land trusts is provided to help the reader understand how land trusts work as a useful tool providing for the preservation of open lands. What is a Land Trust? Land trusts are local, regional, or statewide nonprofit organizations directly involved in protecting important land resources for the public benefit. Land trusts operate in rural, urban, and suburban areas. They protect forests, wetlands, farmlands, wildlife habitat, urban gardens, ranches, watersheds, coastlines, river corridors, ridge lines and trails– whatever kind of open land is important to the communities and regions where they operate. Although land trusts have existed for a century, over half were formed in the last decade. Across the country, an average of one new land trust is formed each week. Many are run solely by volunteers; they often work hand-in-hand with local governments and concerned citizens to help meet local objectives. All leverage scarce dollars through active community participation. Working in conjunction with private property concerns, the entrepreneurial methods used by land trusts allow them to address community concerns for open space. Land and/or development rights (conservation easements) may be voluntarily donated to a land trust, sold to a land trust at full value, or a unique combination of donation and purchase may be used, a technique called a “bargain sale.” Tax Benefits of Land and Easement Donations There are several potential tax benefits of donations to a land trust. These include income tax charitable deductions and, for land related donations, reductions in estate tax and property tax. This brief summary provides an introduction on these subjects. Specific situations should be discussed with a qualified professional. Deductions to Income Tax: Many types of donations to a qualified nonprofit land trust will create deductions for charitable contributions on a donor’s federal income tax return. These deductions reduce the federal and state income tax a donor must pay. Cash donations, such as membership donations, or donations to facilitate the acquisition or administration of land create these charitable deductions. The amount of the cash donation is the deduction. Land donations, may also create income tax deductions. Open lands which are gifted to a land trust are devoted to a public and charitable purpose. Other properties may be donated for use in exchange for open space lands or to leverage funding for land purchases or operating expenses. The amount of the deduction for the charitable donation, in most cases, is the current fair market value of the land. The fair market value of the land should be determined by an appraisal obtained by the owner at the time of the donation. Donations of conservation easements, may also create income tax deductions. Special rules govern these deductions since the owner retains the land and only grants an easement to the land trust. The easement must fit within and be appraised according to IRS guidelines. The appraisal will set the amount of the deduction. For example, if a parcel of land is worth $200,000 on the open market, a conservation easement may reduce the market value of the land to $50,000 by eliminating development potential. The value of the conservation easement (and the income tax deduction generated by the charitable donation) is $150,000. Conservation easements can play a role in reducing the tax impact when land is sold. If some land is sold for development, other land can be subjected to a conservation easement, thus helping to offset the financial gains or income from the sale of the land. Estate Tax Reductions. Donating land to a land trust removes the land from the owner’s estate. The owner may enjoy, with the general public, the benefits of the land, such as its scenic or recreational features. But the owner is relieved of the burden of carrying the land in the estate. Besides the obvious benefit of simplifying the estate, there may be a tax savings since the value of the estate is reduced. A conservation easement also reduces the value of an estate by the value of the easement. It may also remove development potential that would increase as time goes on. Granting a conservation easement may allow heirs to retain land, by saving on estate taxes, and avoid forced sales of land to pay taxes. Property Tax Reductions. Donating land obviously removes the tax burden from the owner. Granting a conservation easement may also reduce property taxes if the land is not already in greenbelt. The granting of an agricultural easement removes the development potential for the land, and removes its speculative value. Therefore, the market and assessed valuation of the land are reduced. Questions and Answers about Conservation Easements What is a conservation easement? A conservation easement is a legal agreement between a landowner and a land trust or conservation group which places permanent restrictions on the use of land. The landowner irrevocably donates some of his or her ownership rights to a qualified organization. Easements are a practical way for concerned landowners to control future use of the land while they retain ownership and receive potential tax savings. What activities might an easement prohibit? Generally, easements will either limit or prohibit the subdivision of a property or the construction of buildings. Most easements prohibit commercial and industrial activity, topsoil removal, billboards and any activities which might disturb the natural values which the easement is established to protect. However, the terms of the easement are based upon the individual landowner’s desires. What uses are permitted? Agricultural, recreational, and residential activities are often allowed on property protected by a conservation easement. Must the easement cover a person’s entire property? No. A landowner can place all or a portion of the property under easement. Does a conservation easement restrict the landowner’s ability to sell or bequeath the property in the future? Landowners can sell or bequeath property that is protected with a conservation easement. Indeed, conservation easements can significantly reduce an heir’s estate tax burden, and are thus a useful tool in estate planning. Since easements are permanent, the restrictions run with the land and bind all future owners. Public-Private Partnerships: Working with Land Trusts Land trusts can fill an essential role, particularly in areas where communities strive to guide growth in the face of rapid development. They bring flexibility, creativity and durability to land use planning, providing solutions which are otherwise unavailable to local governments and agencies. By purchasing land or by holding donated property or easements, private land trusts can protect land that governments cannot. Furthermore, it is a land trust’s fundamental responsibility to protect land in perpetuity, which increases a community’s confidence in their ability to plan for the future. NOTE: This article is being printed by permission from the Virgin River Land Preservation Association. |
