What is a Conservation Easement?
A conservation easement is a tool used by landowners to preserve natural and open space values of their land. It is a voluntary agreement between a landowner and an eligible organization, such as Northern Prairies, that spells out which land-use practices are consistent with the landowner’s wishes.
How is a Conservation Easement set up?
A legal document which transfers certain land use rights to a land trust or similar organization is known as a “Conservation Easement” or a “Deed of Conservation Easement”. Even though there are common elements to every easement, such as those precluding subdivision, commercial development and other activities detrimental to soil, water or wildlife habitat, each easement is tailored to the unique character of the land and the conservation goals of its owners.
What Type of Uses Are Allowed?
The following are general examples of the types of uses that can be allowed by a conservation easement:
- Continued agricultural and forestry use
- Limited construction of buildings, fences, water improvements, etc., as specifically stated in the easement, and which are compatible with conservation objectives
- Sale, or other methods of transferring parcels, subject to terms of the easement
- Landowner control of access
- Additional residences compatible with conservation objectives
- Wildlife and fisheries protection, restoration and enhancement projects
- Any and all uses not specifically prohibited
Do I Have To Allow Public Access on My Land?
No. Landowners still control access to their property, and Northern Prairies does not require public access.
How Long Does a Conservation Easement Last?
Conservation easements which seek to take advantage of favorable income tax treatment (see below) must be granted in perpetuity. This also gives the donor the comfort of knowing the property will remain as they describe in the conservation easement.
How Long Does It Take to Put a Conservation Easement on My Property?
It typically takes from three to nine months to complete the paperwork necessary for a conservation easement.
What Happens after the Easement is in Place?
Once a conservation easement is signed, Northern Prairies and the landowner begin a working relationship to assure that the conservation easement is maintained. Northern Prairies is not in the day-to-day land management business. Landowners continue to make all of their property management decisions while the easement sets out the allowable uses of the property.
How Often Do You Monitor Conservation Easement?
Annual monitoring visits are conducted by Northern Prairies. These visits are set up by appointment with the landowner for a mutually agreed-upon time.
Can I Sell My Property If I Put a Conservation Easement on It?
Yes. The landowners retain full ownership of the property and can transfer it as they wish. The conservation easement remains attached to property with the same conditions as placed on it by the landowner who initiated the easement.
Qualifying for a Tax Deduction:
To qualify for a tax deduction, your conservation easement donation must be considered a charitable gift by the Internal Revenue Service. A qualified charitable contribution can be made only to an IRS-qualified, tax-exempt organization (such as Northern Prairies).
The value of the conservation easement is determined by a qualified appraisal. For example, if the appraisal determines that the land without restrictions has a fair market value of $2 million, and that the fair market value of the land with restrictions is $1,300,000, then the value of the conservation easement is $700,000. This is also the value of the potential tax deduction.
Reminder: Each landowner’s situation is unique and the availability and extent to which the tax deduction may be utilized needs to be determined individually by the landowner and their financial and/or legal adviser.
Individual landowner/taxpayer: May claim up to 50% of adjusted gross income (AGI) per year as a qualified charitable contribution income tax deduction and may carry forward any remaining value of the qualified charitable contribution for up to 15 years.
Qualified farmers or ranchers: May deduct the value up to 100% of their AGI, with the same 15 year carryforward period, for donations of conservation easements that satisfy the following requirements:
A “qualified farmer or rancher” is a taxpayer who earns more the 50% of his or her income from the business of farming (as set forth in the IRS Code) in the taxable year in which the conservation contribution is made. The conservation easement must cover property that is used, or is available for use, for agricultural or livestock production.
The conservation easement must contain a restriction that the property will remain available for agricultural or livestock production.
Income Tax Deductions for Farming and Ranching Corporations:
Qualified farming or ranching corporations which earn over 50% of their income from farming or ranching operations, may also deduct up to 100% of taxable income with a 15 year carryforward period for a qualified agricultural conservation easement. Other specific IRS provisions may also apply.
Since each situation is unique, landowners need to obtain legal and financial advice from their own advisors. Northern Prairies is willing to provide basic information and guidance, but we cannot provide legal or financial advice.
Previous Tax Provisions: In the event the enhanced incentives are not extended, here are the previous tax provisions which the law would most likely revert back to:
All individual landowner/taxpayer: May claim up to 30% of adjusted gross income (AGI) per year as a qualified charitable contribution income tax deduction and may carry forward the remaining value of the qualified charitable contribution for up to 5 years