Virginia is losing many farms and open spaces to the increase in population and sprawl. Unfortunately, our rural nature and culture are disappearing fast. The Ward Burton Wildlife Foundation believes that conservation easements are the best land protection tool available to landowners to permanently protect their land while still retaining ownership. Conservation easements are not for everyone, but they generally are a win-win situation for the landowner and the community. They help the landowner leave a legacy of good stewardship to his/her family and to the community, and also landowners may realize a significant financial compensation for their easement through tax benefits, incentives, and/or credits.

A conservation easement is a protection that a landowner places on his/her property to limit future development and subdivision. Each easement is unique and reflects the good stewardship of each landowner, but all easements have in common that they protect the land you love, preserving family farms, wildlife habitat, streams, open space, woodlands and scenic views. If neighbors see the advantages of donating an easement, they may do the same hence leading to the protection of larger landscapes in your community. What a great tool to protect our land!

The below questions and answers further explain conservation easements, and these were adapted from the Conservation Partners, LLC website at www.conservationpartnersllc.com. Conservation Partners LLC is a knowledgeable resource and is one of many terrific organizations that help landowners donate conservation easements.

Why do people donate easements?

You donate an easement if you love your land and want to permanently protect the things you love about it, such as its scenic beauty, wildlife habitat, historic integrity or its ability to provide a farming or forestry livelihood. An easement donor is basically making a charitable donation in the form of certain valuable use and development restrictions. Those restrictions are perpetual and generally reduce the market value of the land being protected. Thus, in most cases, an easement donor is making a genuine and usually economic sacrifice. But, it's probably not going to feel like you're giving up much because you are giving up something that you didn't really want anyway- the right to damage what is special about your land.

Who is "the holder of the easement?"

Certain government agencies and private organizations, commonly known as "land trusts", hold conservations easements in Virginia. The holder of your easement is responsible for enforcing the restrictions set forth in the easement. As the landowner, you remain responsible for its care and management. The easement holder will inspect the land about once a year and is available for consultation to make sure the use of the land is consistent with the terms of the easement.

Why do easement holders want to acquire easements, and why do donors get tax benefits?

The whole system supporting conservation easements- from the laws authorizing their creation and enforcement, to the formation of agencies and nonprofits to hold them, to the provision of financial incentives for landowners- exists because properly-drafted easements protecting land with important conservation attributes can be extremely valuable to the general public. Much of the undeveloped, private land in this country is providing significant benefits to the public in the form of agriculture, forestry, clean water, scenic views, wildlife habitat, and so on- benefits that would be lost if the land were developed. The federal government and many state governments offer income and estate tax incentives that reward-and partially compensate-donors of qualifying conservation easements for their economic sacrifice. By offering these benefits, the government is offering to share with landowners the costs associated with permanently protecting the important conservation values of their land.

Is it a lot of trouble to donate an easement?

Granting a conservation easement is one of the most consequential things a landowner can do, and it should be taken seriously and done correctly. Doing everything right can take a while, from several months to more than a year depending upon the complexity of the easement. But it's worth it, and the process actually can be enjoyable if you work with the right people. You absolutely will need a good attorney and appraiser who are experienced with conservation easements, and of course you will want to choose your easement holder very carefully. In addition, working with an experienced consultant can help smooth the process significantly.

What tax benefits are available for easement donors?

We firmly believe that an easement donation will only work if the donor is concerned primarily with protecting his or her land from development, and he or she should look to the tax incentives as a way of partially offsetting the cost of that protection. That said, an easement donor can potentially benefit from various federal and state income and estate tax incentives. The following is a list of some of the more important tax benefits available to donors of easements that qualify under applicable law:

Federal charitable income tax deduction: The deduction, generally equal to the value of the easement, can be used to reduce the donor's "adjusted gross income" by up to 30% (or 50% in some situations) per year for six years or until it's used up. For years 2006 and 2007 only, the annual limitation is increased to 50% of adjusted gross income for all qualifying easement donations, and to 100% of AGI if the donor is a qualifying farmer. In addition, for easements donated during 2006 or 2007 only, the deduction may be taken over a sixteen year period. Prospective easement donors should obtain up-to-date information on the federal income tax deduction from an independent, qualified tax professional.

Basic estate & gift tax benefit: The donation of a qualifying conservation easement will not have gift tax consequences and will remove the value attributable to the easement from the donor's estate for estate tax purposes.

Additional estate tax exclusions: If certain requirements are satisfied, up to an additional 40% of the after-easement value of the land can be excluded from a landowner's estate for estate tax purposes. The maximum amount that may be excluded is $500,000.

Virginia land preservation income tax credit: The state tax credit can be used to offset the donor's Virginia income tax liability dollar-for-dollar, and any unused credit can be transferred by gift or sale to other Virginia taxpayers. The ability to sell the credit makes it attractive to easement donors who do not have a significant Virginia income tax liability.

How does the state tax credit benefit an easement donor?

Here is a quick example illustrating the benefit an easement donor might realize from the Virginia land preservation tax credit. Let's assume that your 200-acre farm, located in an area where suburban sprawl is starting to occur, is worth $500,000. That is the price at which you realistically could sell your farm as it is. We'll also assume your land has significant conservation value, its perpetual protection is consistent with the comprehensive plan, and the easement you're donating is reasonably restrictive, prohibiting subdivision and most commercial uses other than farming. It allows you to maintain or expand your existing house and build a guest cottage nearby-but no other houses. Your appraiser estimates that the easement donation will reduce the value of your land from $500,000 before the easement to $300,000 after the easement. Thus, the "value" of your easement is the difference, or $200,000. If the easement qualifies under applicable law, you will be entitled to a transferable land preservation tax credit equal to 40% of the value of your easement, or $80,000. After you register your credit with the Tax Department, you will own $80,000 of credit that can be used to pay Virginia income tax. You may expect to make enough money in the eleven years before the credit expires so that you can use up all $80,000 paying your own state income taxes. But if, like most easement donors, you don't have that kind of income-or if you would rather have some cash up front rather than waiting-you'll want to sell part of your credit. You can do that privately or through an intermediary who can help you find buyers.

Legal disclaimer: This material is intended for informational purposes only. Neither the Ward Burton Wildlife Foundation nor Conservation Partners, LLC provides legal or tax advice, and nothing herein is to be considered professional advice of any sort. Readers should obtain legal tax advice based upon their particular circumstances from their own independent professional advisors.

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