What is a Conservation Easement?

A conservation easement is a legally recorded agreement by which landowners may voluntarily restrict the use of their land. A conservation easement protects important land resources and can be held by a qualified conservation organization such as the Ozaukee Washington Land Trust or a local unit of government.

Provided that certain conditions are met, donors of easements may be eligible for income, estate and/or property tax benefits. One condition is that there must be an established, recognizable public benefit, such as protecting rare species, valuable agricultural land, public water supplies, or scenic vistas visible from roads. Public access is not a requirement.

Although the duration of a conservation easement can vary depending on the desires of the landowner, tax benefits are available only for perpetual easements. Many land trusts will only accept perpetual easements, since they provide permanent protection by subjecting all future landowners to the same restrictions.

Conservation easements are also the principal legal mechanism used to protect land in a Purchase of Development Rights (PDR) or Transfer of Development Rights (TDR) program.

What Types of Land Can Be Protected through Conservation Easements?

Any type of undeveloped or sparsely developed property can be protected with a conservation easement. Conservation easements can be used to protect agricultural land, forested land, wildlife areas, wetlands and other scenic or natural lands.

What Effect Does This Agreement Have on My Property Rights?

A landowner who conveys a conservation easement retains all rights to use the land for any purposes that do not interfere with the conservation of the property as stated in the terms of the easement. The landowner retains the title to the property, the right to sell it, the right to restrict public access, and the right to give it to whomever he or she chooses.

However, most or all of the rights to develop are restricted or eliminated. The terms of a conservation easement are individually tailored to reflect each landowner's particular needs, situation and property. For example, one landowner may want to prevent any future development. Another may want to retain the right to construct an additional barn or shed.

A third landowner may want to reduce, beyond what is allowed by current zoning, the number of homes that may be built on a certain parcel. The easement can be written to apply to the entire property or to only a portion of it.

How is the Easement Value Determined?

Land ownership can be viewed as owning a variety of separate rights on the property. These rights include, but are not limited to, the right to farm the land, the right to build on the land, and the right to exclude the public. When a conservation easement limits any of these rights, the value of the land is affected.

The value is determined by having a 'before' and 'after' appraisal completed by a qualified appraiser who meets IRS requirements. First, the land is appraised in light of its full development potential. Then the land is appraised again, taking into account the easement restrictions which limit some or all of the property's development rights. The difference between these two figures is the value of the easement.

In instances where the easement is donated and qualifies under IRS regulations, this amount also is the value of a charitable contribution which can be taken as an income tax deduction. Appraisal costs are the responsibility of the landowner considering donating a conservation easement.

What are the Tax Benefits of a Donated Conservation Easement?

Federal Income Tax Benefits -Under the IRS code, the donation of a qualified conservation easement may be treated as a charitable contribution. The value of the contribution can be deducted at an amount up to 30 percent of the donor's adjusted gross income in the year of the gift.

If the easement's value exceeds 30 percent of the donor's income, the excess can be carried forward and deducted (again, subjected to the 30 percent limit) over the next five years, if needed.

Estate Tax Benefits -Donation of easements, whether during the landowner's life or by bequest, can reduce the value of the land upon which estate taxes are calculated. This can greatly benefit the landowner wishing to transfer land to relatives.

The estate tax benefits of a conservation easement can often mean the difference between heirs having to sell property to pay estate taxes or being able to keep the property in the family.

Property Tax Benefits -The conveyance of a conservation easement may reduce a landowner's property taxes. This depends on current zoning and land use, current assessed value, and whether the owner participates in a current-use assessment program.  Under Wisconsin law, county assessors must take a conservation easement into consideration in establishing the market value of the land subject to the easement.

However, existing tax basis, assessed value, and current zoning of each piece of property are important factors in determining the potential benefits of any easement. The exact terms of each individual easement also have a bearing on its effect on property taxes.

What Criteria Must Be Satisfied?

To be eligible for most of the above tax benefits, the agreement must be entered into with a qualified conservation organization, such as the Ozaukee Washington Land Trust or a local unit of government. In addition, the terms of the easement must be perpetual and they must meet other IRS requirements.

The criteria that must be satisfied for the Ozaukee Washington Land Trust to accept such a donation are available upon request.

What Rights Does the Easement Holder Have to My Land?

If the Ozaukee Washington Land Trust or another qualified organization accepts an easement on your land, it is obligated to oversee and enforce the easement's terms and conditions. For example, an organization has the right to enter and inspect the property (usually once a year) to ensure that the terms of the agreement are being upheld.

Except in unusual circumstances, these visits are scheduled with the landowner. The organization does not have the right to use your property, nor does the easement allow public access to the property since it remains privately owned.

To learn more about donated conservation easements, contact the Ozaukee Washington Land Trust