John S. Powers, Area Wildlife Biologist
For many people in Alabama and across the United States, land ownership is a dream. Often their dream takes years of hard work and sacrifice in other areas to achieve. For others, property has been held by their families for generations. It has been cared for and molded in such a way as to represent values and priorities the landowner holds dear. For some in both groups, the joy and privilege of land ownership can become a source of concern, worry, and financial strain.
The negative side of owning property can take any number of forms Sometimes simply paying the property taxes on a piece of land can become daunting, especially if the land is located near an expanding urban or metropolitan area. In other circumstances, the specter of estate or capital gains taxes clouds whether or not a beloved piece of property can remain in the family. For other landowners, concerns exist regarding the future of their land after their deaths which have nothing to do with financial issues. Conservation easements may provide a valid solution to the issues facing any or all of these landowners.
A conservation easement is a restriction a landowner voluntarily places on certain specified uses of his or her property to protect natural, productive, or cultural aspects of the land. The designated restrictions are recorded as a written legal agreement between the landowner and the “holder” of the easement in the county or counties where the property is located. The “holder” of the easement may be either a government agency or a recognized nonprofit conservation organization. In Alabama, conservation easements are most often donated, but in some cases the easement may be purchased from the landowner. With a conservation easement, the landowner retains legal title to the property and determines the types of land uses to be continued and those to be restricted. The land can still be sold, leased, or left to heirs at the time of the original owner’s death. Hunting, fishing, and other recreational uses, as well as timber management and use of other natural resources can all be enjoyed as long as such activities are consistent with the restrictions that are chosen and are designated in the initial easement agreement. The “holder” of the easement is granted the right to assess the condition of the property periodically to ensure that it is maintained according the terms of the legal agreement. The “holder” of a conservation easement does not actually acquire the rights transferred under the agreement, only the right and responsibility to monitor and enforce the restrictions placed on the property.
Conservation easements are flexible in many ways. They may apply to an entire piece of property or only a portion thereof and the landowner can, in most cases, continue current land use practices. Conservation easements may allow limited construction or development of a portion of the property as long as it doesn’t interfere with the easement’s stated goals. Conservation easements do not inherently grant public access, but they may if that is the landowner’s wish. The value of the easement will be tied to the value of the rights relinquished by the landowner under the easement agreement.
Conservation easements are recognized by the state of Alabama under the Uniform Conservation Easement Act and by the United States Internal Revenue Service. Both allow tax deductions for landowners based on the value of the property rights transferred under a conservation easement provided certain criteria are met. The easement must meet a definite conservation purpose. Examples of this would be the protection and/or restoration of bottomland hardwood habitat or wetland habitat. Also, conservation easements must be granted to or held by “a qualified conservation organization.” Suitable organizations include certain local, state, and federal governmental agencies whose primary purposes are the conservation of natural resources. Many publicly supported private conservation organizations such as the Alabama Nature Conservancy are recognized as well.
Another essential element in the conservation easement process is the development of a baseline ecological assessment. This document will detail the plant, animal, and physiographic details of the property at the time the easement is initiated as well as current land uses. The ecological assessment will be used by the conservation organization while monitoring the property in the future. Finally, to qualify for the most tax benefits, conservation easements must be granted in perpetuity. In other words, they must be permanent and will be associated with the property even after ownership is transferred through inheritance or sale. For this reason, it is important for landowners to seek legal assistance in the development of easement agreements so that restrictions to the landowner’s rights are clearly and concisely set forth. Landowners should consider carefully, not only what activities are currently underway on the property, but also what activities they may want to undertake or allow in the future. The above mentioned financial benefits are several and are based on the reduction in market value of a piece of property associated with initiation of a conservation easement. As previously established, a conservation easement restricts the rights of a landowner and the activities allowed on land covered by such an agreement.
The value of an easement is calculated as the market value of the property with the easement in place subtracted from the pre-easement value of the property. If a tract of land currently valued at $100,000 is placed under a conservation easement which reduces its value by half, the value of the easement will be $50,000 rather than $100,000. Further, assuming the easement is donated to a qualified conservation organization, the value of the easement (in this case $50,000) may be considered a charitable donation when paying federal and state income taxes. If this deduction exceeds limitations for a single year, the landowner may take deductions up to his or her limit for up to five more years. Finally, estate taxes will be lowered proportionately by the reduction in market value of the property, making it easier for heirs to retain ownership of treasured family land.
Beyond financial benefits, and possibly just as important to many conservation minded landowners is the peace of mind establishment of a conservation easement may afford. Conservation easements allow landowners to exert a degree of control over the future. Not only the future of their land, but the future of generations to come as well as the natural resources of our state, the nation, and the world. The landowner gains, in essence, a continuing stewardship over the world their children and grandchildren will live in. In this time of urban sprawl, clean farming, and industrial timber production, the knowledge that one’s own personal corner of the world will remain, in large part, as a person leaves it, as that person wants it to be, has value greater than dollars and cents.