- Donated conservation easements
- Purchased conservation easements
- Tax information
- Tradelands and bequests
- Other transactions
What is a conservation easement?
Conservation easements are legal agreements that enable landowners to permanently protect their land while continuing to own and enjoy it. In a conservation easement transaction, landowners work collaboratively with a qualified nonprofit land trust such as the Columbia Land Conservancy (CLC) to determine which activities will be permitted on the property in the future, and which will not. Often, uses such as farming, appropriate forestry, and the right to build a home or two are permitted, while other development of the property is restricted. Although state statutes and federal regulations provide a guiding framework, the exact details of each conservation easement can be tailored somewhat to meet the unique needs of each property and landowner. Click here to learn more about easements.
Why consider donating a conservation easement to a land trust?
Landowners who are concerned with protecting the integrity of the natural resource and agricultural values of their property from future development often find a conservation easement to be a useful tool. Additionally, landowners who are concerned with issues such as a proactive response to climate change and mitigation of negative impacts to our regional ecosystems may find that a conservation easement helps them to achieve their goals for their property.
What are the financial implications of donating a conservation easement?
Permanent conservation easements extinguish some of a property’s development rights in perpetuity. The value of the conservation easement is determined by a qualified appraiser who calculates the difference between the land’s value without restrictions and its value with the conservation easement in place. As a general rule, the more restrictive a conservation easement is (i.e. the more rights that are extinguished by the easement), the higher the value of the easement.
While donating a conservation easement does not reduce a landowner’s property tax, the New York State Conservation Easement Tax Credit (CETC) is available to landowners of conserved lands. The CETC offers New York State taxpayers an annual income tax credit of 25% on their school district, county, and town property taxes up to $5,000. Additionally, donating a permanent conservation easement to an organization such as the Columbia Land Conservancy can qualify as a tax-deductible charitable gift. Such gifts may result in significant income, property, estate, and capital gains tax benefits. Tax advisors should be consulted for additional details.
Purchase of Development Rights programs financially compensate landowners. In this scenario, CLC works with the landowner to establish a conservation easement that will permanently protect the agricultural and natural resources of the land. As with donated conservation easements, the landowner still owns the property and can use it for farming and other purposes specified in the easement.
New York State Farmland Protection Implementation Grants
The New York State Department of Agriculture and Markets occasionally makes grants available for land trusts to extinguish the development rights on privately-owned working farms through the Purchase of Development Rights (PDR). PDRs pay a landowner to permanently protect their land. The Farmland Protection Implementation Grant (FPIG) Program is funded through the New York State Environmental Protection Fund.
These agricultural conservation easements aim to support our local farmers while permanently protecting the agricultural resources on the Property. Payments for these easements generally range from 75%-87.5% of the full easement value, and we can sometimes find match funding from partner organizations. When appropriate, we can apply for additional funding to purchase an affordability covenant that is included with the easement and aims to keep farmland affordable and owned by qualified farmers through a preemptive purchase right agreement.
Other grant funding
Other programs, such as the USDA Agricultural Land Easement Program (ALE[TD1] [TD2] ) and the NYS Forest Conservation Easements for Land Trusts Grant Program, may also help you protect your land. Please contact CLC staff to learn if your property is eligible for any grant funding opportunities.
Donating land, or partial interests in land (such as a conservation easement), to an organization such as CLC can result in significant income, property, estate, and capital gains tax benefits, depending on your unique situation.
CLC provides the following as an informational resource to assist you in beginning a conversation with your own financial and tax advisors. The following should not be construed as legal or tax advice.
Donating land outright
There can be many benefits to conveying land outright (i.e., the land and all the structures and rights associated with it, also known as “the fee,” “fee simple estate” or “fee title”). Donating land to an organization such as CLC typically qualifies as a charitable gift for federal and state income tax purposes. Typically, the value of the gift, as determined by a qualified appraisal in accordance with IRS regulations, can be deducted from the donor’s Adjusted Gross Income (AGI) – up to 30% of AGI in the year of the gift, and in each of the following five years, until the value of the gift is used up. Once you no longer own the land, you are no longer responsible for management and upkeep, or for paying the property taxes. If the land is donated, there is no capital gain to be taxed, and the value of the land is removed from your taxable estate, reducing your estate tax exposure. Most importantly, whether you donate your land for conservation purposes or as a tradeland, you can rest assured that your gift will contribute to conservation in Columbia County!
Donating conservation easements
There are substantial tax incentives for donating conservation easements.
Income tax benefits
Federal tax law provides enhanced incentives for the donation of conservation easements that meet the “qualified conservation contribution” requirements of Internal Revenue Code Section 170(h) and Treas. Reg. § 1.170A-14. Individuals (and corporations that are taxed like individuals) can typically deduct up to 50% of their Adjusted Gross Income (AGI) in the year the gift and in each of the following 15 years, until the value of the charitable contribution is used up. Qualifying farmers can deduct up to 100% of AGI over the same time period. More information on the enhanced federal income tax incentives for the donation of conservation easements is available here. Many donors also see a reduction in state income tax liability as a result of the federal incentives.
NOTE: A rulemaking by the Internal Revenue Service has created some uncertainty about the impact of the New York State Conservation Tax Credit on the availability or the amount of the charitable deduction for a qualified conservation contribution.
Property tax benefits
The New York State Conservation Tax Credit provides New York State landowners whose land is restricted by a conservation easement that was established as a result of a donation (or partial donation) with an additional benefit: reduced property taxes. The benefit is available to the current owner of the protected land, regardless of whether or not it was the current owner who donated the conservation easement. The annual credit reduces property tax liability by 25% of the property taxes attributable to the land (not structures), up to $5,000 per year. Landowners must pay their property taxes in full, and the credit is provided subsequently by the state, regardless of whether landowners pay income taxes in NY.
Landowners with or without conservation easements on their property may also wish to enroll in one of two state programs that provide a property tax reduction for eligible properties: the NY Forest Tax Program (480-A) and the NY Agricultural Assessment Program.
Estate tax benefits
Placing a conservation easement on a piece of land during one’s lifetime can significantly reduce the value of that property, thereby reducing the value of the landowner’s estate. Most families find it preferable to take the time to have discussions about the future of their land, and make decisions, before a crisis hits.
In certain circumstances, and in accordance with IRC Section 2031(c)(9), heirs may even grant a conservation easement after the death of the landowner (but before filing estate tax returns) and still take advantage of the estate tax benefits. It is important to note that this option, while useful, requires the family to make significant, permanent decisions, under time pressure, shortly after the death of a loved one.
Section 2031(c) of the Internal Revenue Code may also allow beneficiaries to exclude an additional 40% of the land’s restricted value from the value of the estate, subject to certain conditions. Individuals interested in potentially utilizing IRC Section 2031(c) should work with their tax advisers or estate planners to explore this option in more detail.
When a landowner sells their property, or a conservation easement, to a charitable organization at a price that is below appraised value, the transaction is referred to as a “Bargain Sale.” Bargain Sales help non-profit conservation organizations like CLC to reduce costs, while offering several benefits to the landowner: they provide the seller with some cash from the sale; they provide a potential income tax deduction for the donated value; and they reduce potential capital gains tax exposure.
Tradelands are properties donated to CLC by landowners who want to support our work. These properties may or may not have significant conservation characteristics. Properties as small as a few acres as well as sites of more than 100 acres have been donated to CLC. CLC staff and Trustees evaluate the donated property’s natural resources; if they are deemed to be of long-term conservation importance, the property will be protected with a conservation easement prior to selling it to a conservation buyer.
Although conveying land and conservation easements are the most common ways for landowners to protect their land, other mechanisms are sometimes useful. If your unique situation is such that another tool might be best for you, such as a life estate or remainder interest, CLC staff can provide you and your tax advisors with some helpful resources on those topics as well.