Please review this FAQ for a quick overview of Land Conservation.
A conservation easement is a legal agreement a property owner makes to restrict the type and amount of development that may take place on his or her property. Each easement is specific to the property and to the interests of the individual landowner. To understand the easement concept, think of owning land as holding a bundle of rights. A landowner may sell or give away the whole bundle, or just one or two of those rights. These may include, for example, the right to construct buildings, the right to subdivide the land, the right to restrict access, or the right to harvest timber. To give away certain rights while retaining the others, a property owner grants an easement to an appropriate third party (usually a Land Trust). The owner and the prospective easement holder identify the rights and restrictions on use that are necessary to protect the property. The owner then conveys the right to enforce those restrictions to a qualified conservation recipient, such as a public agency, a land trust, or a historic preservation organization. The landowner continues to own and control the property, and may receive an income tax deduction for the value of the easement as well as possibly receiving a local property tax deduction. To determine the value of the easement donation, the property is appraised both at its fair market value without the restrictions and at its fair market value with the easement restrictions. The difference between the two appraised values is the easement value and the amount of the charitable deduction. For the community, the easement provides benefits, preserving open space, protecting natural resources, etc.
What is a historic preservation easement? Agricultural easement? Scenic easement? Conservation restriction?
Easements are called by different names according to the type of resource they protect. Easements used to protect the façade and surroundings of historic structures or historic land areas are called historic preservation easements. When used to preserve an agricultural operation, they are termed agricultural easements. When the resources are primarily scenic, easements can primarily carry that name. Another name for a conservation easement is a conservation restriction. Whatever they are called, the concept is the same.
People grant conservation easements to protect their land or historic structures from inappropriate development while retaining private ownership. By granting an easement in perpetuity, the owner may be assured that the resources on his or her property will be protected indefinitely, no matter who the future owners are. The public benefits through the creation of open space, which is counted toward the Athens-Clarke County’s total open space and contributes to the county’s eligibility for state open space funding. Quality of life in the community is enhanced, helping businesses attract qualified employees to live in Athens-Clarke County. Also, granting an easement can yield an income tax deduction and, by reducing the market value of the property through the granting of the easement, it may lower the assessed property taxes. This can in some cases help farmers afford the land they own or inherited.
The donation of a conservation easement is a tax-deductible gift, provided that the easement is perpetual and is donated “exclusively for conservation purposes” to a qualified conservation organization like the Athens Land Trust. Internal Revenue Code Section 170(h) generally defines “conservation purposes” as the preservation of land areas for outdoor recreation by, or the education of, the general public; protection of relatively natural habitats of fish, wildlife, or plants, or similar ecosystems; preservation of open space-including farmland and forest land-for scenic enjoyment or pursuant to an adopted governmental conservation policy (in either case, such open space preservation must yield a significant public benefit); and, preservation of historically important land areas or buildings. To determine the value of the easement donation, the property is appraised both at its fair market value without the restrictions and at its fair market value with the easement restrictions. The difference between the two appraised values is the easement value and the amount of the charitable deduction.
A conservation easement can reduce estate taxes. If the property owner has restricted the property by a perpetual conservation easement, the property must be valued in the estate at its restricted value. To the extent that the restricted value is lower than the unrestricted value, the value of the estate will be less and the estate will thus be subject to a lower estate tax. If the property owner does not want to restrict the property during his or her lifetime, the owner can still specify in his or her will that a charitable gift of a conservation easement be made to qualifying organization upon the owner’s death. Assuming the easement is properly structured, the value of the easement gift will be deducted from the estate, thus reducing the value on which estate taxes are levied. Again, a lower tax may result.
Property tax assessment is usually based on the property’s market value, which reflects the property’s development potential. If a conservation easement reduces the development potential of the property, it may reduce the level of assessment and the amount of the owner’s property taxes.The actual amount of reduction, if any, depends on many factors. State law and the personal attitudes of local officials and assessors may influence or determine the decision to award property tax relief to easement grantors.
Since January 1, 2012 the Georgia conservation tax credit has become transferable. This means that landowners who donate Conservation Easements (CEs), but cannot personally use the state income tax credit, can sell their credit to other Georgia resident taxpayers who want to reduce their state income tax liability. In this mutually beneficial arrangement, landowners receive cash and credit buyers are able to reduce their income tax burden. At the same time, Georgia’s working farms, open spaces, wildlife habitat, water quality, scenic vistas and natural heritage are protected. There are professionals who specifically deal with state conservation tax credit exchanges. Landowners who are entering into conservation easements or who have existing credits may engage them to help them with the sale of their Georgia tax credits. Landowners may wish to consult these professionals and their own tax advisers to determine their eligibility to sell credits. Landowners may also wish to refer to the Georgia Land Conservation Program website for more information: www.glcp.georgia.gov.
Any owner of property with conservation resources may grant an easement. If the property belongs to more than one person, all owners must consent to granting an easement. If the property is mortgaged, the owner must obtain from the lender an agreement from the lender to subordinate its interests to those of the easement holder so that the easement cannot be extinguished in the even of foreclosure.
An easement restricts development to the degree that is necessary to protect the significant values of that particular property. Sometimes this totally prohibits construction, sometimes it does not. If the goal is to preserve a pristine natural area, for example, an easement may prohibit all construction, as well as activities that would alter the land’s present natural condition. If the goal is to protect farm or ranch land, however, an easement may restrict subdivision and development while allowing for structures and activities necessary for and compatible with the agricultural operation. Even the most restrictive easements typically permit landowners to continue traditional uses of the land.
An easement is written so that it lasts forever. Only gifts of perpetual easements can qualify a donor for income tax benefits. Like most conservation organizations, the Athens Land Trust will only accept perpetual easements. An easement runs with the land-that is the original owner and all subsequent owners are bound by the restrictions of the easement. The easement is recorded at the county or town records office so that all future owners and lenders will learn about the restrictions when they obtain title records.
As the grantee organization, the Athens Land Trust is responsible for enforcing the restrictions that the easement document spells out. To do this, ALT monitors the property on a annual basis. ALT representatives visit the restricted property, usually accompanied by the owner. They determine whether the property remains in the condition prescribed by the easement and documented at the time of the grant. ALT maintains written records of the monitoring visits. These visits also keep ALT and the property owner in touch. If a monitoring visit reveals that the easement has been violated, ALT has the legal rights to require the owner to correct the violation and to restore the property to its condition prior to the violation.
Landowners who grant conservation easements make their own choice about whether to open the property to the public. Some owners convey certain public rights such as allowing hiking or fishing in specific locations or permitting guided tours once a month or once a year. Others do not. However, some types of easements require public access to qualify for income tax deduction. If the easement is given for recreation or educational purposes, public access is required. For scenic easements, much of the property must be visible to the public, but physical access is not required. Access generally is not required for easements that protect wildlife or plant habitats or agricultural lands.For historic preservation easements, either visual or physical access is required, depending on the nature of the building or property to be preserved.