Conservation Easement Information

One powerful tool for preserving working ranches, wildlife habitat, recreational areas and scenic lands is a voluntary land preservation agreement, called a Conservation Easement, between a landowner and a qualified conservation organization such as the Middle Park Land trust, which will perpetually protect the natural resources on the property.

Conservation Easements keep land in private hands and preserve traditional uses of land such as family farming or ranching, although the continuation of such uses is not always required. The agreement makes it possible to keep land from being developed without requiring its sale or changing the way it is used.

Conservation Easements have been used by private landowners for more 20 years as a financial planning tool and a means to prevent future development on their property. In contrast with some other conservation strategies, Conservation Easements respect private property rights and allow landowners to maintain control of their land. Many easements co-exist with agricultural operations on farms or ranchland, while others preserve public recreation areas, view sheds or wildlife habitat. Protecting land for public benefit does not mean public access to the land, although in some cases, with landowner approval, it can open up private property to the public.

Land under Conservation Easement may still be mortgaged, sold or passed on to one's heirs, while the landowner may realize significant estate and income tax benefits for their conservation contribution. Land trusts are in turn responsible for ensuring that the easements it accepts have "significant public value" and are upheld over time. The IRS requires annual monitoring of easements for this reason

The IRS offers generous tax incentives to Conservation Easement donors in exchange for preserving land that benefits the public through preservation of an important natural resource, recreation area or scenic landscape. For the years 2006 and 2007, the government has increased these incentives so that a landowner is able to take 50% off their adjusted gross income (AGI) up to the appraised value of the conservation easement for up to 15 years. Qualified farmers and ranchers have an even stronger incentive, as they are allowed to take of 100% of the AGI up to the value of the conservation easement for up to 15 years.

Colorado has enacted one of the nation's most generous tax incentive systems for donations of Conservation Easements. Colorado taxpayers who place a "qualified" Conservation Easement on thier land in Colorado receive a "tax credit" from the state based on the value of the easement as determined by a qualified appraisal. The maximum credit available in a given year is $375,000 for the donation of an easement valued at $750,000 or more. (The credit is valued at 50% of the easement value up to the $750,00 maximum).

Colorado allows these credits to be carried forward for 20 years, or be sold to other Colorado taxpayers. Tax credit brokers around the state assist landowners in finding a buyer for tax credits that they cannot personally use. Other Colorado taxpayers purchase these "credits" at a discounted rate (usually around 80% of the value) which reduces the buyers tax liability and provides cash for the conservation easement donor.

Since state tax credits do not need to be sold or used the year they are created, (there is a 20-year carry forward) the conservation easement donor may sell or use only part of the credit, while keeping the remainder to sell or use in future years. Landowners considering Conservation Easements are strongly encouraged to obtain their own tax advice to determine best use of the benefits for each situation.

Many landowners are looking for an alternative to the classic financial planning scenario of having to sell their land to a developer or keep it only to have heirs lose it in the face of overwhelming inheritance taxes. Properly structured Conservation Easements can provide an alternative by reducing future estate taxes, as well as providing upfront compensation to the landowner through tax benefits. Conservation Easements may allow continued use of one's land, and in some cases, may allow for a limited number of carefully-planned home sites. In addition, landowners can sell or mortgage the protected property at any time with the assurance that it will be preserved in the future.

HIGHLIGHTS OF CONSERVATION EASEMENT TAX BENEFITS
• Colorado taxpayers are eligible for income tax credits for the donation of a qualified Conservation Easement.
• The maximum tax credit allowed per year is $375,000 for an easement donation valued at $750,000 or more.
• Conservation tax credits are transferable to other Colorado taxpayers.
• Tax credit brokers will assist the sale of tax credits from its easement donors to interested buyers at a discount.

HIGHLIGHTS OF CONSERVATION EASEMENT PROGRAMS
• Permanently preserve open land
•Allow property to stay under private ownership and control
• Allow continued agricultural and other historic land uses
• Minimize inheritance taxes
• Provide federal and state income tax benefits