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Conservation Easements 101

Conservation Easements 101. Jeff Francell The Nature Conservancy Texas Chapter. What is a Conservation Easement?. A restriction a landowner voluntarily places on specific uses of land to project to protect its natural, scenic, productive or cultural values

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Conservation Easements 101

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  1. Conservation Easements 101 Jeff Francell The Nature Conservancy Texas Chapter

  2. What is a Conservation Easement? • A restriction a landowner voluntarily places on specific uses of land to project to protect its natural, scenic, productive or cultural values • Landowner retains title to the property and determines what uses to continue and restrict • Generally perpetual • Landowner grants holder of the conservation easement the right to periodically monitor the property to ensure compliance • A Conservation Easement is recorded with county real property records • Chapter 183, Texas Natural Resources Code, Section 170(h) IRS code

  3. Why Use a Conservation Easement? • Landowner’s interest in protecting conservation value of their land into future generations • Estate planning • Income tax benefits • Potential to sell conservation easement

  4. How are conservation easements valued? • Before and After Appraisal • Determined by qualified real estate appraiser • Full fair market value is accessed • Restrictions are specified (# parcels, building envelopes, impervious cover, setbacks) • Reduced value is accessed • Subtract reduced value from full value = value of CE • CE value highest when development/subdivision pressure is highest and land use restrictions are greatest • CE value generally between 20-50% of unrestricted FMV

  5. Federal Income and Estate Taxes • Federal Income Taxes • Similar to other charitable contributions • Amount determined by qualified real estate appraiser • Difference between before and after value • Most landowners able to deduct 50% of AGI carried forward 16 years through 2011/2012 (was 30% for six years) • Estate Taxes • Determine “highest and best use” • Land is valued as restricted by conservation easement • Tax liability is reduced in the estate • No limit on conservation easement for estate tax purposes

  6. What is a qualified conservation organization? • Land Trusts • A regional, state or national nonprofit organization that preserves land for its natural, recreational, scenic, historic or productive value (example, The Nature Conservancy, Hill Country Conservancy) • Governmental Entities • City or County (City of Austin, San Antonio) • State Agency (Texas Parks and Wildlife, General Land Office) • Federal Government (US Fish and Wildlife Service, Natural Resources Conservation Service)

  7. Purchased Conservation Easements • Also referred to as Purchase of Development Rights • Limited availability for Texas Landowners • Water quality (City of Austin, San Antonio) • Endangered Species (USFWS Sec 6) • Prime soils, historic value, wetlands (NRCS, FRP, WRP) • Appraised value is determined with same formula, but generally no IRS 170(h) • Increasing popular in Texas (Texas Farm and Ranch Land Conservation Program, GLO) • Matching funds often required • Generally more restrictive than donated CEs

  8. Frequently asked questions • Can I sell my property with a conservation easement? • Can I build on my property with a conservation easement? • What if the property is mortgaged?

  9. Frequently asked questions • What if I don’t own mineral rights? • Does a conservation easement grant public access? • Can a developer use conservation easements?

  10. Frequently asked questions • Can a conservation easement be modified or amended? • Can a conservation easement by donated by will? • What is the endowment used for?

  11. Frio Ranch Limited • 14,300 acres in Uvalde Co • Bargain Sale CE/City of San Antonio Prop 1 • Purpose: Water quality & Quantity • Terms • No partitions • 6 5 acre building zones • .05 percent imp cover • CE Value 40% of FMV

  12. Elm Creek Ranch • 3500 acres Collingsworth County • Donated Conservation Easement • Purpose: Wildlife Habitat/Rare Plant Community • Terms • Two parcels • Two building envelops • No commercial wind/water use • No plow/row crop agriculture • CE value 30% of FMV

  13. TNCTexas Focus Areas

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