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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

Conservation Easements 101

Jeff Francell

The Nature Conservancy

Texas Chapter

What is a conservation easement
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

Why use a conservation easement
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

How are conservation easements valued
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

Federal income and estate taxes
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

What is a qualified conservation organization
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)

Purchased conservation easements
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

Frequently asked questions
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?

Frequently asked questions1
Frequently asked questions

  • What if I don’t own mineral rights?

  • Does a conservation easement grant public access?

  • Can a developer use conservation easements?

Frequently asked questions2
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?

Frio ranch limited
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

Elm creek ranch
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

Tnc texas focus areas
TNCTexas Focus Areas