1 / 32

Title of Presentation Smaller Type

Understand the basics of conservation easements - legal agreements to protect land's value, provide financial benefits, and save on taxes. Learn how it works, safeguards land, benefits landowners, and impacts land value. Discover tax laws, profiles of donors, and transaction structures.

vienna
Download Presentation

Title of Presentation Smaller Type

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Title of PresentationSmaller Type Conservation Easements 101 South Llano Watershed Alliance

  2. The Basics • What Is A Conservation Easement (CE)? • Voluntary legal agreement • Signed by both landowner & land trust • Filed at county courthouse • TX Natural Resource Code • Chapter 183

  3. The Basics • What Conservation Easements Do: • “Partnership” between landowner & land trust to accomplish goals of both • Permanently protect land’s intrinsic values • Provide income or tax savings to landowners

  4. The Basics How Does CE Work? Property ownership = owning a bundle of sticks Examples: - Mineral Rights - Water Rights - Hunting Rights - Access/Easement - Development Rights

  5. The Basics How CE Protects Land: • Permanently restrict intensity • of use or development of land • Give partner organization the • right to enforce restrictions

  6. The Basics How Landowners Are Protected: • All restrictions negotiated • Landowners continue agricultural use & recreational enjoyment • No public use required

  7. The Basics How CE Provides Financial Benefits: • Sale of CE = cash • Donation of CE = tax savings • Tax credit in some states

  8. The Basics How CE Can Be Sold: • Highly Motivated Buyer • Competitive Process • Negotiated Price • Cash or Trade

  9. Sale of Conservation Easement

  10. Dahlstrom Dilemma • Owned a Ranch worth $30M • Looming federal estate tax liability • Need to provide financial stability for family • Wanted Ranch to be preserved forever • Desire to share Ranch with public • Current quarry operations on Ranch

  11. Conservation Easement Terms • 2,275 acre ranch; includes quarry • Protect archeological sites • Water quality and quantity is the priority • No subdivision • Limited building • Allows agricultural and eco-tourism business • Allows existing quarry operations until 2060

  12. The Basics How CE Provides Tax Savings: • Income tax deduction when donated • Lower appraised value of land in estate • Exclude part value from estate tax • Property tax relief in some cases • Tax credit in some states

  13. The Basics RULE OF THUMB -- How CE Impacts Land Value: • Near cities reduction/deduction can be 50-90% of land’s appraised value • Rural land reduction/deduction can be 30-60% of land’s appraised value

  14. Who Should Consider A CE? • Desire to preserve land or “keep in the family” • Land with conservation value/public benefit • Location - Development “pressure” drove up value; unused value locked in the land • Concerned about increasing ownership costs • Sufficient income to use large tax deduction or ranch big enough for estate taxes

  15. Profiles Of Donors/Sellers • Urban Owners of Rural Land • Land Rich, Cash Poor Families • Heritage Landowners • Developers marketing rural land

  16. TAX LAW: For CE Charitable Gifts in 2012 30% of AGI Rule. Sec. 170(b)(1)(C) Limits annual charitable deductions to 30% of the donor’s AGI. $500,000 AGI X 30% (2012) 50% Rule (Incentive) $150,000 MAD $250,000 MAD

  17. TAX LAW: For Charitable Deductions 30% of AGI Rule. Sec. 170(b)(1)(C) 5 Year Carryover Rule Sec. 170(d)(ii) For contributions that exceed the 30% of AGI limitation, there is a 5 year carryover, which allows unused deductions in the first year to be carried over up to 5 years (Incentive 15 yrs)

  18. Income Tax Savings 2012 - 2017 Donor’s AGI $ 500,000 Tax Rate 35% Value of CE (50% FMV) $ 5,000,000 Max. Annual Deduction (30% AGI*) $ 150,000 Annual Tax Savings $ 52,500 Number Years to Use Deduction* 6 TOTAL TAX SAVINGS $ 315,000

  19. Income Tax Savings 2012 – 2027 Under Incentive Legislation Value of CE (70% FMV) $5,000,000 Donor’s AGI $ 500,000 Max. Annual Deduction (50% AGI*) $ 250,000 Number Years to Use Deduction* 16 Tax Rate 35% Annual Tax Savings $ 87,500 TOTAL TAX SAVINGS $ 1,400,000

  20. Structuring The Deal Transaction Structure: • Donation • Sale • Combination • Phasing in CE over • multiple tax years • Contract or letter of intent • Donate CE after death

  21. Transaction Steps • 1. Establish conservation, • family & financial goals -- analyze outcomes • Select & negotiate with land trust • Create transaction team • 4. Complete all due diligence steps • Record CE, complete any cash gift • Implement & file post-gift state / federal requirements • 7. Monitoring & enforcement

  22. “Qualified Conservation Contribution” Tax Code Sec. 170(h) Requires: • A real property interest (CE) • Exclusively for conservation purposes • To a qualified organization – land trust

  23. Identify Conservation Purpose Treasury Regulation Sec. 1.170A-14 describes 4 “Qualified Conservation Purposes:” • Protection of relatively natural habitat • Open Space: scenic enjoyment or • government policy • Outdoor recreation or education • with public access required • Historical preservation with public • visibility or access required

  24. Choose a “Qualified” Organization • Governmental agencies with • conservation missions or policies • Non-profit conservation • organizations

  25. Select a Land Trust • Partnership – values fit with landowner • Capacity to do the deal • Long term capacity • Landowner resource • Costs

  26. Texas Perspective • Texas land trusts - Helped conserve more than • 1.5 million acres of Texas land • TLTC Directory - 49 Texas land trusts in operation • TLTC at www.texaslandtrusts.org

  27. Creating the Transaction Team • Appraisal – Appraiser substantiates value • Baseline Report – Biologist, ecologist documents conservation values • Survey – Surveyor prepares legal descriptions, maps, exhibits, marks boundaries • Land Planning – Land use planner for development plan • Financial Planning & Analysis – CPA, CFP, etc. • Legal Advice & Negotiation – Client’s attorney

  28. Basic Goals of Drafting • Protect client’s future rights in the property • Maximize client’s financial benefit • Protect conservation values • Meet organization’s needs and goals

  29. Possible Restrictions??? • Subdivision • Additional buildings • Commercial activities • Agriculture or grazing • Mineral development • Hunting and fishing • Habitat restoration • Road building • Motorized vehicles • Exotic species • Agency restrictions • Recreation • Outdoor education • Care of scenic features • Care of water features • Care for historic features • Land Trust monitoring & access • Public access • Trash & dumping practices • Timber management • Management plan • Development plan

  30. Result After Easement • Landowner: • Create a Legacy • Save Tax • Still Use Land • Land Appreciating & Marketable • Unlocked Value • Land Trust: • Conserve • Habitat • Scenic Views • Open Spaces • Historic Sites • Outdoor Recreation • Low Cost

  31. Stay informed and connected… • Like us on Facebook • www.facebook.com/BraunGresham • Follow us on Twitter • twitter.com/BraunGreshamLaw • Join our Landowner Alert System • http://www.braungresham.com/contact-us/#contact 31

  32. “Conservation will ultimately boil down to rewarding the private landowner who conserves the public interest.” • Aldo Leopold Braun & Gresham, PLLC Cassie Gresham www.braungresham.com

More Related