Conservation Easement Basics
What is the Jackson Hole Land Trust?
The Jackson Hole Land Trust is a private, non-profit organization that was established in 1980 to preserve open space and the critical wildlife habitat, magnificent scenic vistas, and historic ranching heritage of Jackson Hole. By working cooperatively with the owners of the area’s privately owned open lands, the Jackson Hole Land Trust has ensured the permanent protection of over 25,000 acres in and around Jackson Hole and the Greater Yellowstone Area.
We work with landowners – individuals, families, and businesses – and with municipalities and state and federal agencies in Teton, Fremont, Sublette, Lincoln and Park Counties to monitor our over 200 existing easement areas, and protect new properties of high conservation value.
What kind of land does the Jackson Hole Land Trust conserve?
We work to protect land that represents our mission-based open space, scenic, ranching, and wildlife conservation values. As guided by strategic planning, we also work to protect easements of high community value.
What are the advantages of working with the Jackson Hole Land Trust?
The Jackson Hole Land Trust is very strongly tied to the communities in which we operate. We understand the local landscape, and with over 35 years of experience, we are a trusted entity in our program area and within the national land trust community. Our organization is fiscally robust, and we have a strong stewardship program to support our conservation easements in perpetuity. In addition, our non-profit tax status brings a variety of potential tax benefits to those conserving their land with us. Since we are a private organization, we can be more flexible in conservation options than public agencies in saving land and forging partnerships for conservation.
What is a conservation easement?
A conservation easement is a voluntary contract between a landowner and a qualified organization (land trust, government agency or other) in which the owner places permanent restrictions on the future uses of some or all of their property to protect specifically identified scenic, wildlife, and/or agricultural resources, known as conservation values. It allows the landowner to continue to own and use the land and to sell it or pass it on to their heirs.
When a conservation easement is donated to a land trust, some of the rights associated with the land are given up. For example, a landowner might give up the right to build additional structures, while retaining the right to grow crops. Further owners will also be bound by the easement’s terms. The land trust is responsible for making sure the easement’s terms are followed on a long-term basis.
Conservation easements offer great flexibility. An easement on property containing rare wildlife habitat might prohibit any development, for example, while one on a ranch might allow continued ranching and the building of additional agricultural structures. An easement may apply to just a portion of the property, and does not require public access.
What can I do with my land once it’s conserved?
You can continue to own and use the land for a variety of purposes, including, but not limited to, residential use, ranching, recreation and education. Conserved land can be sold or passed on to family members. The conservation easement will “run with the land,” requiring future owners of the land to abide by the terms of the conservation easement.
What are the Jackson Hole Land Trust’s responsibilities regarding conservation easements?
The Jackson Hole Land Trust is responsible for upholding the terms spelled out in each conservation easement. Therefore, our land stewards monitor each protected property once a year, and more often when necessary, to determine that the property remains in the condition prescribed by the easement document.
The Land Trust maintains written records of these monitoring visits, which also provide the landowner a chance to keep in touch with the Land Trust. We have an established Stewardship Fund to support the long-term stewardship of our easements.
Are there any transactional costs to me as the landowner?
Yes, conserving your land will involve some costs.
Whether you are selling or donating a conservation easement on your property, you can anticipate covering the cost of your own legal and tax advisors and the cost of an appraisal.
Additionally, we do ask conservation easement donors to make a one-time contribution to help ensure the perpetual protection of your land and others protected by conservation easements held by the Land Trust. Your charitable contribution will help to build our Stewardship Fund, which ensures our ability to support and uphold our landowner’s conservation goals and the resources protected by our conservation easements in perpetuity.
If you cannot afford these costs, we are willing to work with landowners to identify other ways to cover their expenses associated with our conservation projects.
What are the steps involved in conserving my property with a conservation easement?
You can visit our webpage or download a PDF for more information about the steps involved in conserving your property with a conservation easement.
What does it mean that the Jackson Hole Land Trust is an accredited land trust?
Accreditation from the Land Trust Accreditation Commission, an independent program of the Land Trust Alliance, provides public recognition of land trusts that are engaged in the long-term protection of the land in the public interest. It increases public awareness of, and confidence in, land trusts and land conservation. In addition, land trusts use the accreditation application process as a way to fine-tune their policies and streamline their operations.
Through the voluntary land trust accreditation program, the Jackson Hole Land Trust has achieved external verification that it is meeting national quality standards. The accreditation seal that we display is a mark of distinction in land conservation. It recognizes organizations like ours for meeting national standards for excellence, upholding the public trust and ensuring that conservation efforts are permanent. We have been accredited since 2009.
Economic/Financial Benefits of a Conservation Easement
Which conservation easements are tax-deductible?
Sometimes landowners sell conservation easements, and other times easements are donated. If the donation benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements, it can qualify as a tax-deductible charitable donation. The amount of the donation is the difference between the land’s value without the easement and its value with the easement. Placing an easement on your property may or may not result in property tax savings depending on County rules.
Conservation easement donations are subject to overarching restrictions. Easements must meet the “conservation purposes” test defined in the existing law; they cannot be donated as part of a “quid pro quo” agreement; and they must be donated to a qualified organization – a governmental unit or a publicly-supported charity that has “a commitment to protect the conservation purposes of the donation, and… the resources to enforce the restrictions.”
What are the federal enhanced tax incentives which are currently in place?
An enhanced federal tax incentive for conservation easement donations (made permanent as of December 2015; retroactively applicable to January 1, 2015) has helped thousands of landowners to conserve their land. The enhanced incentive raises the deduction a donor can take for the donation of a conservation easement from 30% of their adjusted gross income in any year to 50%. It also allows qualifying farmers and ranchers to deduct up to 100% of their income. Further, it extends the carry-forward period for a donor to take tax deductions for voluntary conservation easements from 5 to 15 years (in addition to the year of donation). These enhanced incentives were made permanent as of December 2015 thanks to the work of land trust advocates and with strong bipartisan support in the U.S. Congress.
Can you give an example of how this federal tax deduction is applied?
With the enhanced easement incentive, a landowner earning $100,000 a year who donates a $1 million conservation easement can take a $50,000 (50% of his/her AGI) deduction for the year of the donation and for an additional 15 years – up to $800,000 in tax deductions.
Who qualifies as a rancher or a farmer?
The enhanced easement incentive defines a farmer or rancher as someone who receives more than 50% of their income from “the trade or business of farming.” The law references an estate tax provision to define activities that are considered farming (IRC 2032A(e)(5)).
Does the enhanced easement incentive apply to bargain sales?
Yes, it does apply to bargain sales of conservation easements that qualify under IRC 170(h). It will not apply to donations of land in fee, or to bargain sales of fee title to land.
Can you give an example of how this enhanced easement incentive would apply to bargain sales?
A bargain sale to a charitable organization is partly a sale or exchange and partly a charitable contribution. In a bargain sale of a conservation easement, part of the easement value is donated and part of it is sold. In a modification of the example above, a landowner earning $100,000 a year offers a $1 million conservation easement as a bargain sale. The landowner donates $800,000 of this value and the Land Trust purchases the remaining value of $200,000 at bargain. Under the current incentives, the landowner could deduct $50,000 (50% of his AGI) for the year of the donation and for up to an additional 15 years – up to $800,000 in tax deductions.
What are the estate tax benefits of conservation easements?
Conservation easements can play an essential role in the ability to pass land on to the next generation. Estate taxes can lead to the break-up, sale and development of family-owned lands, even when landowners would prefer to keep these lands intact. The most broadly applicable estate tax benefit of a conservation easement is the federal recognition that property encumbered by a conservation easement is valued for estate tax purposes as restricted, rather than at its unrestricted value. The decreased value of the land in turn decreases potential estate tax. This applies to donations by will, but the reduction has also been recognized for existing easements and post-mortem donations. In most cases, the reduction will even apply if the easement was sold or donated by a previous owner.
Section 2031(c) of the IRC provides an estate tax exclusion of up to 40% of the encumbered value of land (but not improvements) protected by a “qualified conservation easement.” That exclusion is capped at $500,000 and is further reduced if the easement reduced the land’s value by less than 30% at the time of the contribution. There are a handful rules of and requirements that must be met to qualify for this reduction.