Land Conservation Agreements How They Work

We hope the following information will answer your questions about Land Conservation Agreements (also called Conservation Easements, or easements) and how Southern Conservation Trust (the Trust) can help you protect the natural features of your land. What is a land conservation agreement? A Land Conservation Agreement (LCA) is a legal agreement between a landowner and a land trust which places permanent restrictions on the land use. An LCA is a practical way for landowners to protect their property and still retain ownership. What activities might an LCA prohibit? Generally, an LCA will either limit or prohibit the subdivision of a property and/or the construction of structures. Most conservation agreements prohibit commercial and industrial activity, topsoil removal, billboards and any activities that might disturb wildlife habitat. However, the terms of the agreement are dependent upon the individual landowners desires. What uses are permitted? Agricultural, forestry and wildlife management activities may be allowed. Limited subdivision to allow home sites for family members may be permitted. In some cases, an easement may allow limited development that protects the propertys natural resources such as wetlands, mature forest, etc. Does a land conservation agreement give the public access? Not necessarily. The landowner decides whether or not to allow public access. If a landowner permits public access, it is usually for a specific area of the property, such as a marked trail or an access point to a body of water. Must a Land Conservation Agreement cover a persons entire property? No. A landowner can place restrictions on all or a portion of the property, or different areas of the property may have specific restrictions.

2 Does a conservation agreement restrict the landowners ability to sell or bequeath the property in the future? Landowners can sell or bequeath property that is protected with an LCA. Since conservation agreements are permanent, the restrictions run with the land and bind all future owners. Are there financial benefits to donating a conservation easement? Income taxes Federal Tax Deduction: Entering into a land conservation agreement may qualify a landowner for charitable deductions if certain IRS criteria are satisfied. The gift value, determined by an appraiser, is the difference between the fair market value of the property before and after the restrictions are placed on the property. Generally, the amount of the deduction in one year is limited to 30% of the adjusted gross income (increased to 50% for easements donated through 2009). Any remaining value can be carried forward for the next five years (increased to 15 additional years for easements donated through 2009) but is subject to the same 30% (or 50%) limit. Georgia Tax Credit Program: The State of Georgia approved a Conservation Tax Credit in 2006 for land donations, bargain sales to land trusts and for land conservation agreements. The taxpayer already benefits from reduced taxes because the taxable income on your state return is indexed to the Federal Adjusted Gross Income. The total tax credit value is limited to an amount not to exceed the lesser of $500,000.00 or 25 percent of the fair market value of the donated real property (easement value). The tax credit in any one year cannot exceed the total tax liability and is limited to $250,000 for an individual and $500,000 for corporations. The carry over period is 5 years. Each donation must be certified by the Georgia Department of Natural Resources in order for the taxpayer to qualify for the tax credit Estate Taxes Land conservation agreements usually lower the value of a landowners estate, therefore reducing estate and inheritance taxes. Families have found that an LCA enables them to keep land that otherwise might be sold to pay estate taxes. Gift and Property Taxes Land conservation agreements may also provide landowners with gift and property tax benefits. If tax reduction is an important factor, the Trust recommends a landowner consult with a tax advisor before proceeding with negotiations. How is an LCA enforced? Southern Conservation Trust, as the conservation easement holder (grantee), is legally obligated to uphold the terms of the LCA, forever. The grantee is responsible for guarding against violations. With a regular, well-documented monitoring program, violations are

3 generally prevented. The periodic monitoring visits serve as a reminder that the landowner is legally bound to keep the property maintained according to the terms of the agreement. What are the steps in entering into a land conservation agreement? 1. A landowner and a Trust representative meet to discuss the landowners goals for the land, how an easement could accomplish those goals, the potential tax benefits, the Trusts role, and the landowners donation to the Trusts Stewardship and Defense Endowment Funds. The project is reviewed by the Trusts Land Committee to make sure it satisfies our Conservation Project Criteria. If both the landowner and the Trust agree that a conservation easement is desirable, restrictions and permitted uses are discussed in more detail. When agreement is reached on uses and restrictions, the Trust provides the landowner a request for a contribution to the Conservation Stewardship and Defense Funds. The Trust recommends the landowner consult legal and tax advisors to review the potential financial implications of entering into a land conservation agreement. A preliminary appraisal may be helpful at this point to estimate the potential tax benefits. If landowner is ready to proceed, legal work begins, including drafting the document, and obtaining a mortgage subordination. The Trust prepares the easement document. A title search and certificate of title is provided by the landowner. In some cases, the landowner may be required to provide an updated survey if the boundaries are unclear or in dispute. A survey may be needed and boundaries marked if portions of the property will be used and restricted in a different manner than other portions, as an exhibit to the easement. The landowner and the Trust review the draft agreement. Revisions are made if necessary. Both the landowner and the Trust should consult their respective legal counsel about the finalized document. If the landowner intends to claim the easement as a charitable deduction, a qualified appraisal must be obtained no more than 60 days prior to the easement donation. (A preliminary appraisal may be updated.) The Trust compiles a baseline property inventory, which includes mapping and photographs. This documentation is required if tax benefits are sought by the landowner and will serve as a guide when the Trust monitors the easement property. Once the final document is reviewed, a formal vote of acceptance is obtained from the Trust Board of Directors. The landowner makes a donation to the Trusts Conservation Stewardship and Defense Funds. The Land Conservation Agreement is signed and recorded. The Trust monitors the property annually.

2. 3.

4.

5.

6.

7.

8.

9.

10. 11. 12.

If you believe a Land Conservation Agreement may be the answer to your concerns about the future of your property, please contact the staff with Southern Conservation Trust at 770-486-7774 or info@sctlandtrust.org.