STEPS TO DONATE A CONSERVATION EASEMENT
- Landowner and land trust representative(s) meet to discuss the landowner’s wishes, needs and conservation objectives. The land trust representative describes the land trust and its policies, and explains how a conservation easement works, appropriateness for the property, and any other conservation options that may be available to the landowner.
- Landowner reviews the material, consults with family members, legal counsel, and/or tax advisors, and indicates an interest in further exploration of an easement.
- A land trust representative visits the property to evaluate its features and natural and open-space resources, and consults again with the owner on the easement terms and the long-term objectives. The land trust representative determines whether protection of the property serves the public interest and, if donated, which of the various IRS public benefit tests are satisfied.
- After consulting with family members, advisers, or others, the landowner reaches a preliminary agreement with the land trust on the proposed terms of the easement and property description.
- The land trust calculates the fee that will be required of the landowner to complete the easement, based on the complexity of the particular easement terms. If the landowner plans to sell their Colorado Tax Credits through a tax credit broker, arrangements can be made with the landowner for payment of those fees after the Colorado Tax Credits have been sold.
- The land trust board votes on an “authorization to proceed” with negotiation of a conservation easement on the property, which means that the board believes that the conservation values on the property may provide a public benefit and that the property fits within the land trust’s strategic plan.
- Landowner determines if certain IRS requirements for an easement to be tax deductible are met.
- The land trust confers with the town or county planning department to confirm any zoning or development issues that might impact the conservation easement.
- If necessary, the landowner has an engineering study completed to estimate development costs that might impact the appraised value of the property.
- The land trust initiates a title search for the property, and reviews it to ascertain chain of title, mineral and water rights, existing easements on the property, and mortgage status.
- If the landowner intends to take a qualified tax deduction or claim a credit for the non-cash charitable gift, the landowner is responsible for hiring an independent appraiser, who is qualified by the Colorado Division of Real Estate, to determine the value of the gift.
- If the landowner intends to sell their Colorado Tax Credits through an authorized Tax Credit Broker, the landowner selects a tax credit broker firm and begins providing information to them.
- The landowner contacts the lender, if any, to arrange for subordination of mortgage. The mortgage must be subordinated for the conservation easement to be effective and, if donated, for a tax deduction to be available.
- The land trust conducts a baseline study to inventory and document the conservation values of the property.
- The land trust board approves the final form of the negotiated conservation easement.
- Conservation easement is finalized and signed. The baseline documentation is certified by the landowner as reflecting property conditions.
- The signed easement documents are recorded at the county courthouse.
- Through the tax credit broker or with the help of the land trust, the landowner files with the State of Colorado for a certificate of tax credit eligibility.
- The land trust provides letters and documents to the landowner that will be required for their tax filings.
- The landowner claims a federal income tax deduction for the donation on a special form with his or her income tax return (Form 8283), and reports the Colorado Tax information using forms 1303, 1304 and 1305. A land trust signature is required on the 1303; the landowner (or his/her tax accountant) provides the 1303 and 1305 to the land trust so that this step can be completed.
- If tax credits are being sold, the landowner receives funds from the sale of tax credits, and pays the fee (from step 5) to EVLT.
- The land trust has the responsibility of monitoring the property once or twice per year to ensure that all of the easement conditions are being met.
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If you would like a landowner packet with more details about this process, please contact us.