Donating A Conservation Easement
Donating a conservation easement is a personal decision for you and your family.
If you think this may be right for you, reach out to the Estes Valley Land Trust to discuss your options.
Steps to Donate Conservation Easement
Donating a conservation easement takes approximately 6-9 months and involves a number of steps. To learn more about this process, contact the land trust. Specific steps may include:
- You, the landowner, meet with the land trust to discuss your interest and conservation objectives.
- We visit the property to evaluate its conservation value, and if it interests the land trust, we begin talking about the terms of the easement and costs/fees involved.
- The land trust board must authorize staff to continue at this point, with an “Authorization to Proceed”.
- The landowner handles tax credits, engineering studies, and appraisals.
- The land trust handles the title search, zoning questions, and baseline documentation
- The land trust board approves the final negotiated conservation easement, then it gets signed and recorded.
- The landowner files for tax credits, sells them through the broker, and pays any land trust fees (from step 2).
- The land trust monitors the property once or twice per year to ensure that all of the easement conditions are being met.
If you would like a landowner packet with more details about this process, please contact us.
In accordance with the IRS Code, lands must exhibit significant value in the following criteria to be up for preservation consideration:
- Land for outdoor recreation or education of the general public.
- Relatively natural habitat.
- Open space for scenic enjoyment of the general public, or Federal, State, or local governmental conservation policy.
- Historically important land or certified historic structure.
By donating a conservation easement to EVLT (or any other qualified land trust), a taxpayer can be eligible for certain state and federal income tax benefits, as well as potential estate tax and property tax benefits. In order to qualify for these tax benefits, an appraisal has to be completed (by a State-approved conservation easement appraiser) that will identify the property values both before and after recording the conservation easement. The difference in those two values is considered the donation value of the conservation easement.
For example, at its full development potential a property might have an appraised value of $1,000,000. After restricting development potential through a conservation easement, the appraised property value has been reduced to $600,000. That means that the donation value of the conservation easement is $400,000.
State income taxes: Colorado has created favorable tax incentives for qualified donors to promote land conservation. Effective January 1, 2015, tax credit certificates are issued for 75% of the first $100,000 of the donated value and then 50% of any remaining amounts in excess of $100,000 up to a maximum credit of $5 million per donation. In our example above, the Colorado income tax credit would be $225,000. These credits can be carried forward for up to 20 years to continue to reduce the donor’s state income tax liability. Alternatively, the credits can be sold or transferred to other Colorado taxpayers for a cash benefit to the easement donor. There are tax credit broker organizations to assist in these transactions. The Colorado Department of Regulatory Agencies has a webpage dedicated to the Conservation Easement Program.
Federal income taxes: The donor of a conservation easement may treat the donation value as a charitable contribution, much like donating to a church or school. In any given tax year, the donation amount that is claimed can be up to 50% of the donor’s adjusted gross income, and unused portions can be carried over for up to 15 additional years. In the above example, the donor could claim a $400,000 charitable contribution if the donor’s adjusted gross income is over $800,000. If the donor’s annual income is closer to $80,000 per year, the donor could claim a $40,000 charitable contribution each year for 10 years.
The above explanation is an illustration only and cannot be assumed for individual cases. Prospective donors should always consult with their personal tax adviser to obtain specific information about how they might take advantage of conservation tax benefits.
EVLT may be able to assist donors in locating qualified professionals to help develop the optimum tax benefits from any donation, whether it is an easement or a financial contribution.