A conservation easement is a restrictive covenant placed on all or a portion of a property for the purpose of conserving natural resources or restricting the use of such property. Conservations easements have been widely used for decades and are well recognized by all government authorities. The use of such strategy has become common among entities such as partnerships, limited liability companies, professional associations and Subchapter S or C corporations seeking favorable tax treatment. This treatment results when the easements are perfected by a transfer to a "qualiﬁed organization" such as a Land Trust or governmental agency capable of receiving such transfers. Internal Revenue Code Regulation Section 1.170-14 provides statutory guidance for taxpayers and their advisors planning such transactions.
In basic form, a land owner maintains ownership of the property while its uses and, therefore, its value is restricted by the easement. When diminution of a property's value occurs as a result of the placement of an easement and such easement is transferred to a qualiﬁed organization, certain tax beneﬁts inure to the beneﬁt of the transferor. It is imperative that the transaction be carefully documented as prescribed by state and US regulators to ensure these beneﬁts are perfected.
Parties involved in performing a conservation easement generally include the following:
- Landowner/Transferor: Taxpayer placing the easement on the property and transferring the easement.
- Qualiﬁed Organization: Typically a Land Trust or governmental agency that can and will receive and enforce the easement/
- Qualiﬁed MAI Conservation Appraiser: Certiﬁed individual who will value the land at its highest and best use in perpetuity and calculate the value of the easement.
- Lender: If present, must subordinate its lien position to the recorded easement.
- Consultants: Includes biologists, naturalists, conservation consultants, and investment bankers to help facilitate the process and execute strategies.
- Dept. of Natural Resources (“DNR”): The state’s DNR approves and sometimes pre-certiﬁes whether or not a property will qualify for conservation easement purposes and whether or not state tax credits would be available to the taxpayer.
Please contact Yukon Property Consultants with further questions. We look forward to working with you.