AN INTRODUCTION TO CONSERVATION EASEMENTS
One of the tools used by Kachemak Heritage Land Trust (KHLT) to protect significant natural environments and open space is a conservation easement. A conservation easement is a voluntary legal agreement between a landowner and KHLT that restricts certain types of development in order to preserve special natural values ofthe property. Individuals and organizations grant conservation easements to protect their land from incompatible development while retaining private ownership and use.
The provisions of each easement are tailored to the particular property and individual owner. The specific restrictions are detailed in the easement document and the landowner conveys to KHLT the responsibility to enforce these restrictions.The conservation easement is binding on all future owners of the property because, unllke a covenant, the easement restrictions travel with the deed.
Easement provisions address such issues as subdivision of the property, construction of roads or buildings, agriculture, or timber harvest among others. An easement restricts development to the degree necessary to protect the significant natural values of the property. Sometimes construction is totally prohibited, often not.
In addition to knowing that the property's conservation values will be preserved forever, the landowner may receive significant tax benefits. The property must meet Internal Revenue Service requirements defining conservation purposes and must be donated to a qualifying organization such as KHLT. In general, the value of the easement donation is the difference between the property's fair market value without the easement and its fair market value with the restrictions in place. Alaska statutes require local governments to recognize the reduction in value from a conservation easement when figuring property taxes. It is important to discuss these potenttal financial benefits with an attorney or tax advisor because each landowner's situation is different.
To establish the value of a conservation easement, the value of the restrictions must be determined. To do this, an appraiser determines what the property is worth (its fair market value) without the easement restrictions and then determines the value of the property after it is restricted by the easement. The difference in value is the amount of the gift. For example, if a property is appraised at $500,000 before a conservation easement is given and $300,000 afterwards, the value of the easement is $200,000.
Different rules govern how much of the value of the gift can be deducted in any one year, depending on whether the value of the property before it is restricted is valued at basis or at appreciated value. Generally, a deduction can be made up to thirty percent of the donor's adjusted gross income each year for a total of six years or until the value of the donation is used up.
In accepting a conservation easement, KHLT assumes the legal obligation to forever carry out the donor's desires by upholding the terms of the easement. So although the easement donor has given something of great significance, KHLT has, in a sense, assumed a perpetual liability. A stewardship donation is requested with each conservation easement. This one-time fee generally reflects a small contribution in relation to the owner's tax savings and the assurance that his or her wishes for the future of the property will be honored.
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