Creating a Conservation Easement or Gifting Land

Introduction

Pound Ridge as we know it today – with its wooded viewsheds, wetlands, varied wildlife habitat, watershed lands protecting our clean water, scenic vistas, buffered lakes and streams – is changing. Competition for land has intensified as our population grows and ‘buildable’ land becomes more scarce. Land that is being developed is often land that is more challenging – such as that with steeper slopes, water, wetlands, rock outcroppings and those that sit along ridgelines. Regulation protecting important topography, natural resources such as water, clean air and ridgelines as well as undisturbed, native vegetation on which wildlife depends, sometimes works as intended and other times, does not. Sometimes, subjects which can be the basis for environmental protection are not addressed by town leaders using ‘best practices’ shown to work in other towns or regions. With development pressures continuing to grow, eventually, as our Comprehensive Plan projects, Pound Ridge will be ‘built out’.

How can we best accommodate the inevitable growth of our community while protecting the natural resources that gives us the wonderful quality of life we experience in Pound Ridge – by maintaining as much open space as possible in strategic locations.

As awareness is heightened about the importance of open space, i.e., land that is essential because of its impact on natural resources and wildlife protection, its recreational and scenic value, or its critical link to already-protected land, there is an unprecedented opportunity for the citizens of Pound Ridge to have a significant impact in the upcoming years. How? Well, there are many ways but one of the most important is through conservation easements restricting development and outright gifts of land for conservation purposes granted by community-minded Pound Ridge landowners.

What is a Land Gift?

A Land Gift is a way for a landowner to provide permanent protection of Land they own by gifting it to The Pound Ridge Land Conservancy. This process transfer the title of the land from the land owner to the PRLC. The land owner normally receives a tax deduction for the property and no longer is required to pay property tax on the land. The PRLC holds all its gifted/donated land in perpetuity. Often, the land owner provides a cash endowment to assist in the maintenance and upkeep of the property.

Land Owners tend to gift land when they wish to reduce the size of their estate, permanently reduce their out of pocket tax payments and/or desire a tax deduction. In the deed, restrictions are allowed which control how and what the PRLC may do with the land. i.e.. No Trails, Trails Allowed but No Parking, etc. Further, you can donate the land but continue to live on it by donating a remainder interest in the property and retaining a reserved life estate. The donation may also entitle you to an income tax deduction when the gift is made.

What is a Conservation Easement?

A conservation easement is a way for a landowner to provide permanent protection for environmentally significant land without giving up ownership of the land. It extinguishes some of the rights the land owner has to develop the property and “donates” those rights to a qualified non-profit organization like the Pound Ridge Land Conservancy or to a public body such as a town, a county or a state agency, that will protect the land “in perpetuity.” The recipient organization or municipality, must accept the gift in writing and agree to enforce the terms of the conservation easement to assure that future owners of the property abide by them.

With a conservation easement, the land owner does not give up ownership and may continue to live on it, sell or mortgage it or pass it on to heirs. It is a legal document, filed with the County and “Runs with the land.” All future land owners will find it when they do a title search.

A Baseline Data Report is Necessary

Whenever a conservation easement is donated, a “baseline data report”, describing and documenting the condition of the property at the time of donation is created. This report, signed by all parties, is referenced in, and becomes part of the conservation easement. It is not only required by the IRS but is also essential for the long term viability of the easement.

This report includes maps, surveys, photographs, inventories of important species and description of habitat that will provide an inventory for future generations.

The Income Tax Benefits of Conservation Easements.

The following is provided not as tax advice but for informational purposes only and to spur further inquiry of tax and accounting professionals. Please seek the independent advice of your professional tax planning consultant as every individual and family’s situation is different.

Property owners who have protected their land in partnership with the PRLC know about the benefits of donating conservation easements. Easements keep wildlife habitats intact, protect the wooded character of our town and help keep water quality clean and our natural resources healthy. These societal benefits are complemented by individual benefits with the federal tax laws permitting the landowner to take an income tax deduction for contributing a ‘qualified’ conservation easement to a land conservation organization. In addition, a new New York State law gives conservation easement donors, both old and new, the opportunity to get a rebate on their property taxes in the form of a state income tax credit on any property in its ‘natural’ state protected by an easement.

Conservation easements have a special status under Federal law and the IRS allows a landowner making a donation to take a charitable deduction for the value of the easement without giving away the whole asset.

To qualify for a tax deduction, the easement must meet certain “conservation purposes” which include:

  • Preservation of land for outdoor recreation and education for the general public or
  • Preservation of a relatively significantly natural habitat or
  • Protection of open space that provides a view shed to the general public

In many instances, the public benefit can be met even though there is no public access to the property and the landowner wholly maintains the right to “private enjoyment” of the land. Wetlands or forestland may provide wildlife habitat and watershed protection that provides significant public benefit. Open fields or woodland that can be seen from the road or other public spaces may provide public benefit in the form of a valuable viewshed.

The IRS considers certain conservation easements to be tax-deductible charitable contributions. The value of the donation is equal to the fair market value of the property before the easement, with its development rights intact, minus the fair market value after the easement. Donors of tax-deductible conservation easements have up to 16 years to take their income tax deduction, and can deduct up to 50% of their adjusted gross income each of those years. In order to qualify for a tax deduction, the donor of the conservation easement must have the property appraised by a “qualified appraiser” at the time the donation is made as well as a baseline report, as described above, that substantiates the condition of the property at the time of the donation. The deductions apply to land donations made after January 1, 2015.

There is also a New York State Conservation Tax Credit for donors of conservation easements. If a landowner donates a conservation easement that meets IRS requirements, they will receive an annual state income tax credit for 25% of the property taxes on their easement-restricted land, up to $5,000 (not including taxes on structures). This tax credit is available to all owners of land with qualified conservation easements (according to the IRS), regardless of when the easement was created and it runs with the land so that successor owners will also benefit.

A gift of land to a duly qualified organization such as PRLC, may provide relief from town or municipal real estate taxes.

Estate Tax Benefit of Conservation Easements

A conservation easement granted during a grantor’s lifetime or even in the grantor’s will or by his or her executors, can significantly lower the taxable value of the land in the estate and, even if the land is sold by the estate, can limit what the new owners can do with the land.

The Pound Ridge Land Conservancy, in conjunction with its partner, the Westchester Land Trust with whom it holds conservation easements, will help potential easement and land donors prepare baseline data reports and work through the intricacies of land donation with donor’s accountant or tax advisor to ensure they comply with these provisions.

For further information on the 2015 legislation making the tax incentive rules permanent please see:
http://s3.amazonaws.com/landtrustalliance.org/ConservationEasementTaxIncentiveBrochure2016.pdf

Testimonials

The Robert Whitehead Preserve

Twenty-nine acres of prime wildlife habitat in the rocky hills of Pound Ridge will be preserved forever thanks to a generous donation to the Pound Ridge Land Conservancy (PRLC) and Westchester Land Trust from Zoe Caldwell and her sons, Charles and Sam Whitehead made in 2003. This parcel of land became the ninth preserve owned by the PRLC.

Under a partnership arrangement agreed to in 2001, the land will be owned by the Pound Ridge Land Conservancy, which will grant a ‘back-up’ conservation easement to Westchester Land Trust to ensure that the property is protected in perpetuity.

Miss Caldwell and her sons donated the land in memory of her husband and their father, Robert Whitehead, who passed away in 2002. “This land is so beautiful, and it has always been a kind of refuge for our family,” said Miss Caldwell. “We are very happy to be able to preserve it, and we are sure Robert – who loved it as well – would agree wholeheartedly.”

Peterson and Brown Easements

Former PRLC board member Sondra Peterson finalized an agreement in November, 2002 with the Westchester Land Trust and the Pound Ridge Land Conservancy, placing over 29 acres of forested rolling hills and wetlands into a conservation easement. “I feel very fortunate to have not only been able to purchase and live on this land but now, with the conservation easement, I am able to protect it from development and preserve it as open space in perpetuity,” said Ms. Peterson. A devout lover of animals and nature, she “wanted to establish a haven for the wildlife in this area and preserve the natural beauty of the landscape.”

In the beginning, Ms. Peterson only wanted to preserve the land and give it to wildlife. “Since then I understand it is very interesting tax wise to do this, which I am very pleased about, but I would have done it anyway.”

Elaine Brown, who was a PRLC board member, and her husband Michael, signed a conservation easement in December, 2003, on 4 acres of their property, which became the third co-easement signed by the WLT and the PRLC. “In the 5 years we’ve lived in Pound Ridge, we have seen changes in the landscape and feel happy that we could do our own little part of keeping this particular piece of town as it is. It also was important to us to ensure that this beautiful property will remain intact in perpetuity. Real estate professionals advised us that much of the value of a large piece of land lies in its size and, increasingly, rarity, given development pressures. We’re pleased that our property will always include a 4-acre conservation area,” commented Ms. Brown.

In 2001, the Pound Ridge Land Conservancy entered into a partnership with the Westchester Land Trust to serve as each other’s backup easement holder. Their goal was to add an additional level of security for those landowners who donate land or conservation easements. With another like-minded organization serving as backup, each would be there to guarantee that the land is protected in perpetuity. This partnership between the two organizations was, in fact, an important factor in both Ms. Peterson’s and the Browns’ decision to donate a conservation easement. They like the idea of a local group like the Pound Ridge Land Conservancy working together with a regional group like the Westchester Land Trust. “It gave me a greater level of comfort knowing that both groups will protect and monitor the land and make sure the easement is fully enforced forever,” said Ms. Peterson.