Grand River Partners Inc.

                                                                                                             preserving the  grand - leaving a legacy

Conservation Easements

Protecting

the Grand River Watershed

The Conservation Easement

Land trust organizations like Grand River Partners, Inc. have protected millions of acres of land all across the country.  Grand River Partners, Inc. and other conservation organizations have permanently roughly 34,000 acres of the 455,680 acres in the Grand River Watershed since 1994.  Grand River Partners, Inc. would like to encourage landowners to become part of this movement to protect open and green space in their community.  By establishing a conservation easement, you can join the growing number of landowners who have conserved their land and helped to protect a piece of the Grand River Watershed.

Today's pressures of encroaching development and urban sprawl have sparked a growing concern over the loss of farmland, green space, and natural resources.  The conservation easement is but one tool landowners, land trusts, and other conservation organizations can use in order to protect and preserve private property; thus, ensuring farmland will continue to be productive and green space will be a  permanently protected haven for wildlife.  Grand River Partners, Inc. is a non-profit land trust dedicated to protecting properties in the Grand River Watershed.

What is a Conservation Easement?

To understand how a conservation easement works, it is important for the landowner to understand they own more than the land itself, including certain rights to the land.  These rights may include the right to farm, harvest timber, subdivide, extract minerals, or develop.  Landowners also have the right to place limits on the types of land uses that may take place on their property through a conservation easement.  The primary objective of conservation easements is to eliminate development as a potential future land use.  Conservation easements are rather flexible agreements that can be tailored to each individual's needs.  Conservation easements allow the property owner to maintain ownership of the land and continue to use the property as they always have.  Some examples of these practices the landowner may be permitted to do are hunt, fish, maintain existing trails, collect firewood, farm, and even allow limited timber harvest.  For establishing a conservation easement, the landowner may receive a fee or a tax benefit.  Conservation easements are permanent agreements that are recorded on the properties deed and do not grant public access.

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What are the benefits of a Conservation Easement?

Conservation easements are a win-win situation for the landowner.  The landowner s will be assured that the property will never be developed, yet they still maintain ownership of the land and enjoy the property as they always have.  The landowner may also receive financial incentives for establishing a conservation easement.  Typically, conservation easements are established in one of two ways, and each is described in the following examples.  A conservation easement typically reduces the property value.  It is this reduction that is used to determine the financial benefit of establishing a conservation easement.

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Example 1 - Old tax rules

In this example; the landowner decides to establish a conservation easement with a land trust and receive a tax benefit.  The fair market value of the property is determined to be $100,000 by a professional appraiser.  Then the property is essentially appraised again at $60,000 with the conservation easement in place.  The conservation easement has reduced the property value by the difference of $40,000.  This figure is the overall value of the charitable donation.  The landowner is then able to deduct 30% of the gross adjusted income from his/her income tax for a period not to exceed 6 years, or until the value of the donation is expended.  For this example, lets assume the landowner has an adjusted gross income of $50,000.  The landowner will be able to deduct $15,000 a year (30% of $50,000) until the donation value of $40,000 has been expended.  The landowner can deduct $15,000 from his/her income tax for the first two years and $10,000 for the final year.  Below is a simple breakdown of how this works.

Conservation Easement Value = $40,000

Adjusted Gross Income = $50,000

30% of Adjusted Gross Income = $15,000

Easement Deduction

Year 1 Deduction =  $15,000                      Year 4 Deduction = 0                        

Year 2 Deduction = $15,000                       Year 5 Deduction = 0               

Year 3 Deduction = $10,000                       Year 6 Deduction = 0

The full value of the conservation easement is realized by year three.

In order to deduct the value of the conservation easement, it must be established in perpetuity, serve a conservation purpose, and must be established with a qualified organization such as Grand River Partners, Inc.  

Grand River Partners, Inc. strongly recommends that any landowner considering a conservation easement consult his/her financial advisor and attorney.

Example 2 - New/Extended tax rules

In this example, the landowner decides to establish a conservation easement with a land trust and receive a tax benefit.  The fair market value of the property is determined to be $2,200,000 by a professional appraiser.  Then the property is essentially appraised again at $1,200,000 with the conservation easement in place.  The conservation easement has reduced the property value by the difference of $1,00,000.  This figure is the overall value of the charitable donation.  The landowner is then able to deduct 50% of the gross adjusted income from his/her income tax for a period not to exceed 15 years, or until the value of the donation is expended.  For this example, lets assume the landowner has an adjusted gross income of $50,000.  The landowner will be able to deduct $25,000 a year (50% of $50,000) until the donation value of $1,000,000 has been expended.  The landowner can deduct $15,000 from his/her income tax for the first two years and $10,000 for the final year.

Conservation Easement Value = $1,000,000

Adjusted Gross Income = $50,000

50% of Adjusted Gross Income = $25,000

Easement Deduction

Year 1 Deduction =  $25,000                    Year 9 Deduction = $25,000                        

Year 2 Deduction = $25,000                     Year 10 Deduction =$25,000                

Year 3 Deduction = $25,000                     Year 11 Deduction =$25,000 

Year 4 Deduction =  $25,000                    Year 12 Deduction =$25,000                         

Year 5 Deduction = $25,000                     Year 13 Deduction =$25,000                

Year 6 Deduction = $25,000                     Year 14 Deduction =$25,000 

Year 7 Deduction =  $25,000                    Year 15 Deduction =$25,000                         

Year 8 Deduction = $25,000                       

The full value of the conservation easement is not realized.  However, under these new tax incentives, the landowner is provided with more of an opportunity to realize the easement's full value. 

There are other benefits in establishing a conservation easement.  Conservation easements are a valuable tool that should be considered in every property owner's future plans.  Conservation easements can be utilized to help ensure the family's property remains in the family by eliminating or reducing estate taxes.

Grand River Partners, Inc. strongly recommends that any landowner considering a conservation easement consult his/her financial advisor and attorney.

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New Tax Law Incentives

Congress recently passed a law to extend the tax benefits of protecting your land by donating a voluntary conservation easement agreement.  If you own land with important natural or historic resources, donating a voluntary conservation easement agreement can be one of the smartest ways to conserve the land you love and protect America's natural heritage. Donating an easement allows you to maintain your private property rights and possibly realize significant federal tax benefits.

***** Conservation easement must satisfy the following:

-  A quallified farmer or rancher is a taxpayer who earns more than 50% of his or her gross income from the business of farming in the taxable year in which the conservation easement contribution is made.

- The conservation easement must cover property that is used, or is available foe use, for agricultural or livestock production.

- The conservation easement must contain a restriction that the property will remain available for agricultural or livestock production.

Click here to see examples

This is a time sensitive issue however.  This new tax incentive will only apply to those conservation easement completed before December 31st, 2009.  

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Our Conservation Easements

Grand River Partners, Inc. currently holds 34 conservation easements and owns 5 properties in the Grand River Watershed for a total of 3,076 acres of permanently protected land.  Below are photos of some of these easements. 

If you would like any further information, or have any questions on conservation easements, please contact us.

Click on the pictures to view larger image