Conservation Easements: Frequently Asked
Questions
For a Grantor to convey a conservation easement that qualifies
for a federal tax deduction, the following documents need to be
prepared:
- Conservation Easement (drafted by either the Grantee
or the Grantor's attorney);
- Inventory of the Property (prepared by a biologist,
planner or other consultant);
- Appraisal (prepared by an independent appraiser working
for the Grantor);
- Title work (usually prepared by the Grantor's attorney);
- Survey and legal description (prepared by a surveyor
working for the Grantor);
- Form 8283 (an attachment to the federal tax return
of all individuals claiming contributions more than $5000, prepared
by the Grantor or his accountant).
Many Grantee organizations will also request management endowments
from the Grantor to help cover future monitoring expenses.
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Under North Carolina property law a conservation easement may
be created for a period of years or it may be perpetual. However,
if the landowner wishes to claim a federal and state tax deduction,
the easement must be granted in perpetuity.
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An easement's restrictions should be tailored to the particular
conservation values of the land. Examples of activities that may
be prohibited or restricted in a conservation easement include industrial
or commercial use, mineral development or exploration, subdivision,
residential use, and extensive timbering. Easements typically restrict
development and subdivision.
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The Grantor retains ownership along with the right and duty to
manage and care for the property. In some cases, where the conservation
organization has special experience in managing a particular habitat
that exists on the property (for example, rare species habitat),
it may be appropriate for the Grantee to be given the right to undertake
certain management tasks.
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Yes, you can sell, mortgage, or otherwise convey the property.
However, the land will remain subject to the conservation easement.
If there is a pre-existing deed of trust on the land, it must be
subordinated to the conservation easement before the easement is
granted.
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Because easements are designed to be permanent, amendment or
revocation is difficult. Revocation is usually accomplished only
through a court proceeding and depends upon demonstrating that due
to a change in circumstances the original conservation purposes
of the easement can no longer be sustained.
If the easement is extinguished, the interest in the land (or
the proceeds from any sale) is allocated to Grantee and Grantor,
respectively, in proportion to the value of the easement and the
value of the land.
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In order to fulfill its monitoring and enforcement obligations,
the Grantee must be provided access to the property on a schedule
agreed to by the Grantor. It may also be appropriate for the Grantee
to be provided access for scientific research and occasional field
trips by its members. Access, both legal and physical, will be determined
before the conservation easement is recorded.
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To qualify as a charitable contribution for federal tax purposes,
an easement must be perpetual, must be made to a qualified Grantee,
and it must meet one or more of the following conservation purposes.
- Preservation of land for public outdoor recreation or
education;
- Protection of relatively natural habitats of fish, wildlife,
or plants;
- Preservation of open space including farm and forest
land;
- Preservation of historically important land or buildings;
To determine whether the land will qualify under one or more
of these conservation purposes, a natural resource inventory including
maps, photographs of existing buildings and roads, a description
of natural habitats, and a survey of wildlife should be prepared.
The inventory allows the owner to decide which conservation purpose
is met and will distinguish ecologically sensitive areas from other
areas that might be appropriate for limited development or other
uses.
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An appraiser using the "before and after test" determines the
value of an easement. That is, the value of the property as restricted
by the conservation easement is subtracted from the value of the
property before the restrictions were granted. The difference between
the two calculations is the value of the conservation easement.
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Since a conservation easement must be recorded in the Register
of Deeds in the county where the land is located, it is a public
document like any other land deed or easement.
Grantee organizations will cooperate with a Grantor who wishes
either to publicize the gift (for example, a corporation may seek
media coverage as part of its public relations program) or to minimize
publicity (for example, a family that wishes relative anonymity).
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In most cases, an easement will not require or allow entry by
the public. However, certain types of conservation easements do
require either visual or physical access by the public to qualify
as charitable contributions under the Internal Revenue Code. Those
easements are:
- Scenic and open space easements, in which the scenic
character of the land is critical to its conservation value
(visual, rather than physical, access to or across the property
is sufficient);
- Land areas set aside for recreation or education for
the general public (these easements are granted infrequently
due to the extensive public access and use they require).
On the other hand, conservation easements that protect significant
natural environmental systems, such as fish, wildlife, or plant
habitat and farmland easements, where there is an official government
policy to protect family farms from fragmentation, will not require
public access.
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