Conservation Easements

Conservation easements may be a good option for landowners wanting to protect their land from future residential and commercial development, and they can yield significant tax benefits thanks to recent legislation.

forestA conservation easement is a voluntary, legally binding agreement between a landowner and a government or nongovernment conservation organization that keeps land in agricultural and/or open space uses. The agreement is customized to meet the landowner's objectives and, in most cases, is perpetual.

In essence the landowner sells his or her right to develop all or part of their land for non-agricultural or non-open space uses to the conservation organization. Current uses, including residential and recreational uses, agriculture, forestry, and ranching can continue. The easement will protect some quality of the property such as wildlife habitat, open space, forest management or aesthetics.

A conservation easement allows you to continue current uses, including residential and recreational uses, agriculture, forestry, and ranching.  The easement will protect some quality of your property such as wildlife habitat, open space, or aesthetics.

In addition, public access to your property is not a requirement to participate in this type of conservation program.

Financial Benefits - Bargain Sale and New Tax Benefits

The Internal Revenue Service (IRS) treats gifts of conservation easements in the same manner that it treats other gifts of land to qualified recipients – taxpayers can deduct the present value of their easement gifts as charitable deductions from income.

flatwoods by Larry KorhnakThe value of a donated conservation easement for tax purposes generally equals the difference between the property’s value before and immediately after the easement is granted. This difference is, in effect, the market value of the property rights the landowner extinguishes, and is the same whether the easement is donated or sold. If a landowner wishes to claim this amount as a charitable contribution, the valuation must be determined by an appraisal prepared by a qualified appraiser and commissioned by the landowner.

A landowner need not donate the entire easement value. In order to achieve a mix of tax benefits and cash, the easement may be sold for an amount less than the fair market (appraised) value. Then the difference between the easement’s appraised value and the sale price is considered a donation. A part donation and part sale is called a bargain sale.

The level of income tax benefit that accrues to an easement donor depends on numerous variables, including the donor’s income, the size of the gift in relation to the donor’s income and the amount of other deductions claimed. Accordingly, the landowner must determine not only the value of the donation but also how the donation will impact his or her tax liability.

Also, a landowner can elect to deduct the easement gift more quickly, at a rate of 50 to 100% percent of adjusted gross income per year, if the easement value claimed is equivalent to the tax basis (usually cost) of the gift. The tax basis excludes any appreciation in value.

The Pension Protection Act - Significant Tax Benefits for Easement Grantors

On August 17, 2006 the President signed the Pension Protection Act which increased the tax benefits of protecting your land by donating a voluntary conservation agreement. These new incentives make it easier for average Americans, including working family farmers and ranchers, to donate land. The legislation allows:

  • A conservation agreement donor to deduct up to 50% of their adjusted gross income in any year;
  • Qualifying farmers and ranchers to deduct up to 100% of their adjusted gross income; and
  • Donors to take deductions for their contribution over as many as 16 years.

These changes allow many modest income landowners to deduct much more than they could under the old rules, bringing increased fairness to the tax code.

Provisions of the tax code - must be purposeful conservation

Under Section 170(h) of the tax code, every conservation easement must meet one of these “conservation purposes” tests:

  1. the preservation of land areas for outdoor recreation by, or the education of, the general public;
    the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem;
  2. the preservation of open space for the scenic enjoyment of the general public, or pursuant to a clearly delineated governmental policy, which will yield a significant public benefit; and
  3. the preservation of an historically important land area or a certified historic structure.

Conservation easements must clearly identify the purposes of the easement and the resources to be protected.  Any reserved rights must be consistent with the protection of the conservation values of the property and the donee land trust must have the commitment and the resources to enforce the terms of the restriction. 

Every donee land trust must adopt and follow the Land Trust Alliance's Land Trust Standards and Practices

Property Tax Benefits

Florida House Bill 7157 went into effect in January 2010 under 196.26 and 193.501, Florida Statutes (F.S.). This law provides property tax exemption for real property dedicated in perpetuity for conservation purposes (form DR-418C) and a current use tax assessment of land used for conservation (form DR-482C). Section 196.26(2), F.S. states that: "Land that is dedicated in perpetuity for conservation purposes and that is used exclusively for conservation purposes is exempt from ad valorem taxation." According to the statute, land that is "dedicated in perpetuity" is "land encumbered by an irrevocable, perpetual conservation easement." The criteria for qualification for conservation assessment are lengthy and available in a Property Tax Oversight Bulletin at: https://taxlaw.state.fl.us/wordfiles/PTO%20BUL%2009-23.pdf.

Landowners who meet the criteria and wish to apply for this assessment need to submit the proper application and all supporting documents to their county property appraiser's office. The applications are located on the Department of Revenue website under the "Ad Valorem Tax" subheading. Links to forms: http://dor.myflorida.com/dor/forms/2009/dr418cfillable.pdf. http://dor.myflorida.com/dor/forms/2009/dr482cfillable.pdf.

Keep in mind that if your property is already receiving favorable tax treatment via an agricultural assessment (or other "current valuation"), a conservation assessment outside of that associated with a perpetual conservation easement may or may not further reduce the property tax. An agricultural assessment is an agricultural production-oriented classification. Land not already in an agricultural classification or some other tax-favorable classification may benefit from a conservation assessment depending upon the post-easement fair market value, the types of encumbrances specified in the conservation easement, future land use options, and other considerations.

Federal Estate Tax Benefits

Federal estate taxes may be significantly reduced through either selling or donating a conservation easement. Additional tax benefits may accrue if the easement is donated. The most direct benefit results from reductions in fair market value and thus the value of the gross estate and the ultimate estate tax burden.

Additional tax benefits may result when easements qualify as a charitable contribution. Section 508 of the Taxpayer Relief Act of 1997, as amended by the IRS Reform Act of 1998 and the Economic Growth and Tax Reconciliation Act of 2001, allows the exclusion of up to 40% of property value encumbered by a conservation easement from the gross estate value. This is in addition to any reduction in taxable estate value resulting from the easement itself. The gross estate exclusion amount is currently limited to $500,000. Also, the 40% exclusion is the maximum amount and is on a sliding scale. This amount is reduced if the value of the conservation easement is less than 30% of the unencumbered property value. The 40% rate is reduced by 2% for every 1% the value of the easement is less than 30% of the unencumbered property value.

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Participating Organizations

What organizations will purchase a conservation easement?

Public Agencies

The major state agencies involved with purchasing conservation easements, particularly large ones that protect watersheds, are:

Non-government Organizations

There are also many private land trusts and other organizations that are interested in protecting open spaces, critical wildlife habitat and other natural and historical resources:

  • The Land Trust Alliance promotes voluntary private land conservation to benefit communities and natural systems and keeps a current listing of land trusts in each state.
  • The Nature Conservancy is a nongovernment organization whose mission is to preserve the plants, animals and natural communities that represent the diversity of life on Earth by protecting the lands and waters they need to survive. They are involved in conservation easements and other land purchases around the country. 

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Concluding Remarks - What You Need to Know

Here are the facts you need to know about conservation agreements before you start:

  • A voluntary conservation agreement, also known as a conservation easement, is a legal agreement between a landowner and a nonprofit land trust or government agency that permanently limits uses of the land in order to protect important conservation values. It allows you to continue to own and use your land and to sell it or pass it on to heirs.
  • When you enter into a voluntary conservation agreement with a land trust, you give up some of the rights associated with the land. For example, you might give up the right to subdivide your land or build additional houses, while retaining the full right to grow crops. Future owners also will be bound by the agreement’s terms. The land trust is responsible for making sure the terms of the agreement are followed.
  • Voluntary conservation agreements vary widely. An agreement to protect rare wildlife habitat might prohibit any development there, for example, while one on a farm might allow continued farming and the building of additional agricultural structures. An agreement may apply to just a portion of the property, and need not require public access.
  • A conservation donation requires not only a willing donor, but a qualified conservation organization to accept the donation. That organization needs to be able to show that the donation closely fits its particular charitable mission. A land trust will not accept a donation that does not fit its mission and purposes.
  • A voluntary conservation agreement can help a landowner pass land on intact to the next generation. By limiting the land's development potential, the agreement lowers its market value, which in turn lowers estate tax. Whether the agreement is donated during life or by will, it can make a critical difference in the heirs' ability to keep the land intact.
  • If a conservation agreement benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements, it can qualify as a tax-deductible charitable donation. The amount of the donation is the difference between the land's value with the agreement and its value without the agreement.
  • To qualify as a charitable donation, a conservation agreement must be permanent. A landowner should get professional financial planning and legal advice before making such a major donation.

It is also essential that the landowner carefully review the implications of the easement with legal and financial advisors before the final agreement. Bear in mind that your easement may be subject to periodic visits by the conservation organization to verify compliance with the agreement.   

These are the questions you need answered before starting a conservation easement: 

  • What activities do you want to prohibit on your land now and in the future?
  • What activities do you want continued on your land?
  • What other activities might you want to do in the future, or permit your heirs to do in the future, that are compatible with your conservation objectives?

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More Resources on Conservation Easements

UF-IFAS Sites

UF-IFAS Publications

UF-IFAS Extension Bookstore

Other Resources


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