What is a Conservation Easement?

A conservation easement is a legal agreement between a landowner and a land trust or government agency that permanently limits use of the land in order to protect its conservation value.  Conservation easements offer great flexibility.  They allow a landowner to continue to own and use the land and to sell it or pass it on to heirs while protecting the important natural features of the property. 

When a landowner donates a conservation easement to a land trust, such as the Couderay Waters Regional Land Trust, which serves the Couderay watershed area of Sawyer and Washburn counties, the landowner gives up some of the rights associated with the land.  For example, the landowner might give up the right to build additional structures while retaining the right to grow crops, or the landowner might permit structures to be constructed on the land, but limit their number and size.  Future owners also will be bound by all of the terms of the easement.  The land trust is responsible for enforcing these terms with current and subsequent landowners.

A landowner sometimes sells a conservation easement, but usually easements are donated.  If the donation 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 easement and its value without the easement.

This Q and A section covers many of the basics about conservation easements.  However, landowners should consult with their own financial and legal advisors to decide if a conservation easement meets their needs.

Q.    Who is allowed by law to hold conservation easements?

A.  A qualified non-profit, tax exempt conservation organization such as a land trust or conservancy may hold a conservation easement, as can federal, state or local government entities.  The Couderay Waters Regional Land Trust is such a qualified non-profit organization.

Q.  Who decides what restrictions are included in a conservation easement?

A.  The landowner and the land trust decide together what is needed to protect the land’s conservation value while at the same time meeting the financial and personal needs of the landowner and family.  Conservation easements are an option known for their flexibility.  For example, an easement on property with rare wildlife habitat may limit or further prohibit development of any kind while a farmland easement would allow continued farming and the building of limited agricultural structures.  An easement on lakeshore property may limit or prohibit development of structures larger than a specified size while allowing structures of a certain size or a certain set-back.  Land subject to conservation easement restrictions remains privately owned and managed by the landowner, but enforcement of the easement restrictions becomes the permanent responsibility and legal right of the land trust.
 

Q.    Does a conservation easement grant public access to land?

A.  An easement need not require public access.  However, public access to protected land can be a stipulation of a conservation easement agreement if mutually acceptable to the landowner and the land trust.

Q.  What effect does a conservation easement have on a landowner’s ability to sell, develop, or pass the land to the landowner’s heirs?

A.  While restrictions defined in a conservation easement run with the property forever, land protected this way can be sold, passed to heirs or otherwise transferred at any time.  Land-use restrictions may affect only certain portions of a property, significant woodland or wetland areas, for example, but allow development on the remainder.  Transfer of ownership does not affect the integrity or enforceability of the easement.

Q.    What are the financial or tax benefits of donating a conservation easement?

A.  Donation of a conservation easement to a land trust is treated as a charitable deduction for tax purposes as long as it meets applicable federal and state tax code requirements. 

¨      Federal and state income tax benefits vary with each easement but, in general, to qualify for a deduction, the easement must serve conservation purposes by preserving natural habitat, historic sites, unique scenic landscapes, wildlife corridors or connections to other protected parcels, public recreation or education areas, or open space. 

¨      Federal estate taxes can be affected by the donation of a conservation easement.  Since the easement reduces the market value of the property, its development potential is likewise reduced, lessening the impact of inheritance taxes and allowing the heirs to retain property that might otherwise have to be sold. 

¨      Reduction in the fair market value of land through a conservation easement allows a landowner to give more land away in any one year without creating a gift tax obligation or may help reduce the amount of gift tax owed. 

¨      Land subject to a conservation easement can qualify for a reduction in assessed value, thereby reducing property taxes on the land.  Under Wisconsin law, local property tax assessors are required to consider a conservation easement when setting the taxable value of the properly.
 

Q.    How is the value of a conservation easement determined?

A.  The value of the charitable contribution, for tax purposes, is the difference between the property’s full market value before and after donation of the conservation easement as determined by a qualified land appraiser.

 

Q.  How is a conservation easement administered?

A.  Accepting the donation of a conservation easement is a tremendous responsibility for a land trust. It means accepting the obligation of monitoring and enforcing the easement terms in perpetuity.  Once an easement is established, the land trust documents the site’s conservation value, performs periodic site inspections to ensure all the easement’s terms and conditions are being honored, and keeps all future owners of the site informed of the easement agreement.

If a violation is found, the landowner is notified according to documented procedures and steps are taken to repair any damage.  Most easement documents contain language that defines the process for resolving disputes between the grantor and the grantee.  The land trust in favor of which the easement is granted would have the right and responsibility to take legal action, if necessary, to enforce easement restrictions.

A stewardship fund is often established along with the conservation easement grant and is used to cover the expense of monitoring, enforcing compliance and legal defense of the easement.  The Couderay Waters Regional Land Trust encourages, but does not mandate, the establishment of such a stewardship fund.