Triangle Land Conservancy

• Triangle Land Conservancy (TLC) is a local non-profit land trust serving Wake, Johnston, Chatham, Lee, Orange and Durham counties

• One of 25 land trusts in North Carolina working to protect farm and forest land, stream corridors, wildlife habitat and natural areas

• Non-profit – funded primarily by our 3,100+ members – individuals, families and area business and organizations.

What is TLC?

• Triangle Land Conservancy's mission is to protect important open space—stream corridors, forests, wildlife habitat, farmland and natural areas—in Chatham, Durham, Johnston, Lee, Orange and Wake counties to help keep our region a healthy and vibrant place to live and work

• Work with landowners to identify best tool for protecting their land

• All of TLC’s work is voluntary

• Conservation methods/tools used by TLC

• Own land – nature preserves, farm preserves, and open lands

• Assist – facilitate acquisition on behalf of another entity. Example: State Parks, County, or City Government

• Conservation Easements – landowner retains ownership, but relinquishes certain rights

What does TLC do?

Public Benefits of TLC’s Conservation

TLC’s conservation work fulfills these four public benefits and helps answer the question to the public “ How does TLC’s conservation work impact me?” Each conservation action TLC performs can be explained as it satisfies benefits to the community.

SupportingLocal Farms and Food

Connecting People with Nature

Safeguarding Clean Water

Protecting Wildlife Habitat

White Pines Nature Preserve

Steep North Facing Bluffs

Unique VegetationWhite Pine

Catawba Rhododendron

Four Miles of Hiking Trails

Confluence of Rocky and Deed Rivers

Spring Peeper Frog on the trail

White Pines Restoration Map

Summer 2012 thinning begins

Group Opening

Loblolly Pine Thinning

TLC Conservation Corps at work

Conservation Easements

A voluntary option for protecting your farm and

forest landTriangle Land Conservancy

January 23, 2014

• As a landowner you have certain property rights– Development– Timber/forest management– Agriculture - grow crops, raise livestock– Extract minerals

• This collection of rights is often compared to a “bundle of sticks” because individual rights can be removed from the collection just as a stick can be removed from the bundle

Property Ownership

• A voluntary legal agreement between a landowner and a qualified conservation organization or public agency that permanently limits certain uses of the land to protect its conservation values

• In effect, conservation easements remove the right to develop the property and to extract minerals from the property from the landowner’s “bundle of sticks”

What is a Conservation Easement?

• Conservation values or purposes – defined in Section 170(h) of the IRS code as:– Wildlife habitat (plants and animals)– Farm and forest land (open space)– Land for public outdoor recreation or education– Historic land or buildings

• Conservation easements “run with the land” - they bind both current and future landowners

What is a Conservation Easement?

• Conservation organization or public agency (Grantee) that holds the conservation easement has right to enforce easement and monitor the property

• Conservation easements are flexible – not “one size fits all”

How does it affect my land?

• Allows landowner to continue to own and use their land– Farming– Forestry– Passive recreation – hunting, fishing, etc.– Often allow for a certain number of structures

• Can still use land as collateral for loan; lease, sell or pass property to heirs

How does it affect my land?

• Does not grant public access– Landowner may allow public access so long as the

conservation values of the property are not diminished

• Remain eligible for present use property tax program

• Remain eligible for federal and state farm programs

How does it affect my land?

• Easement holder visits property regularly (usually once a year) to ensure landowner is in compliance with easement terms

• Ensures conservation values are protected and maintain the deductibility of the easement

• Easement holder may request a contribution to their stewardship endowment – tax deductible

Stewardship

• Federal income tax deduction

• No State of NC income tax credit

• Estate taxes

• Limited state and federal funding

Financial Benefits

• Independent appraisal– Qualified appraiser – qualifications defined through a 2006

law - PL109-280– Essentially two appraisals in one report– First appraisal – highest and best use – fair market value– Second appraisal – value of property subject to

conservation easement – Conservation value = difference between first appraisal

and second appraisal

How is the Value Determined?

• Example:– Appraised fair market value of farm “as is” equal to

$500,000– Appraised value of farm subject to terms of conservation

easement equal to $250,000– Value of conservation easement equals $250,000

How is the Value Determined?

• Federal Tax Law– Internal Revenue Code

• 26 USC 170(h) – qualified conservation contribution

– Internal Revenue Regulations• 26 CFR 1.170A-14 – qualified conservation contributions

• Individual landowner may use the conservation easement value to:– Deduct up to 30% of their adjusted gross income (AGI) for

the year of the gift– Any unused conservation easement value may be carried

forward an additional 5 years

Federal income tax deduction

• Example: Landowner donates a conservation easement valued at $150,000– Landowner’s adjusted gross income is $100,000– Landowner can deduct up to 30% or $30,000– Instead of paying federal income tax on $100,000, they are

now paying tax on only $70,000– The remaining $120,000 in value may be used over the

next 5 years

Federal income tax deduction

• Qualified farmers and ranchers may use the conservation easement value to:– Deduct up to 100% of their adjusted gross income (AGI) for

the year of the gift– Any unused value may be carried forward an additional 5

years– Qualified farmers and ranchers defined as someone who

receives more than 50% of his or her gross income from “the trade or business of farming”. Complete definition in IRS Code 2032A(e)(5)

Federal income tax deduction

• If a conservation easement is granted during a Donor’s lifetime, only the restricted value of the property under the conservation easement will be included in the owner’s estate.

• If a conservation easement is granted by will, the Donor’s estate may claim an unlimited charitable deduction for the value of the easement.

Estate Taxes

• A limited number of local, state and federal government funding sources exist that may pay a portion or all of the value of the conservation easement.

• Project must meet funding source criteria.

• Funding agency will have input into the terms and conditions of the conservation easement.

Public Funding

• Contact your local land trust or other conservation entity that holds conservation easements – Must be a “qualified organization” as outlined in Section

170(h) of the IRS code for income and estate tax purposes

• Outline your conservation and land management goals and identify conservation values of property

Steps Involved in Completing a Conservation Easement

• Review property features using GIS mapping and conduct a site visit

• Negotiate terms of conservation easement– Should take into account current uses of land and potential

future uses– Balance landowner goals with mission of easement holder

Steps Involved in Completing a Conservation Easement

• Due diligence– Title examination– Environmental assessment– Boundary survey

• Draft conservation easement deed– Must comply with tax codes, state law and requirements

set by public funding sources if applicable

Steps Involved in Completing a Conservation Easement

• Baseline documentation report– Establishes a reference point for determining compliance

with the terms of the conservation easement – photos, maps, detailed summary of conservation values of the property

• Execute and record conservation easement– All current property owners must sign– Conservation easements are recorded in Office of Register

of Deeds

Steps Involved in Completing a Conservation Easement

• Future borrowing needs– Conservation easement may reduce value of property as

collateral

• Conservation easements are difficult to amend– Impact to conservation values?– Tax implications– Assume the conservation easement will not be amended

in the future

Landowner Considerations

• In order to qualify for tax deduction, title must be clear of encumbrances that could extinguish the easement– The holders of any mortgage or deed of trust must consent

in writing to the easement and the consent must be recorded (subordination agreement)

• Every landowner should consult with a qualified attorney and financial advisor

Landowner Considerations

• Conservation easements are a multi-step process that may take several months and in some cases years to complete

Landowner Considerations

• Costs typically incurred to complete a conservation easement may include:– Survey– Appraisal– Environmental assessment– Stewardship endowment

• Potential costs should be discussed at beginning of project and parties should determine how the costs will be paid

Transaction Costs

• Bo Howes, Conservation Project Manager• rhowes@triangleland.org (919) 908-0052• Walt Tysinger, Land Manager• wtysinger@triangleland.org (919) 908-0053 www.triangleland.org

• Conservation Trust for NC www.ctnc.org

• Land Trust Alliance – national land trust group www.lta.org

Contacts and Resources