Conservation Easements are legally binding agreements that permanently restrict the development and future uses of real property in order to protect certain conservation values.
The donation of a conservation easement provides the opportunity for certain federal tax benefits. In order to take advantage of the income tax benefits, the donation must satisfy the Internal Revenue Code requirements for a charitable contribution. Only qualified conservation contributions satisfy the requirements for a charitable contribution and income tax deduction.
A qualified conservation contribution is a: 1) qualified real property interest; 2) donated to a qualified conservation organization; for 3) conservation purposes. 26 U.S.C. Section 170(h)(1). In addition, the easement’s conservation purpose must be protected in perpetuity, the easement’s value must be determined by a qualified appraisal, and the easement must be donated or sold for less than market value. Each of these terms is carefully defined by the Internal Revenue Code, and each must be satisfied to obtain the charitable income tax deduction.
The donation of a conservation easement may also provide estate tax benefits. The value of the donated conservation easement is removed from the taxable estate and therefore results in a reduced value of the estate. In certain situations, the estate may also take advantage of a partial exclusion from estate taxes.
