Tools for Land Conservation Sarah Richardson, Land Conservation Coordinator Potomac Watershed Forum August 10, 2007

2 Improves/preserves the quality of life Safeguards drinking water supplies Reduces runoff that overloads streams and lakes in developed areas Protects wildlife habitat and biodiversity Provides recreation in and near urban areas Improves air quality Can be used to help curb urban sprawl Protects scenic resources Protecting Open Spaces

3  In Virginia, 60,000 acres are converted to development each year.  Every day, more than 100 acres are converted to impervious surfaces.  USDA estimates 20,000 acres of prime farmland are lost each year.  DOF estimates 31% of forests with high value for water quality are threatened by development in the next 5 to 15 years. Development in Virginia

4  Forest lands provide the best land cover for water quality protection.  Private landowners hold nearly 80% of forest land in the Bay watershed.  64% of Bay watershed forest land is held by family (not corporate) owners.  Therefore: protection of forestland is largely up to family landowners. Development in Virginia

5 1.Virginia Land Conservation Foundation  Competitive matching grant program for individual projects  Eligible: state agencies, local governments, nonprofits  Grant applications ranked by an interagency team  Future funding unknown State Programs for Land Conservation: A Three-Legged Stool

6 2.Purchase of Development Rights  Office of Farmland Preservation (VDACS)  Matching funds to localities – not competitive  Currently about $5 million available 3.Private Land Trusts and VOF  Depend to a great extent on generous federal and state tax incentives for donations or bargain sales  Most land conservation in Virginia happens this way State Programs for Land Conservation: A Three-Legged Stool

7 How do we protect land? Land conservation = acquisition  Acquire what?  Fee simple interest  Conservation easements (most land protection is through easements) Who acquires the land?  State & federal agencies  Local governments  Private land trusts How is it acquired?  Purchase  Donation

8 What are conservation easements?

9 Owning Land  These include the right to: –occupy the land; –use the land; –sell the land, give it away, or bequeath it in a will; –keep others off the land; and –subdivide the land.  Owning all the sticks is called “fee simple” ownership.  Landowners possess a collection of rights that are like a bundle of sticks.  Each stick in the bundle represents a right the landowner possesses.

10 Conservation Easements  A conservation easement is a voluntary, legally binding, and perpetual agreement created when a landowner gives or sells a few of their property rights (some of the “sticks in the bundle”) to another party, who holds those rights in public trust forever.  The landowner does this with the express intention of conserving some characteristics of the land.  Enforcement of the easement is transferred to a public body or a “holder.”

11 Conservation Easements  By giving up some rights from the “bundle of sticks”, a landowner ensures that the property will be protected from unrestricted development forever.  The landowner retains possession and use of his land, while conserving the property for future generations and potentially realizing some of the financial gain from that asset.

12 Conservation Easements  Rights commonly given up in a conservation easement are: The right to subdivide, The right to build new structures, The right to engage in activities that may endanger the resource being protected.  These rights are given up forever.

13 Conservation Easements  Rights that are not given up in a conservation easement: The right to sell or give the land away, The right to occupy the land, The right to use the land in any way that does not endanger the resource being protected, The right to exclude others from the property (except the easement monitor), Any right not specifically mentioned in the conservation easement.

14 Who Holds Conservation Easements? The Code of Virginia authorizes public bodies and “holders” to receive conservation easements.  Public bodies are state agencies, counties or municipalities, park authorities, Soil & Water Conservation Districts, or community development authorities.  Holders are defined by Va. Code as charitable organizations whose primary purposes include:  protecting natural resources and natural or open-space values of real property;  assuring availability of property for agricultural, forestal, recreational, or open-space use;  maintaining or enhancing air or water quality; or  preserving historic, architectural, or archaeological lands.

15 What Are the Best Candidates for a Conservation Easement?  A landowner who is motivated by love of the land and desire to preserve it.  Tax incentives are great, but they won’t make the landowner wealthy!  Land that has good conservation value.  Land that doesn’t require intensive management.  Current and future uses of the land are compatible with preservation.

16 Tax Incentives  To qualify as a charitable contribution, a donation must be:  In perpetuity (permanent)  Made to a qualified grantee (land trust or public agency)  Must meet at least one 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

17 Federal Tax Deductions  2006 and 2007 – these rules expire 12/31/07 unless Congress decides to extend them.  Generous deduction: Landowners who donate a conservation easement on their land can apply the value of the donation as a deduction on up to 50 percent of their adjusted gross income (AGI).  Farmers: Qualified farmers and ranchers (50 percent of income from agriculture) can deduct the value of the donation on 100 percent of their AGI per year.  Carry forward: The donor can carry the deduction forward for 15 years.

18 Other Tax Incentives  Capital gains tax exclusion  If the land is dedicated to open-space use, any profit on the sale of land or an easement on land is not taxed.  Estate and gift taxes  Donation of a conservation easement reduces the assessed value of the land, which can reduce the tax liability of an estate or taxes due on gifts of land.  Property taxes  Land restricted by a conservation easement is eligible for reduced property taxes.

19 What is the Virginia Land Preservation Tax Credit?  LPTC is a credit against Virginia state income tax available to landowners who donate any interest in land for a conservation purpose in perpetuity. –The credit is worth 40% of the appraised value of the easement. –The recipient can use the credit for their state taxes or sell it to another taxpayer for cash.

20 Virginia Tax Credits  Cap: each year, tax credits granted will be capped statewide at $100 million.  First come, first served – donations that come in after the cap is reached are rolled over to the next year.  Carry forward: Tax credits can be claimed in the year of the gift and the subsequent 10 years or until used up.  Transfer : Tax credits may be transferred (given or sold).

21 Example of Land Preservation Tax Credit  Ms. Jones owns 100 acres of land with an appraised value of $300,000. –She donates a conservation easement, which reduces the value of her property by giving up subdivision rights and restricting development. –After the donation her property has an appraised value of $200,000. –Therefore, the appraised value of the easement is $100,000.

22 Appraised Value of Ms. Jones’ Conservation Easement Property Value Before Easement = $300,000 Property Value After Easement =$200,000 Value of Conservation Easement =$100,000 Land Preservation Tax Credit = 40% of $100,000 Land Preservation Tax Credit = $ 40,000

23 What is DCR’s role in the Land Preservation Tax Credit? The Code of Virginia requires DCR to:  Report annually on all donations of less- than-fee-simple interests in land (i.e., conservation easements) where a donor claims a Land Preservation Tax Credit of any value.  Verify to the Virginia Department of Taxation the Conservation Value of all donations of interest in land where a credit of $1 million or more is claimed by the donor.

24 What does this mean to those applying for a Land Preservation Tax Credit?  A copy of all applications for credits from donations made on or after January 1, 2007, must be sent to DCR.  All applications claiming a credit of $1 million or more will be subject to a verification of “Conservation Value.”

25 What is Verification of Conservation Value?  DCR’s verification of Conservation Value will consider three factors: Conservation Purpose, Public Benefit, and Water Quality and Forest Management.  Together these are the Conservation Value of the donated land.

26 For more information on DCR’s Conservation Value Review: onservation_foundation/

27 So What Can YOU Do?  Landowner outreach  Hand out brochures or other publications  Hold landowner information meetings  What to do in the absence of funding  Encourage donations  Track inquiries to demonstrate need  Refer landowners to appropriate easement holders

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29 Progress towards land conservation goals  Governor’s goal to protect 400,000 new acres by 2010  155,561 new acres have been protected as of June 30, 2007  242,439 acres left, with 2.5 years to go  Chesapeake 2000 Agreement goal to protect 20% of Virginia’s lands in the Bay watershed by 2010  18% have been protected

30 What is the Commonwealth doing to advance these land conservation goals?  Outreach and capacity building – educational workshops and conferences for land trusts and other conservation organizations  Tracking – monthly reports and conserved lands database  Targeting tools – Virginia Conservation Lands Needs Assessment

31 What is DCR doing to advance these land conservation goals?  Grants – Virginia Land Conservation Foundation, Land and Water Conservation Fund, Water Quality Improvement Fund  State Parks and Natural Area Preserves – both acquisitions and conservation easements  CREP – permanent easements on riparian buffers in farmlands

32 DCR’s Office of Land Conservation Sarah RichardsonJeremy Stone (804) (804)