The Texas Agricultural Land Trust (TALT) The mission of the Texas Agricultural Land Trust is to help Texans conserve their agricultural lands, wildlife habitats, and/or natural resources, and to enhance and sustain the long-term stewardship of private lands for the benefit of all Texans.
Outline I.Why protect agricultural lands? II.What is an Agricultural Conservation Easement? a.Donated easements b.Purchased easements III.What are the benefits and drawbacks of Agricultural Conservation Easements?
Why Protect Agricultural Lands? Texas is the second-largest agricultural state in the United States, accounting for about 7 percent of the total U.S. agricultural income. The food, horticulture and fiber industry is the second-largest resource-based industry in the state, generating $100 billion a year for the economy. These dollars have a compounding positive effect for communities by supporting local businesses like implement dealers, veterinarian services, hardware and feed stores. Agricultural lands produce food and fiber, host diverse wildlife, and provide clean, abundant water. They support rural economies and a multi-billion outdoor recreation industry.
Loss of Agricultural Lands 1997-2007 2.1 Million Acres Converted 40% of conversion in the top 25 high-growth counties. (red indicates high conversion rates) Source: Dr. Neal Wilkins, Institute for Renewable Natural Resources, 2009 Texas Land Trends Study, www.texaslandtrends.orgwww.texaslandtrends.org
Source: Dr. Neal Wilkins, Institute for Renewable Natural Resources, 2009 Texas Land Trends Study, www.texaslandtrends.orgwww.texaslandtrends.org Fragmentation of Rural Lands
COCS Studies: Expenses Required Per $1 in Taxes Paid – By Land Use Type ResidentialCommercialAg Lands Bexar County $1.15$0.20$0.18 Hays County $1.26$0.30$0.33 Bandera County $1.10$0.26 Source: American Farmland Trust
What is a Conservation Easement? A voluntary, legal agreement between a landowner and a conservation organization or government agency that permanently limits a property’s uses in order to protect the property’s conservation values.
Types of Conservation Easements Donated easements, governed by IRS regulations---must be perpetual to qualify for a deduction Purchased easements (a.k.a Purchase of Development Rights—PDR; or Purchase of Agricultural Conservation Easement---PACE), governed by the rules of the organization making the purchase; depending on the funder, can be for a term of years Bargain Sale, or a combination of a donated and purchased easement, most commonly used to offset tax considerations
Purposes of Conservation Easements Conservation easements have different purposes, including: Protection of significant natural resources including water and/or endangered species and their habitats; Protection of historical resources; Public access, for recreation and/or education The purpose of an agricultural conservation easement is to protect the viability and productivity of agricultural lands while also protecting other conservation values such as wildlife habitat, water quality; and/or scenic landscapes.
Agricultural Conservation Easement Limits future non-ag use of the land; Encourages the business of ranching or farming; Flexibility allows ranch or farm to adapt to changing economic conditions; Permits construction of new ag buildings and residential dwellings; Does not require public access; Landowner retains private ownership of the ranch or farm subject to the easement restrictions ; Allows for oil and gas activity as long as there is minimal permanent damage to the surface
Agricultural Conservation Easement The process is essentially the same for donated and purchased easements: Determine reserved rights (how many partitions will be allowed, how many “building envelopes”, etc.) Get an appraisal, preferably from an appraiser who has experience appraising conservation easements Develop a “baseline report” that documents the condition of the property at the time of the transaction
NOTE: The before value of a conservation easement donated within the first 12 months of purchasing a property must be your basis, or what you paid for the property. Before conservation easement value = $2,000,000 After conservation easement value = $1,4000,000 Value of charitable contribution = $700,000 NOTE: The before value of a conservation easement donated within the first 12 months of purchasing a property must be your basis, or what you paid for the property. Valuation of Conservation Easements
Donated Easements: Tax Incentives Can deduct donation against 30% of adjusted gross income (AGI) Carry-forward = In addition to the year of the donation, 5 years
Tax Deduction: How it works Let’s assume that the landowner’s annual adjusted gross income for income tax purposes is $390,000, which remains constant. The deduction resulting from the easement is as follows: (30 percent of $390,000 = $117,000): Year of Contribution$117,000 Carry Forward to Year 1$117,000 Carry Forward to Year 2$117,000 Carry Forward to Year 3$117,000 Carry Forward to Year 4$117,000 Carry Forward to Year 5$115,000 Note: An enhanced tax incentive that allowed for deducting against 50% of AGI and a carry-forward of 15 years expired in December, 2009. The Land Trust Alliance is leading the effort to have this incentive re-enacted and made permanent. For more information, see www.lta.org.www.lta.org
Purchased Agricultural Conservation Easements (Purchase of Development Rights) - Federal Grasslands Reserve Program Farm & Ranch Protection Program – Managed by USDA/NRCS – States, Counties, Cities or Land Trusts Can Apply – FRPP: NRCS Pays for 50% of Project Costs – GRP: NRCS Pays for 100% of Project Costs
Purchased Agricultural Conservation Easements - State Texas Farm & Ranch Lands Conservation Program: – Managed by the General Land Office; – Allows for both perpetual and 30-year term easements; – Oversight board = representatives from statewide agricultural organizations; – Not yet funded by the Legislature.
Purchased Agricultural Conservation Easements – Local/Resource Specific City of San Antonio $90 million Aquifer Protection Initiative, 2005 – to protect Edwards Aquifer City of Austin $50 million open space protection bond initiative, 2006 – to protect Barton Springs U.S. Army ACUB Program – to create open space buffers around military installations
The Easement Holder A non-profit land trust whose mission is land conservation; or a governmental entity Has the right to monitor and enforce the easement Typically visits the property once a year to ensure that the terms of the easement are being upheld 49 Texas land trusts, each with a specific mission
Texas Agricultural Land Trust Mission is to halt the loss and fragmentation of rural, agricultural lands in Texas; Board comprised of landowners who understand the day-to-day challenges of working lands; Holds agricultural conservation easements on rangeland and wildlife properties throughout the state; Does not interfere in day-to-day management of farm or ranch
Benefits of Agricultural Conservation Easements A voluntary mechanism to protect property from fragmentation or development ---fits family’s long- term stewardship goals for the farm or ranch Income tax deduction Estate tax benefits/facilitates inter-generational transfer Convert equity to cash (in the case of purchased easements)
Drawbacks of Agricultural Conservation Easements Projects are expensive/in the case of purchased easements, cash match isn’t always available Take a long time to complete Do not ensure that the land will continue to be farmed, ranched or managed for wildlife --- only that the land will be available for agriculture and hunting Sale of conservation easement is subject to capital gains tax Tax benefits are generally only available to the first generation of easement donors Use of property is limited for the future
Resources for Further Information Texas Agricultural Land Trust www.txaglandtrust.org Texas A&M Land Trends Study www.texaslandtrends.org American Farmland Trust www.farmland.orgwww.farmland.org; www.farmlandinfo.orgwww.farmlandinfo.org Texas Land Trust Council http://www.texaslandtrustcouncil.org/ Land Trust Alliance www.lta.org