1. Agricultural Conservation Easements John Bonham Carolina Mountain Land Conservancy

2. Definition A written agreement between a landowner and a qualified conservation organization or public agency under which: the landowner agrees to keep the land available for agriculture and restrict subdivision and non-farm development and other uses that are incompatible with commercial agriculture; and the landowner agrees to keep the land available for agriculture and restrict subdivision and non-farm development and other uses that are incompatible with commercial agriculture; and the conservation organization or public agency is responsible for monitoring the easement to ensure the terms of the easement are met. the conservation organization or public agency is responsible for monitoring the easement to ensure the terms of the easement are met.

3. Key Point A conservation easement is permanent. The agreement is recorded on the county’s land records and runs with the title. All future landowners must comply with the terms and conditions of the agreement.

4. Role of the Easement Holder Works with the landowner to develop the conservation agreement. Works with the landowner to develop the conservation agreement. Assists the landowner in facilitating the transaction. Assists the landowner in facilitating the transaction. Works with the landowner to achieve the stated goals of the agreement. Works with the landowner to achieve the stated goals of the agreement. Monitors the property annually to ensure that the conditions of the agreement are being upheld. Monitors the property annually to ensure that the conditions of the agreement are being upheld.

5. Development of the Agreement Identify the conservation values of the property. Identify the conservation values of the property. Identify the area of the property to be conserved. Identify the area of the property to be conserved. Define the reserved rights. Define the reserved rights. Write the conservation agreement. Write the conservation agreement.

6. Conservation Values Values defined by the IRS Values defined by the IRS –Follows a clearly delineated public policy –Open space for the scenic enjoyment of the general public –Protection of a relatively natural habitat or ecosystem Other values Other values –Prime farmland soils –Rural heritage –Protection of water quality –Proximity to conserved land

7. Identifying the Conservation Area Not all of the landowner’s holdings must go under the easement. Not all of the landowner’s holdings must go under the easement. Conserve as much of the land containing the conservation values as possible. Conserve as much of the land containing the conservation values as possible. Consider potential future needs that will be incompatible with the agreement. Consider potential future needs that will be incompatible with the agreement. Consider the challenges to monitoring when delineating the conservation area. Consider the challenges to monitoring when delineating the conservation area.

8. Reserved Rights Must be compatible with the stated conservation values and purposes of the agreement. Must be compatible with the stated conservation values and purposes of the agreement. Examples: Examples: –Commercial agriculture and forestry –Construction of agricultural buildings –Draw water from streams & ponds for irrigation –Small-scale non-agricultural activities

9. More on Rights Rights of use are conditioned upon the conservation values and purposes. Rights of use are conditioned upon the conservation values and purposes. The agreement will expressly reserve, prohibit, and restrict certain activities. The agreement will expressly reserve, prohibit, and restrict certain activities. –Example: agricultural activities must be conducted in accordance with a conservation plan prepared by NRCS or SWCD. –May or may not restrict activities near streams and other water bodies.

10. Completing the Transaction Required documents: Required documents: –Current survey of the conservation area –Title report –Appraisal if seeking grant funding and/or tax benefits –Baseline inventory of the condition and resources of the property –Mortgage subordination agreement

11. After Completing the Easement Landowners: Landowners: –retain ownership of the land –remain eligible for the Present Use Value tax program –can farm, hunt and restrict public access –may use the land as collateral for a loan –lease or sell the property –remain eligible for federal and state farm programs

12. Easement Value Determined by a licensed appraiser Determined by a licensed appraiser Easement Value = Easement Value = Fair Market Value – Restricted Value The appraiser must consider any increase in value to portions of the property outside the conservation area. The appraiser must consider any increase in value to portions of the property outside the conservation area.

13. Federal Tax Benefits The portion of the easement value for which the landowner is not directly compensated is considered a charitable donation. The portion of the easement value for which the landowner is not directly compensated is considered a charitable donation. The landowner can deduct up to 30% of adjusted gross income annually. The landowner can deduct up to 30% of adjusted gross income annually. Has the year of the donation plus 5 years to use the deduction. Has the year of the donation plus 5 years to use the deduction. May increase to 50% or 100% and 16 years. May increase to 50% or 100% and 16 years.

14. North Carolina Tax Benefit An income tax credit equal to 25% of the donated value of the easement. An income tax credit equal to 25% of the donated value of the easement. Available for the year of the donation and 5 years following. Available for the year of the donation and 5 years following.

15. Stewardship Being a conservation partner with a landowner and monitoring the property annually requires human and financial resources. Being a conservation partner with a landowner and monitoring the property annually requires human and financial resources. If a land trust is to be the conservation partner they will likely require a contribution to their stewardship endowment before they can accept the easement. If a land trust is to be the conservation partner they will likely require a contribution to their stewardship endowment before they can accept the easement. Some grant programs will provide funds for stewardship in addition to transaction costs. Some grant programs will provide funds for stewardship in addition to transaction costs. Contributions made by the landowner are tax deductible. Contributions made by the landowner are tax deductible.

16. Why Conserve With An Easement? Protect the land from subdivision and development, thereby preserving its condition for future generations. Protect the land from subdivision and development, thereby preserving its condition for future generations. Ensure that the land will always be available for farming and/or forestry. Ensure that the land will always be available for farming and/or forestry. Extract equity from the land through direct compensation and/or tax benefits. Extract equity from the land through direct compensation and/or tax benefits. Tax benefits for estate planning. Tax benefits for estate planning.

17. Final Thoughts The land will retain marketable value. The land will retain marketable value. That value will increase over time along with other property in the area. That value will increase over time along with other property in the area. Use a qualified appraiser. Use a qualified appraiser. Start planning early. Start planning early. Consult a tax expert. Consult a tax expert.

18. Your Land Your Farm Your Legacy John Bonham Carolina Mountain Land Conservancy 828-697-5777 john@carolinamountain.org