Why Use Conservation Easements

By Don Moore, PLAN Jeffco Board Member

An important tool in the toolbox to preserve open lands and natural landscapes is the use of conservation easements. Conservation easements have been increasingly gaining favor in recent years as a means to preserve wildlife habitat and agriculture lands, and to protect scenic views, lands for recreation, and lands of significant ecological, historic, or cultural value. Conservation easements may aid in limiting or directing where urban development may take place. Placing land into a conservation easement may offer significant financial and non-financial benefits to landowners while allowing for the continued private ownership of the land, restricting development, and contributing to the environmental stewardship of the land.

A conservation easement is a voluntary legal agreement that permanently limits the use of the land in order to protect its conservation values. Conservation easements offer benefits to both the landowners and the surrounding community. For the community, conservation easements help maintain local property values and preserve the character of the community. For the landowner, an easement may provide financial benefits through considerable tax incentives and reduced property taxes. For the holder of the easement, which may be a land trust, municipal, state or federal government agency, the easements protect properties with unique natural or historic values without the cost of purchasing the property in fee or the cost to maintain the property. While the cost of conservation easements to the holder of the easement varies, it is common that an easement will cost half or less than half of the cost of purchasing the property in fee.

Rules for conservation easements, according to the Internal Revenue Service, must serve at least one of the following purposes: preserving land for outdoor recreation or educating the public; protecting natural habitats for fish, wildlife and plants; conserving open spaces such as farmland or forests; safeguarding historic significant structures or land areas.

Landowners still retain certain rights to use their property for recreational purposes, farming or ranching, for example, unless these activities conflict with conservation objectives of the easement. Property owners usually have the right to continue living on the land, while using their land for agricultural or other compatible purposes. In some cases, a conservation easement may also include specific reserved rights for the landowner to build limited additional structures or make limited improvements, depending on what is agreed to by the landowner and easement holder. Conservation easements run with the land, meaning that not only the original owner but all owners of the land that come after them are subject to the provisions of the easement.

The financial benefits to a property owner may include federal and tax deductions, estate tax benefits, Colorado state tax credits, property tax benefits, and cash payments.

Easements created in Colorado in 2021 to 2026 may receive tax credit certificates issued for 90% of the donated value, up to a maximum of $5 million per donation. For conservation easements donated in 2027 to 2031, tax credit certificates are issued for 80% of the donated value up to a maximum of $5 million per donation.

The property tax rate for lands subject to a conservation easement are limited to the rate set for agricultural lands, eliminating the possibility of the land being taxed at a higher rate, such as for residential or industrial uses.

Non-financial benefits to a property owner may include the ability to maintain an agricultural operation for future generations, preservation of the land in its undeveloped, productive state, and preservation of water rights for agricultural purposes. Conservation easements may also eliminate future family disputes over what to do with the property when the original property owner passes. Conservation easements also provide opportunities for future farmers and ranchers to get a start by allowing them to purchase land at a more affordable price.

The cost to create a conservation easement may include the cost to create the following: a baseline inventory report documenting the current condition of the property; an appraisal to determine the value of the conservation easement; a mineral remoteness assessment to determine the likelihood of mineral extraction; title work; an environment assessment. These costs may be borne by either the property owner or the potential holder of the easement.

For people interested in creating a conservation easement, they should meet with the potential easement holder, whether that is a local land trust organization, or their local, state or federal agencies.

For more information on conservation easement tax credits, consult with the Colorado Department of Regulatory Affairs – Colorado Division of Conservation.

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