'Tis the Season for Conservation Easements

While people are busy with all the festivities and wonder of the holidays, appraisers and land trusts are busy too: working together to help in their unique ways to protect land. Conservation easements coincide with the holidays due to end-of-year tax planning, which only adds to the spirit of giving with lots of new protected land.

Last week, I had the opportunity to discuss conservation easements with Katherine Eddins, the executive director of the conservation organization Georgia-Alabama Land Trust. Katherine is an attorney and a forester, and her organization holds over 750 conservation easements protecting over 250,000 acres, many of which are in the Greater Chattanooga area.

I have gotten to know Katherine and her organization because our firm is employed on occasion by Georgia-Alabama Land Trust or a conservation easement donor working with her group to do a special type of appraisal: a conservation easement appraisal or other special appraisal on conservation lands. I asked Katherine to explain to readers what a conservation easement is and why an appraisal is required.

"A conservation easement is a voluntary legal agreement between a landowner and a private land trust or government agency that permanently limits use of the land in order to protect its conservation values," she replied. "Conservation easements allow landowners to continue to own and use their land for farming, growing trees, hunting and recreational activities. They can also sell the land or pass it on to their heirs. Conservation easements are used as a tool to help safeguard our states' natural heritage and at-risk wildlife species by protecting high-priority habitats and waters on private lands."

An appraisal is required to establish the development and other economic value a landowner is giving up when the landowner makes a donation or sells a conservation easement. Not just any appraiser can do this. The appraiser must have at least a "certified general appraiser" designation and have knowledge about conservation easements and the Treasury regulations regarding what needs to be included in the appraisal to substantiate the easement's value.

On a typical assignment, we will go out to the land and start the process of research to determine the highest and best use of the land without the conservation easement, and then the value with the conservation restrictions. As with all appraisals, we are tasked with finding the comparables to support our analysis, and these must be defendable in the event of an audit.

I asked Katherine what motivates people do conservation easements. The reasons vary, she said, but there is a thread of land conservation that runs through each easement deal. Many landowners want to protect the land so that future generations can enjoy the legacy of a beautiful forest, farm and wildlife habitat.

"We have done so many wonderful conservation easements in the Greater Chattanooga area, particularly in Dade, Walker and Chattooga counties and over in Alabama in Jackson and DeKalb counties," Katherine said. "Landowners have protected amazing wildlife habitat, created public trails, working farms and forest within 30-45 minutes of Chattanooga."

Katherine said that landowners are also motivated by the economic benefit of conservation easements, some more than others. Easement gifts can result in significant income and other tax benefits to the donors, and given the value of land in the Greater Chattanooga area, the tax savings can be six figures or more.

I asked Katherine about the downside to conservation easements. She said that as with any charitable gift, conservation easements are subject to audit by the IRS. If the IRS audits a conservation easement, the landowner needs to have all the i's dotted and t's crossed to avoid or pass through the audit.

"The land trust is very good at identifying conservation values and documenting these and working with the landowner and their tax professionals on these things," she said. "But the main document the IRS looks at is the appraisal. It needs to be very thoughtful, thorough and include all the things listed in the Treasury regulations. If this is not done right, the IRS can deny the tax deduction, which can be very difficult for the landowner."

Katherine said that between now and the year's end, her organization expects to close on easements protecting an additional 18,000 acres of land, and our firm is helping with this. 'Tis truly the season for land protection!