instead of a simple federal tax deduction. State and Local Programs State and local funding sources will vary across the country and are a valuable part of stacking financial resources. Often, state wildlife agencies fund conservation easements and occasionally county and municipal programs exist. Sorting through the various funding options with an eye toward conserving working ag land is the reason it’ s important to work with a land trust organization that has agriculture as its main priority, Glenn added.
As mentioned, Colorado, Virginia and four other states offer transferable tax credits.“ These are a unique and powerful tool, whereby the state will give you a tax credit for a portion of the value of your easement. If you can’ t use that tax credit because you don’ t have enough state tax liabilities, you can sell it to another taxpayer for cash.” Beyond that, proceeds from the Colorado state lottery help fund conservation easements on working farms and ranches.
At the local level, Glenn pointed to northern Colorado, where the city of Fort Collins purchased easements on farm, ranch and other rural properties by stacking municipal, county, state and federal programs.“ It’ s been a good partnership because you have city money, county money and state money. And sometimes you can combine that with federal money to get a really good outcome for landowners,” he said.
In addition, a conservation easement can be leveraged as a way to expand by using a 1031 exchange, allowing the deferment of capital gains taxes.“ You can, without selling your ranch or a portion of the ranch, sell the easement and then use those proceeds to 1031 into another property. That is probably one of the coolest incentives that I’ ve seen used,” Glenn said. How Easements Are Valued Determining the value of a conservation easement requires an appraisal, which often requires an appraiser who specializes in conservation easements. The appraisal begins with determining the value of the property unencumbered from any restrictions. Then the appraiser looks at what the potential conservation easement restrictions might be.
“ They have to make assumptions about what those restrictions will do to the market after the easement is put in place and make some judgement calls about what that will do to the value of the property,” Glenn explained.
The value of a conservation easement is the difference between the value of the property unencumbered and the value of the property encumbered with the easement restrictions. That difference is what landowners are compensated for.
“ Typically, that will range anywhere between 15 % and 80 %-85 % of the unencumbered value, based on a number of things. How close are you to development? How restrictive is that easement? The more restrictive it’ s going to be, the more valuable it’ s going to be, meaning the spread is going to be greater,” he said.
Having a firm idea of the goals a conservation easement is designed to meet is essential. A landowner may be considering an easement that’ s more restrictive if meeting financial objectives is the primary goal. Others may consider a conservation easement because their core focus is to keep the land largely undeveloped, so more flexibility is the goal.
To that end, Glenn encouraged sitting down with everyone in the family who is involved in the future of the operation and talking about goals as an important first step. Those can be difficult conversations because family members may view those goals and the operation’ s future through different perspectives.
What’ s more, Glenn said,“ Make sure you’ re bringing your tax advisor and your financial planner into the discussion, too, along with a land trust, because landowners could be leaving money on the table when they don’ t bring the full package.”
And, in a twist on estate planning, if family members can’ t agree on future goals and the direction of the operation, the cash from a conservation easement can satisfy the financial desires of family members by buying their interest, helping keep peace in the family and the farm or ranch still in family hands.
Conservation easements can provide a one-time cash investment to an operation.
FOR MORE INFORMATION For more information or to talk to someone about the costs and benefits or conservation easements in general, contact the Partnership of Rangeland Trusts at 303-225-8677( https:// rangelandtrusts. org) or any of its member organizations:
• California Rangeland Trust 916-444-2096 or info @ rangelandtrust. org
• Colorado Cattlemen’ s Agricultural Land Trust 303-225-8677 or info @ ccalt. org
• Montana Land Reliance 406-443-7027 or info @ mtlandreliance. org
• Nebraska Land Trust 402-438-5263
• Northwest Rangeland Trust 509-520-7483
• South Dakota Ag Land Trust 605-280-2378 or contact @ sdalt. org
• Texas Agricultural Land Trust 210-826-0074 or info @ txaglandtrust. org
• Wyoming Stock Growers Land Trust 307-772-8751 or communications @ wsglt. org
www. NCBA. org NATIONAL CATTLEMEN 17