Conservation Easement FAQs

If you're interested in land protection, take a look at these Frequently Asked Questions to see if donating an easement is right for you.

Q. What is an easement?
A. The dictionary defines an easement as an interest or right which one person has in the land of another. Ownership of land can be thought of as a bundle of rights to that land. The owner can transfer away some or all of those rights. The owner may transfer his or her interest in rights such as water, development or timber and still own the land to which those rights are attached.

Q. What is a conservation easement?
A. A conservation easement is a legal agreement between a property owner, the donor and a qualified conservation organization or agency, or the holder, in which the owner voluntarily agrees to restrict the type and amount of development that may take place on his or her property. A conservation easement is a way to preserve property that has a conservation or historic value while keeping the property in its natural and undeveloped state and still maintaining ownership of the property. The owner also keeps the right to use property for economic gain or recreation and the right to sell or deed the property to another. A donation of a conservation easement also may reduce estate, income and property taxes.

Q. What kind of properties qualify for a conservation easement?
A. As a general rule, a conservation easement must have a valid conservation purpose. A guide is provided by the Internal Revenue Code Section 170(h)(4)(A), which defines valid conservation purposes as:

1. The preservation of land areas for outdoor recreation by, or the education of, the general public; 2. The protection of a relatively natural habitat of fish, wildlife or plants, or similar ecosystem; 3. The preservation of open space including farmland and forestland where such preservation is: A.) For the scenic enjoyment of the general public or B.) Pursuant to a clearly delineated federal, state or local government conservation policy, and will yield a significant public benefit or C.) The preservation of a historically important land area or certified historic structure.

Q. How long does a conservation easement last?
A. An easement may be granted for a term of years or in perpetuity. However, for a landowner to take full advantage of the possible benefits of a donated easement, it must be given in perpetuity.

Q. What is contained in the easement document?
A. The conservation easement document contains a series of restrictions relating to use of the land. The owner transfers, by deed of conservation easement to DU, certain rights which will protect the property in the future. The owner initially gives up all development and rights to the property, but then reserves the rights they specifically desire and need to farm, ranch, hunt, etc. The purpose of the document under the law is to preserve the land in an undeveloped state, so the owner initially gives up all rights. But the land also needs to be used for other purposes to benefit the owner, for example as a farm. The owner then reserves the right to undertake agriculture or other necessary activities on the land. The document is recorded on the land records of the town or county where the property is located. This way, the easement is attached to the land by the records and "runs with the land." In other words, all subsequent owners of the property, or anyone who obtains an interest in the property, purchases it subject to the terms of the easement.

Q. Can an easement be changed?
A. The conservation easement is a document that dictates preservation in perpetuity. Changes seldom occur in practice. The only time a significant change is allowed is with the approval of a court of law upon the showing that the original purpose for the easement is no longer valid. An easement occasionally may be amended for certain reasons. The addition of property to the easement, clarification of terms or boundaries or additional restrictions could be grounds for an amendment. As a general rule, an easement only will be amended if the amendment will strengthen the document and increase protection of the property.

Q. Who can hold a conservation easement?
A. An easement holder should be chosen with great care, and it is recommended that a national organization be selected. A donor must be sure that the holder has the expertise, time and financial commitment to protect the property indefinitely. In order to take advantage of the tax benefits of the donation, one condition is that the owner must grant the easement to a public agency or a conservation organization that qualifies as a public charity under Internal Revenue Code Section 501 (c)(3).

Q. How does Ducks Unlimited fit in?
A. The majority of America's remaining wetlands are found on private lands, working with landowners is an integral part of DU's conservation program. DU believes that most lands can benefit wildlife and produce an economical return to its owner. DU can help provide technical advice and help the landowner adopt wildlife friendly management practices. DU is a national organization with significant resources. An endowment fund ensures DU will be able to monitor and enforce restrictions on the properties in perpetuity.

Q. What responsibilities does DU have as the holder of an easement?
A. Monitoring and enforcement of the terms of the easement are a cooperative effort between the owner and the holder. The holder is responsible for enforcement of the restrictions in the document. The holder must monitor the property on a regular basis and maintain a written record. Each year a regional biologist or other qualified representative from DU will visit the property and prepare a written report based upon the condition of the property. Usually the owner or his manager chooses to accompany the biologist. Both parties need to be assured that the property continues to be maintained in compliance with the terms of the easement. Should the monitoring uncover a violation, then DU has the duty and legal right to require the owner or violator to correct the problem. The holder may take legal action. Communication between the owner and the holder helps to eliminate the need for drastic actions, and most problems are solved by the parties themselves.

Q. Does DU accept all easements offered?
A. No. DU concentrates its conservation efforts in certain focus areas, which are regions of importance to waterfowl. These areas include the most important nesting, migration and wintering areas for migratory birds throughout North America. If the property does not fit with DU's mission, DU will help the landowner find a more appropriate organization to accept the easement.


Q. If I donate an easement to DU, will it ever be transferred to the government?
A. DU is a private nonprofit organization. It is not affiliated with the federal government or any state or local branch. In the unlikely event that DU should ever cease to exist as a conservation organization, the easement document provides that the easement automatically transfers to another private nonprofit organization that has experience with conservation easements.

Q. What is the responsibility of the owner in the easement process?
A. Each state has its own laws that will determine the legal consequences of a conservation easement. Each prospective donor should consult his or her attorney and tax professional as to the laws of their state and the legal and tax implications of the proposed easement.

The landowner is responsible for obtaining an appraisal of the property. The appraiser will furnish both a market value of the property and a value of the property after a conservation easement has been placed thereon. This difference in valuation may determine the amount of tax deduction allowed. According to IRS rules, if a gift is valued at $5,000 or more, an appraisal must be completed by a qualified appraiser to document the donation. A qualified appraiser is one who is knowledgeable in making appraisals of the type of property donated, who is not the donor or holder. (See Internal Revenue Code, 26 USC Section 170 Et. Seq., and Treasury Regulations 1-170 Et. Seq. for legal requirements.)

A Baseline Documentation Report (BDR) is necessary for all easement donations. The BDR is an inventory of the conservation values of the property, which includes habitat and wetland analysis, as well as suggested management ideas to ensure its protection and highest use to waterfowl and wildlife. It is essentially a snapshot of the property at the time of donation. The IRS requires a donor to "make available to the holder prior to the time the donation is made, documentation sufficient to establish the condition of the property at the time of the gift." (See Treasury Regulations Section 1-170A-14.) A BDR fulfills the IRS documentation requirement, and provides the holder with critical information about the property that is used for monitoring and enforcement. The cost of this report may run several thousand dollars. DU can help the donor to arrange for the preparation of these documents.

Additionally, the landowner will need to obtain a title search or a title opinion from a title examiner or attorney in the area. Title information is necessary to disclose the encumbrances recorded on the land records that might be in conflict with the conservation easement. The cost may be minimal, depending on how long the donor has held title to the property and the number of encumbrances recorded on the land records.

Q. What are the steps in the easement process?
A. A landowner who wishes to donate a conservation easement to DU should contact the nearest DU office. (http://www.ducks.org/about/contact.asp) A regional biologist will contact the landowner and conduct a site visit to determine if the property contains valuable habitat and if it complements DU's mission. The regional biologist will prepare a short document for use by DU called a Preliminary Property Inspection (PPI) report. The terms in the easement document will then be negotiated between the owner and DU. In the meantime, the owner will arrange for the appraisal, title work and BDR. The process is one of mutual cooperation as both donor and holder are working toward the preservation of valuable habitat. When both parties are satisfied with the terms and the conditions of the conservation easement, it is signed and recorded with the recording clerk of the local county or town.

Q. What if there is a mortgage on the property?
A. An easement, recorded after a mortgage, could be extinguished if the mortgage is ever foreclosed. Mortgages on the property should be identified, and if the donor will be claiming a deduction, a subordination should be obtained. The existing mortgage holders will have to subordinate (make secondary) their rights to those of the easement holder. In other words, the easement has to be first in line. The donor should contact any lenders early in the easement process and obtain a subordination for those mortgages.

Q. What is the endowment fund?
A. DU has the welcomed duty of monitoring and enforcing the easement forever. Of course, this requires funding. DU has established an endowment fund that is set aside for the permanent work of monitoring and enforcing easements. DU will request that each donor make a tax-deductible donation to the endowment fund. This donation is based upon the assessment of the donated easement toward the overall mission of DU. A donation to the fund insures that the owner's wishes will be carried out in perpetuity.

Q. Can I donate an easement in my will?
A. A conservation easement may be granted in a will, but some potential tax benefits may be lost. No income tax or property tax benefits are available, but estate taxes may be reduced. The landowner should negotiate the terms of the easement with the holder, and arrange for a bequest to the endowment fund. The owner should work with his or her estate planning professional to update his or her will with the appropriate instructions for the executor to follow to complete the donation.

Q. What restrictions are contained in a conservation easement?
A. An easement is tailored to fit the particular property based on the desires of the owner and the goals of the conservation group. The only rule is that all restrictions must be consistent with the applicable laws. Typical restrictions eliminate commercial and industrial uses and mining, limit subdivision, roads, homes, other structures and design timber cutting according to best management practices. An easement might prohibit all future development, commonly called a "forever wild" easement. An easement might preserve the land for historic or educational use, or allow a certain amount of development that will not damage the natural value, but help the owner gain economic benefit. For example, Mr. Smith owns a 2,000-acre ranch. He wants to donate a conservation easement but has certain needs for his family and ranch business. Mr. Smith donates an easement that prohibits future development, but he reserves the right to subdivide two lots, one for each child on a specified portion of the ranch, and to build additional feeding structures and storage buildings for the ranching operation. He also reserves the right for his family and himself to hunt and fish the property. Mr. Smith has protected his land but also reserved the rights necessary to continue his ranching operation and pass it on to his children.

Q. What are the estate tax benefits?
A. Property passed by will or by law upon the death of the owner is subject to estate or inheritance taxes. Federal estate taxes are based upon the current fair market value of the property, and range from 28 to 55 percent. Most property values appreciate, or increase, over time. When the landowner dies, the fair market value of the property is assessed at full value for its highest use, usually development. Estate taxes may create a tax burden for heirs. If the estate is "land rich and cash poor" the tax could force heirs to sell the property. A conservation easement can be the ideal technique to reduce the value of an estate and possibly lower the estate tax burden. If a property is restricted during the owner's lifetime, only the restricted value of the property is included in the estate. For example, Mrs. Smith owns a 1,000-acre farm that was bought in the Depression for a few dollars an acre. In the real estate market today, the land would bring at least $1,000 per acre. Her estate value is more than $1 million in real estate alone, and could have tax liability. She decides to donate a conservation easement on the property. The appraisal values the property at $1 million unrestricted, and $500,000 restricted by the conservation easement. Her estate value has been reduced by $500,000, enabling her to significantly reduce her tax burden and possibly help pass the farm to her children.

Q. What are the income tax benefits?
A. To qualify for a tax deduction, one requirement is that a conservation easement donation must be a charitable gift as defined by the IRS.  The donation must be made to a qualified charitable organization and if worth more than $5,000, documented by a qualified appraisal.  The maximum charitable deduction is set by federal tax law at a percentage of your annual adjusted gross income (AGI).  Tax laws change frequently so be sure to consult your accountant or financial planner for current regulations.  In some states, there is also a deduction or credit against state income taxes for the donation of an easement.  Generally, the donor of appreciated real estate (most conservation easement property is long term capital gain property) may be allowed to deduct up to 30 percent of adjusted gross income in one year.  The excess value of the gift may be carried forward for five additional tax years.  The Pension Act of 2006 raised the federal tax deduction a donor can take for donating a conservation easement from 30 percent of their adjusted gross income to 50 percent.  Allows qualifying farmers and ranchers to deduct up to 100 percent of their income, provided the land remains available for agriculture production.  It also increases the carryover, or the number of years for a donor to take the deduction from five years to 15 years.  These benefits only apply to easements donated in 2006 – 2007.  Let’s assume Mr. Johnson has an AGI of $100,000 and an easement value of $500,000 in 2007 when he makes the donation.  He can deduct 50 percent of $100,000 or $50,000 that year.  Additionally, he can carry over the remainder ($500,000 – $50,000 =$ 450,000) for 15 additional years or until he uses up the deduction.  Assuming his income remains constant, he could deduct $50,000 each year for 15 more years for a total deduction of $500,000.

If the property is ordinary income property, the amount of the deduction is only the adjusted basis of the property.  Corporate property also is treated differently, and other rates apply.  In some states, the donor also may be entitled to a deduction toward state income taxes.  In all cases, the donation should be reviewed with a tax professional or attorney to determine the deductions allowed.

Q. What are the property tax benefits?

A. An easement donor may be entitled to a reduction in property taxes. Property taxes are based on the assessed value of the property, which is usually for its highest and best use. A reduction in the fair market value by easement restrictions should mean a corresponding reduction on property tax. Land restricted by a conservation easement also may be eligible for other tax relief through state or local programs that help forestland and farmland owners.