Archives for December 2013

How much will an easement cost?

Adams County easement2.fwThe short answer is, “probably nothing.” The reason is that if you have a qualified conservation easement that NCCT will accept, then you probably can claim all expenses and contributions relating to the easement against your gross income used to determine federal and state taxes. Secondly, in the previous three segments, we describe potential tax savings resulting from reduced property value. It is not unusual for property in Central Wisconsin to be revalued at $30,000-40,000 less as a result of an easement, depending on the location and size of the property. (See “Tax Benefits” in the Land Conservation Options.) You will want to check with your attorney or tax advisor, but in most cases, a property owner ends up saving money with an easement. That said, there are up-front costs in addition to the $500 you gave to NCCT to initiate work on your easement. At closing, you will be asked to pay all attorney and filing costs incurred by NCCT, amounting to $1200 on average. You will also be asked to make a donation to NCCT’s easement protection and stewardship endowment. The amount you donate is up to you, but we suggest a minimum of $5000, and if your easement has greater risks or is more difficult to monitor, our guidelines suggest up to $10,000 donation. Remember that all costs and donations can be claimed when you calculate your taxes.

Can granting an easement reduce an owner’s property tax?

Property tax assessment usually is based on the property’s market value, which reflects the property’s development potential. If a conservation easement reduces the development potential of the property, it may reduce the level of assessment, and the amount of the owner’s property taxes. The actual amount of reduction, if any, depends on many factors. State law, local officials, and assessors influence or determine the decision regarding property tax relief to easement grantors.

How can granting an easement reduce a property owner’s estate tax?

Many heirs to large tracts of open space—agricultural land in particular—face monumental estate taxes, or capital gains taxes. Even if the heirs wish to keep their property in the existing condition, the federal estate tax is levied not on the value of the property for its existing use, but on its fair market value, usually the amount a developer or speculator would pay. The resulting estate tax can be so high that the heirs must sell the property to pay the taxes.

A conservation easement, however, nearly always reduces property value. If the property owner has restricted the property by a perpetual conservation easement before his or her death, the property must be valued in the estate at its restricted value. To the extent that the restricted value is lower, the value of the estate will be less, and the estate will thus be subject to a lower estate tax. (Note that if the property owner donates the easement during his or her lifetime, he or she may also realize income-tax savings.)

Even if a property owner does not want to restrict the property during his or her lifetime, the owner can still specify in his/her will that a charitable gift of a conservation easement be made to a qualifying organization upon the owner’s death. Assuming that the easement is properly structured, the value of the easement gift will be deducted from the estate, reducing the value on which estate taxes are levied. Again, a lower tax results.

How can donating an easement reduce a property owner’s income taxes?

Portage County easement2.fwThe donation of a conservation easement usually is a tax-deductible charitable gift, provided that the easement is perpetual, and is donated “exclusively for conservation purposes” to a qualified conservation organization or public agency. Internal Revenue Code Section 170(h) generally defines “conservation purposes” to include the following: the preservation of land areas for outdoor recreation by, or the education of, the general public, and the protection of relatively natural habitats of fish, wildlife, or plants, or similar ecosystems, the preservation of open space—including farmland and forest land—for scenic enjoyment and pursuant to an adopted governmental conservation policy.

To determine the value of the easement donation, the property is appraised both at its fair market value without the easement restrictions, and at its fair market value with easement restrictions. The appraisal must be done by a certified appraiser who meets IRS requirements. The difference between the two appraised values is the easement value. Detailed federal regulations govern these appraisals.

As an example: A property has an appraised fair market value of $100,000. Mrs. Price, the landowner, donates a conservation easement to a local land trust. The easement restrictions reduce the property’s appraised market value to $64,000. Thus, the value of her gift of the easement is $36,000. Assuming the easement meets the conservation purposes test, Mrs. Price—like any donor of property—is eligible to deduct an amount equal to 30 percent of her adjusted gross income each year for a number of years [check tax code as the specifics are subject to change], or until the value of the gift has been used up. If Mrs. Price has an annual adjusted gross income of $60,000, she can deduct $18,000 a year (30% x $60,000) until she has used up the $36,000 value. In this case, she will use up the gift in two years (2 x $18,000=$36,000), if her income does not change. Easement donors may qualify for greater savings, especially when state income-tax deductions are applicable. Potential donors should seek legal and tax counsel.

How long does an easement last?

An easement usually is written so that it lasts forever. This is known as a perpetual easement. Where state law allows, an easement may be written for a specified period of years; this is known as a term easement. Only gifts of perpetual easement, however, can qualify a donor for income- and estate-tax benefits. Most land trusts accept only perpetual easements.

An easement runs with the land—that is, the original owner and all subsequent owners are bound by the restrictions of the easement. The easement is recorded at the county or town records office, so that all future owners and lenders will learn about the restrictions when they obtain title reports.

Must an easement allow public access?

Landowners who grant conservation easements make their own choice about whether to open their property to the public. Some landowners convey certain public-access rights, such as allowing fishing or hiking in specified locations, or permitting guided tours. Others may elect to keep their property closed. Some types of easements require access. For example, if the easement is given for recreation or educational purposes, public access is required. For scenic easements, at least some of the property must be visible to the public, but physical access is not necessary. Access generally is not required for easements that protect wildlife or plant habitats, or agricultural lands.

What are the grantee’s responsibilities?

The grantee organization, or land trust, is responsible for enforcing the restrictions that the easement document spells out. To do this, the grantee monitors the property on a regular basis, typically once a year. Grantee representatives visit the restricted property, usually accompanied by the owner. They determine whether the property remains in the condition prescribed by the easement, and documented at the time of the grant. The grantee maintains written records of the monitoring visits. The visits also serve to keep the grantee and the property owner in touch.

If a monitoring visit reveals that the easement has been violated, the grantee has the legal right to require the owner to correct the violation and restore the property to its condition prior to the violation.

How restrictive is an easement?

An easement restricts development or use to the degree that the owner and land trust deems appropriate to protect the significant values of that particular property. Sometimes, this totally prohibits development. Sometimes it only limits it.

If the goal is to preserve a pristine natural area, for example, an easement may prohibit subdivision and all construction, as well as activities that would alter the land’s present natural condition. If the goal is to protect agricultural land, an easement may only restrict subdivision and development while allowing for structures and activities necessary for and compatible with the agricultural operation. Even the most restrictive easements usually permit landowners to continue all ownership priviledges consistent with restrictions.

Who can grant an easement? To whom may the property owner grant an easement?

Marathon County easement.fwIf the property belongs to more than one person, all owners must consent to granting an easement. If the property is mortgaged, the owner must obtain an agreement from the lender to subordinate its interest to those of the easement holder, so that the easement cannot be extinguished in the event of foreclosure.

If an easement donor wishes to claim tax benefits for the gift, he or she must donate it, or sell it for less than fair market value to a public agency or to a conservation organization that qualifies as a public charity under Internal Revenue Code Section 501(c)(3). Most land trusts and government agencies meet this criterion. An organization that accepts the donation of an easement will typically ask the owner to make a contribution toward the cost of monitoring and protecting the easement, or will establish a stewardship fund from other sources.

What kind of property can be protected by an easement?

Any property with significant conservation values can be protected by a conservation easement. This includes forests, wetlands, scenic areas, historic areas, and mixed-use land that includes agriculture and combinations of other habitat. Land conservationists will evaluate the distinctive features of your property. You and the land trust will then determine which resource values merit protection through restrictions identified in the easement. Any property with significant conservation or open-space value may be the subject of an easement.

Why grant a conservation easement?

Portage County easement.fwPeople grant conservation easements to protect their land from development or certain types of use while retaining ownership. By granting an easement in perpetuity, the owner can be assured that resource values will be protected forever, no matter who assumes ownership of the property. Because easements restrict management or development options, they usually reduce the market value of property. This loss of value, at least with conservation easements, may be claimed as a tax benefit because it is the public that gains from the protection of conservation, scenic or historic values.

What kinds of easements are there?

Easements often are called by different names, according to what they protect. Most people are familiar with easements that protect right-of-ways or access to property across neighboring land. Easements used to preserve the façade and surroundings of historic structures or historic land are called “historic preservation easements.” Conservation easements protect habitat, surface or ground water, aesthetics, rare species, or combinations of these.

What is a conservation easement?

Adams County easement.fwA conservation easement is a legal agreement that restricts the type and amount of development, or certain management practices that may take place on a property. Each easement’s restrictions are tailored to the particular property and to the interests of the individual owner.

To understand the easement concept, think of owning land as holding a bundle of rights. A landowner may sell or give away the whole bundle, or just one or two of those rights. These may include, for example, the right to construct buildings, to subdivide the land, to restrict access, or to harvest timber. To give away certain rights while retaining others, a property owner grants an easement to an appropriate third party.

The specific rights a property owner forgoes when granting a conservation easement are spelled out in the easement document. The owner and the prospective easement holder, called a land trust, identify the rights and restrictions on use that are necessary to protect the property. What can and cannot be done to the property is defined. The owner then conveys the right to enforce those restrictions to an easement holder, such as a public agency or a land trust.

NCCT Welcomes New Board Members


Greg Dahl

Greg DahlGreg recently retired after more than 31 years from the Wisconsin Department of Natural Resources working in Wildlife Management. Most recently he was the Wisconsin Rapids Area Wildlife Supervisor where he was involved in the management of the Buena Vista Wildlife Area and the prairie chicken program, involved in the establishment of the Central Wisconsin Grassland Conservation Area, and oversaw the Mead/McMillan and the Sandhill/Meadow Valley work units.  Throughout his career he worked and partnered with other Department programs (forestry, fisheries, law enforcement and lands), other agencies and sportsmen groups. He is an active member of NCCT’s Stewardship and Properties Committees. His hobbies and interests include fishing, hunting, gardening (both vegetable and perennials), bird watching, hiking, camping, travel, and activities with family and friends.

 

 

Justin Isherwood

Justin IsherwoodJustin is an award-winning author and fifth-generation Portage County farmer. He farms peas, sweet corn, field corn, potatoes, and maple syrup on 1400 acres in southern Portage County. He has authored 24 books and is an active columnist in the local paper. He is a member of the Wisconsin Potato Board, board member of the United Potato Growers of Wisconsin, and has fought to get Portage County Drainage District to adapt new hydrological precepts without dredging and with habitat. Justin shares that he “was raised by woodlots, farmers who dwelt well with woods, sawmills, wood craft” and that it continues to be a part of his life. Married to Lynn for 45 years, they live in a hundred plus year farmhouse at the far end of a dirt road.

 

 

Diane Wessel

Diane WesselDiane is an AICP planner and a graduate of UWSP with a BS in Forest Management. As planning analyst for Marathon County, she is responsible for planning all aspects of community development including natural resource management, economic development, farmland preservation, landuse, hazard mitigation, stormwater management, sewer service, and intergovernmental relations.  Diane served as project manager and grant administrator for the largest multi-jurisdictional planning grant in the state.  Diane is staff to several committees of the County Board, the Wausau Area Metropolitan Planning Commission, and as a county representative to Marathon County United Way committees.  She is creator and chair of the North Central Wisconsin Stormwater Coalition since its creation in 2008, editor and contributor to Marathon County’s newsletter, graduate of Leadership Wausau, graduate of Wisconsin Women in Government, and is an active member of the American Planning Association.

 

 

Roger Zimmermann

Roger ZimmermannRoger recently retired from the Wisconsin Public Service Corporation at the Weston Power Plant, as the Weston Plant Manager. Roger has been the chair of the Central Wisconsin Airport and the Marathon County Solid Waste Board. He served on the Marathon County Board for 7 years serving on the Infrastructure Committee, Marathon County Library Board, Executive Committee, Rules Review Committee and the Human Resources Committee. He is currently serving on the Board of Adjustment, and the Public Service Commission. Roger Zimmermann has been taking photos of the native plants and animals at NCCT’s Rice Lake property for the past six months and plans to complete a one-year cycle of its flora and fauna. He has had photos published in many issues of Nature Photographer magazine and was a winner in the Nature Photographers 2012 Fall Contest. Besides Photography, Roger is the president of the Wisconsin Valley Woodturners Club and has published articles about wood turning in American Woodturner magazine.

3000 Acres – NCCT’s Legacy of Success

3000 Acres Robertson(1)During the 2012-13 fiscal year, NCCT completed easements on three properties that totaled 292 acres. The first easement to be completed was Nancy Stevenson’s easement that was signed in the last week of December. The Stevenson easement permanently protects a 40-acre bird sanctuary in the Town of Linwood, Portage County.  Nancy and her late husband purchased the property along Mill Creek in 1967.  Her 45-year record of birds using the property includes 88 nesting species among a total of 179 species.  This represents perhaps the longest and most complete record of a bird habitat in central Wisconsin.

In February of 2013, NCCT completed its first conservation easement on public land. The 35 acre Benn Conservancy, located adjacent to the Rosholt School District, was established by James E. Benn and Louise Benn Bernard to support conservation education and to provide public access to families in the Village of Rosholt. The Benn family decided to donate the property to Rosholt School District along with a conservation easement to NCCT to ensure the property would be protected in perpetuity.

In late April, NCCT and the Robertson Family Limited Partnership signed NCCT’s latest easement, on a 218-acre property located in the Town of Marion, Waushara County. The Robertson property is a working farm, with 148 acres in Managed Forest Law Program. The easement contains part of a sylvan lake, with an underdeveloped shoreline and more than 60 acres of relatively natural native forest and savanna ecosystems, providing significant habitat for wildlife and plant communities. The signing of this easement was significant as it pushed the total number of acres permanently protected by NCCT easements to well over 3,000 acres (3,139.62 acres to be exact!).
NCCT is grateful to have contributors like Nancy Stevenson, James Benn, Louise Benn Benard, and Allan and Joan Robertson, who care deeply about protecting the beautiful central Wisconsin landscape where we work, play, and live. Conservation easements help protect in perpetuity quality habitats, species diversity, watersheds, and beautiful places with inspiring histories.