Colorado Open Lands
Conservation Options
For most landowners their property is their most significant financial and, frequently, treasured asset. Years spent caring for and being supported by a ranch or farm, or years of vacations in a beloved hideaway, makes any decision about its future use a significant life event. Like most major decisions, the better-informed one is, the easier it is to decide on the right course of action.
When considering the future for your land, the first step is to determine your goals. Depending on the answers to some very fundamental questions, the wide variety of options will begin to narrow to a workable few. The best news is that you have the power to permanently keep your land the way you want. A land trust can be a very important partner and guide by explaining the options available.
In Colorado Open Lands’ experience, a landowner most often wishes to continue to own the land, but would like to take advantage of the income, property, and estate tax benefits typically afforded by a conservation easement. Because a conservation easement does not meet the needs of every landowner, however, it is important to be familiar with a variety of different options.
Options:
Conservation Easement: A conservation easement is a legal agreement between a landowner and a qualified conservation organization or government agency that permanently limits a property’s uses to protect its conservation values. It is a flexible tool that protects land, while leaving it in private ownership.
Bequest: Land or a conservation easement may be conveyed during the landowner’s lifetime, or at the time of his/her death. If you choose to make a bequest (donation at the time of death), it is important that you discuss the matter with your heirs as well as with the land trust, or other recipient of the property. Land and easement bequests typically provide estate tax benefits.
Protective Developments: If a landowner needs to generate some income, but wishes to continue agricultural operations and is motivated by conservation goals, a carefully planned limited development can be designed to meet both needs. Essentially, a few selected home sites are created, while the important conservation values of the property and the majority of the land is permanently protected from future development.
Government Assisted Projects: An increasing number of local and regional government entities are creating land conservation programs with tax-based funding sources. Many entities, however, do not have the staff expertise to complete projects on their own, and turn to conservation organizations for assistance in structuring and negotiating these conservation projects.
Compensation:
Tax benefits: A variety of tax benefits are often available to landowners who make a charitable gift of land or conservation easement. Real property taxes may be lowered, due to the reduced development value of a property. A charitable conservation donation may offer substantial income tax benefits which can be carried over for up to five years or until the entire donation is utilized. Finally, a charitable donation of a conservation easement may significantly lower the value of land within an estate, thereby reducing federal and state estate tax obligations. These tax benefits may be available in conjunction with some or all of the following:
Tax credits: A Colorado income tax credit is available to Colorado taxpayers making a qualified donation of a conservation easement. The credit is in an amount equal to the value of the conservation easement donation up to $100,000 per donation. For any donation claimed above $100,000, 40% of the donation can be claimed as a credit, up to a maximum tax credit of $260,000. This credit may be used by the donor to offset their own Colorado income tax obligations, it may be sold or transferred to another Colorado income taxpayer, or, in years of a State budget surplus, a cash payment may be available from the State.
Bargain Sale: This is the conveyance of all or a partial interest in property for less than the fair market value of those interests. This part sale/part gift provides some income to the landowner, in combination with a potential charitable donation for the value of the interest conveyed, but not purchased.
Leases, Management Agreements, and Mutual Covenants: In some cases, a conservation organization or a government agency may wish to lease a property or enter into a management agreement with a landowner to assure that the property’s conservation values will be protected. Several landowners, concerned about protecting the open space they collectively own, or a view they all share, can exchange mutual covenants to protect those features. While leases and management agreements are temporary, they can give the landowner sufficient time to choose a permanent solution.
Funding sources: Conservation organizations do not typically have their own project funding source and must go outside the organization to raise monies for each project. Sources include local, county or state government agencies, local or national private foundations, corporate foundations, or private individuals. Most funding sources require matching funding, so a single project typically has multiple funders.
The future of the Colorado landscape is being determined landowner by landowner. Actions taken today by an individual landowner will affect the landscape our children will experience in 20 years, and our great-grandchildren in 100.
Taking no action has severe consequences for our open space heritage. Growth and the development that follows are visible on a daily basis. However, both individual and collective efforts can put in place a legacy of preservation for the future of our entire community by using a medley of land preservation tools.
Colorado Open Lands works with willing landowners to determine the best approach for each property, and each landowner. We help landowners protect the important conservation values on their land, while securing the most advantageous structure, management and financial outcome available.